Impacting the "first stock of smart driving chips" Black Sesame Intelligence once again broke through the Hong Kong stock IPO

Reporter Xia Zhibin and Quartz Jing reported from Shanghai

In recent years, with the rapid development of intelligent networked vehicles, autonomous driving chip companies have also entered the fast lane of development, and they are also seeking to go public, such as Black Sesame International Holding Limited (hereinafter referred to as "Black Sesame Intelligence").

The reporter of "China Business Daily" noticed that Black Sesame Intelligence submitted a form to the Hong Kong Stock Exchange on June 30, 2023 to apply for an IPO, and then the company's listing application expired in early January this year because it did not pass the hearing within 6 months. On March 22, Black Sesame Intelligence submitted another listing application to the Hong Kong Stock Exchange, with CICC, Huatai International and CCB International as its joint sponsors.

According to the prospectus, the revenue of Black Sesame Intelligence from 2021 to 2023 will be 60.5 million yuan, 165 million yuan, and 312 million yuan respectively. At the same time, the losses of Black Sesame Intelligence during the year were 2.357 billion yuan, 2.754 billion yuan and 4.855 billion yuan respectively.

It is unknown whether Black Sesame Intelligence can successfully impact the "first stock of intelligent driving chips" this time. Regarding the company's revenue growth, year-on-year losses and other issues, on April 8 and 16, the reporter sent a letter to the mailbox of the official website of Black Sesame Intelligence, but as of press time, there has been no reply. On April 12, 15 and 16, the reporter also called the black sesame smart number left by the "Wind Financial Terminal" many times, but no one answered. In addition, the reporter also called the relevant staff of Black Sesame Intelligence on April 12, and the staff said that they would help the reporter inquire about the management of the official website mailbox, but since then, the reporter has called and sent text messages to the number many times, but there has been no reply.

However, Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, told reporters: "For autonomous driving companies, losses are a common problem, mainly due to the high cost of research and development in the industry, and the relatively slow commercialization process." ”

Approximately 80% of the proceeds will be used for research and development in the next five years

According to the prospectus, Black Sesame Intelligence is a supplier of automotive-grade computing SoC and SoC-based intelligent vehicle solutions, SoC is an integrated circuit that integrates including central processing unit, memory, I/O interface and other key electronic components.

Since its establishment in 2016, Black Sesame Intelligence has been favored by the capital market, and has received investment from well-known VC and industrial capital such as Northern Light Venture Capital, SAIC Motor, China Merchants Venture Capital, Oceanpine Capital, Tencent, Boyuan Capital, Dongfeng Motor Group, Xiaomi Yangtze River Industry Fund, NIO Capital, Geely, Wu Yuefeng Capital, Bank of China Investment, SDIC China Merchants, Lenovo Venture Capital, etc., with a total of 10 rounds of financing. After the last round of financing, Black Sesame Intelligence's valuation reached $2.218 billion.

Black Sesame has designed two series of automotive-grade SoCs, the Huashan series of high-computing power SoCs and the Wudang series of cross-domain SoCs. According to Frost & Sullivan, it is the world's third-largest supplier in terms of shipments of automotive-grade high-computing power SoCs in 2022. Black Sesame began mass production of Huashan A1000/A1000L SoCs in 2022 and delivered more than 25,000 pieces, and as of December 31, 2023, the company's flagship A1000 series SoC has shipped more than 152,000 pieces.

The reporter noted that in April 2023, Black Sesame Intelligence released the Wudang series of cross-domain SoCs, which, according to Frost & Sullivan, is the first product in the industry to integrate autonomous driving, intelligent cockpit, body control and other computing domains.

It is reported that the customer base of Black Sesame Intelligence has increased from 45 on December 31, 2021 to 85 on December 31, 2023. As of the Latest Practicable Date, Black Sesame has cooperated with more than 49 automotive OEMs and Tier 1 suppliers, such as FAW Group, Dongfeng Group, Jiangqi Group, Hechuang, ECARX, Baidu, Bosch, ZF and Marelli.

According to the data, Black Sesame Intelligence's revenue comes from autonomous driving products and solutions and intelligent imaging solutions. Among them, the revenue of autonomous driving products and solutions from 2021 to 2023 will be 34.26 million yuan, 142 million yuan, and 276 million yuan respectively. The revenue of intelligent imaging solutions from 2021 to 2023 will be 26.24 million yuan, 23.16 million yuan, and 36.07 million yuan respectively.

Taking Black Sesame Intelligent Autonomous Driving Products and Solutions as an example, the revenue generated from 2021 to 2023 accounted for 56.6%, 86.0% and 88.5% of its total revenue, respectively. In response to the above situation, Black Sesame Intelligence explained that the significant growth in 2022 was due to the increase in sales of the company's products and solutions and the mass production of its own SoC at the end of 2022.

It is worth noting that the competition in the automotive-grade SoC and solution industry is very fierce. According to Frost & Sullivan, the global automotive SoC market is expected to grow from $42.8 billion in 2022 to $179.2 billion in 2028, growing at a CAGR of 27% during the period. Moreover, according to the same source, the global market size of SoC-based smart road solutions is expected to reach approximately $14.8 billion in 2026 and further reach $39.2 billion in 2030.

In Bai Wenxi's view, Black Sesame Intelligence's IPO application shows the company's long-term confidence in the autonomous driving chip market and its positive attitude towards the capital market. "As a company that sprints to be the 'first share of domestic autonomous driving chips', the listing of Black Sesame Intelligence may bring it an injection of funds, which will help strengthen its R&D and market expansion in the field of autonomous driving. ”

"Considering the rapid development and market potential of autonomous driving technology, as well as the Chinese government's support for the smart car industry, Black Sesame's IPO could be an important milestone in its development history," Bai said. But investors are likely to keep an eye on its ongoing losses and future profitability, which will be something that companies will need to focus on explaining and addressing during the IPO process. ”

It is reported that about 80% of the funds raised in the IPO of Black Sesame Intelligence will be used for research and development in the next five years, about 10% will be used to improve commercialization capabilities, and about 10% will be used for working capital and general company purposes, especially the purchase of inventory for SoC mass production.

The cumulative loss in three years is nearly 10 billion yuan, and the profit is in trouble

From the perspective of the market, although Black Sesame Intelligence has had a good performance, it is still difficult to escape the current situation of losses. According to the prospectus, from 2021 to 2023, the annual losses of Black Sesame Intelligence will be 2.357 billion yuan, 2.754 billion yuan, and 4.855 billion yuan respectively.

As for the reason for the company's loss, one of the reasons given by Black Sesame Intelligence is that the company continues to invest in research and development. Relevant data show that from 2021 to 2023, the R&D expenditure of Black Sesame Intelligence will be 595 million yuan, 764 million yuan and 1.363 billion yuan respectively.

The reporter noted that for the company's R&D expenditure, Black Sesame Intelligence explained in the prospectus: "The industry in which we operate is facing rapid technological change and is constantly evolving rapidly in technological innovation. We need to invest significant resources (including financial resources) in R&D to make technological advances in order to expand our product portfolio and services and make our products and solutions innovative and competitive in the market. As a result, we may continue to incur significant R&D expenditures in the future. ”

Regarding the company's market performance, Bai Wenxi said: "The revenue growth of Black Sesame Intelligence shows that the company has achieved certain results in market expansion, but the expansion of losses also reflects its large investment in research and development, marketing and product innovation." This loss is likely to persist in the short term until the company is able to achieve economies of scale and increase market share. Autonomous driving companies need to achieve long-term survival and development through continuous technological innovation, cost control, and effective market strategies. ”

In addition, the gross profit margin of Black Sesame Intelligence is also declining year by year. From 2021 to 2023, the company's gross profit margin will be 36.1%, 29.4% and 24.7% respectively. "The decrease in gross profit margin from 2021 to 2022 is due to the increased revenue contribution of autonomous driving products and solutions, which involves more hardware components, which generally means that the gross profit margin is relatively low. Black Sesame Intelligence said.

Black Sesame Intelligence adopts the OEM model. In the prospectus, Black Sesame Intelligence said: "We currently rely on TSMC to manufacture all of our SoCs. Due to the complex proprietary nature of SoCs, any transition from TSMC to a new manufacturer, disaster or other business disruption at any TSMC facility involving the manufacture of our SoCs will take a significant amount of time to complete and may result in a shortage of our inventory and adversely affect our business, results of operations and financial condition. In addition, we are susceptible to the risk that TSMC may not be able to meet the demand for our SoCs or cease operations altogether. Furthermore, we are also susceptible to the risk that TSMC may not be able to meet the cost of demand due to the global shortage of semiconductors. ”

Regarding the advantages and disadvantages of the foundry model, Bai Wenxi told reporters that the foundry model has its obvious advantages and potential risks for autonomous driving chip manufacturers. "The advantage is that enterprises can use the production capacity and technical experience of professional foundries such as TSMC to quickly transform product design into actual products, shorten product time-to-market, and reduce their own production costs and fixed asset investment. In addition, the foundry model also allows companies to focus on core technology and market development, improving operational efficiency. ”

"However, there are some drawbacks to the foundry model, such as a high dependence on suppliers, which may affect the quality and delivery time of products. In addition, fluctuations in foundry costs may also have an impact on a company's gross profit margin. Therefore, enterprises need to weigh these pros and cons when choosing an OEM model to ensure the stability of the supply chain and the reliability of product quality. ”

TSMC is located in Taiwan, China, and Black Sesame Intelligence also mentioned in the prospectus that the company's ability to obtain sufficient supply of SoCs may be adversely affected by events such as natural disasters in Taiwan, including earthquakes, droughts, and typhoons, as well as geopolitical challenges.

According to the official determination of the China Earthquake Network, at 7:58 on April 3, a 7.3-magnitude earthquake occurred in the sea area of Hualien County, Taiwan (23.81 degrees north latitude, 121.74 degrees east longitude), with an epicenter depth of 12 kilometers. Whether the earthquake will have an impact on TSMC's SoC manufacturing of Black Sesame Intelligence, the reporter also mentioned it in the interview letter, but also did not receive a reply.