The company is the leading enterprise AI solution provider in China and the leader of "AI+ Manufacturing". Founded in 2018, the company is hatched by Innovation works, mainly providing AI products and solutions for manufacturing, financial and other industries. According to Frost Sullivan, the company is the third largest AI technology-driven solution provider in China's enterprise AI solution market in 2020, and ranks first in China's "AI+ manufacturing" market.
Since its inception, the company has focused on "AI+ manufacturing" and "AI+ finance". Revenue in 2021 was 860 million yuan, an increase of 86.3 percent over the same period last year, of which manufacturing / financial revenue was 4.5 billion yuan, an increase of 132.5 percent over the same period last year. In 2021, the company made an adjusted net loss of 140 million, and the loss rate narrowed.
The market for "AI+ manufacturing" is huge and participants are scarce. Technology, capital and policy jointly support the vigorous development of domestic enterprise-level AI. According to Frost Sullivan, China's market for "AI+ made" solutions is only 9.1 billion in 2020, and it is expected to be close to 65 billion yuan by 2025, with a CAGR of 48% in 2020-2025, with great potential for market growth.
The manufacturing subdivision scene covers a wide range, the long tail application is numerous, and the degree of standardization is low, so most enterprises do not choose "AI+ manufacturing" as the key area. Innovative Qizhi starts with 6 major manufacturing industries + 2 major financial industries, refines and iterates the common model suitable for a certain scene, and quickly replicates it in the same scene. The company provides a variety of solutions such as intelligent hot metal transportation, intelligent engineering radar detection, intelligent wind power operation and maintenance, intelligent defect detection and so on.
High barriers, expandability, scale effect, broad prospects for commercialization. 1) High barriers: based on the high value and high barriers of iterative subdivision scenarios and integrated software and hardware delivery, the company's high-quality customer repurchase rate in 2021 is 102.5%. We believe that the "1mm N" model adopted by the company can effectively promote the repurchase of old customers and support the high stability of ARPU. 2) Extensible: the company will subdivide the common model of the scene through "1cm N"
Mode, quickly replicate to more customers in the same field. According to the prospectus, 96.2% of the 1985 AI technology assets accumulated by the company can be reused in different projects. We expect the company to have more than 70 KA customers and more than 150 SME customers in 2022. 3) scale effect: MMOC platform and reusable technology assets can effectively improve development efficiency, and large-scale applications can dilute R & D costs in the future.
The company's adjusted net profit is closer to turning losses into profits than its peers, and is expected to break even by 2024.
For the first time, coverage gives a "buy" rating. We predict that the company's revenue in 2022-2024 will reach 100 million yuan in 15-24-38, an increase of 73%, 59%, 59%, and adjusted net profit of-1.3 billion, 0.7 / 30 million yuan. Based on 5x2023e pact S, we give innovative 2121.HK a target price of HK $31, covering the "buy" rating for the first time.
Risk tips: the risk of increased competition in the industry, the risk of customer loss and insufficient customer intake, the risk of performance growth and the risk that cost control does not meet expectations.