Shangtang is an industry-leading AI software company. With the self-developed SenseCore device and the “Nisshin SenseNova” model as the core, application scenarios continue to expand, promote the industrialization of AGI, and create a new AI business model. Covered for the first time, giving a buy rating.
Key points to support ratings
Quad-core drivers lead the new trend of smart technology. Shangtang is an industry-leading artificial intelligence software company. Its main business is divided into four major sectors: smart commerce, smart cities, smart living, and smart cars. It closely revolves around the company's self-developed SenseCore AI device as the core platform for large-scale model production, driving the company to continue to develop and become a leading enterprise in the AI industry.
“Big device+big model” continues to be upgraded, and generative AI development space is broad. 1) SenseCoreAI devices continue to be upgraded. As of the first half of '23, SenseCore AI devices have launched about 30,000 GPUs, and the computing capacity has reached 6 exaFlops. 2) The base model is continuously iteratively upgraded:
In June 2023, the first domestic pre-trained large model InternLM that surpassed GPT-3.5-Turbo performance was released. 3) The Japan-Japan SenseNova large model system is gradually being enriched and has been applied in practice in industries such as finance, medical care, mobile terminals, and industrial parks.
Artificial intelligence application scenarios continue to expand, creating a new AI business model. The company's Nishi-Nippon SenseNova large model system can promote high-efficiency, low-cost, and large-scale AI innovation and implementation. 1) Currently, customers mainly come from companies in 2B fields such as finance, real estate, energy, education, etc., and are customizing and privatizing large-scale industry models. 2) Provide customers with API interfaces and services. According to actual application requirements, customers can use the various AI technical capabilities of the “Nishi-Nippon SenseNova” model to achieve various AI applications. 3) In the future, Shang Tang will continue to build and upgrade its own 2C model application platform to create a diverse AI user community.
The scale of revenue grew steadily, and net profit loss to mother gradually narrowed. Based on the SenseCore device, we expect the revenue scale of the company's four major business segments to grow steadily in the future, and the management expense ratio will gradually decrease under the scale effect; as the company switches from using third-party cabinet services to using its own AIDC, the R&D cost rate will also gradually decrease. Over the long term, the company's comprehensive gross margin will gradually stabilize at around 55%. As SenseCore AI devices and generative AI-related businesses continue to be implemented and applied, we expect the company's losses to gradually narrow.
valuations
Since the company is a technology company in the process of growth, net profit is currently still in loss, so we use the PS valuation method. The average PS value of comparable companies in 2023/24/25 was 10.07/7.81/6.11 times. Considering that the company is in the leading position in the AI industry, the company's related business is expected to continue to grow strongly in the future. We expect that on 2023/24/25, Shangtang's revenue will be 42.99/ 55.28/ 6.955 billion yuan, corresponding to 6.16/4.79/3.81 times PS. First coverage, giving a buy rating.
The main risks faced by ratings
Macroeconomic growth is slowing; government revenue is falling; model development falls short of expectations; changes in industry policies and regulatory measures that exceed expectations.