Despite taking advantage of the autonomous driving industry and the investment of Huawei, Saimu Technology's IPO path was not smooth.

On May 29, Beijing SiMu Technology Co., Ltd. (“SiMu Technology” for short) once again submitted a prospectus on the Hong Kong Stock Exchange to issue H shares for listing on the Hong Kong Main Board. This is another application after it was submitted and expired twice on December 30, 2022 and October 31, 2023.

Domestic ICV simulation test leaders do not have a strong voice

According to the prospectus, Saimu Technology is a Chinese technology company focusing on innovation in simulation technology. It is mainly engaged in the design and development of ICV simulation testing products and provides related testing, verification and evaluation solutions. ICV means equipped with advanced on-board sensors, controllers, brakes and other devices, integrating advanced communication and network technology.

According to Frost & Sullivan, in terms of revenue in 2023, Saimu Technology is the largest market participant in China's ICV testing, verification and evaluation solutions industry, with a market share of about 5.3%. In terms of revenue in 2023, it is the largest market participant in China's ICV simulation testing software and platform market, with a market share of about 5.9%. The company is also one of several market players in China that can provide one-stop ICV testing, verification and evaluation solutions.

ICV refers to a new generation of vehicles equipped with a new generation of advanced on-board sensors, controllers, brakes and other devices, integrating advanced communication and network technology to achieve information exchange and sharing with different elements such as vehicles, people, vehicles, roads, clouds (V2X); sensing complex environments and intelligent decision-making, collaborative control and other functions; “safe, efficient, comfortable, and energy-efficient” driving; and ultimately driverless operation. According to Frost & Sullivan, ICVs can be used for traditional fossil fuel vehicles and electric vehicles, while Saimu Technology's ICV testing, verification, and evaluation products and services target both forms of ICVs.

In 2021, SiMu Technology and related customers jointly launched China's first cloud-based ICV simulation testing platform, which can achieve cloud deployment of full-stack capabilities from security analysis to simulation testing, thereby significantly improving testing efficiency. According to Frost & Sullivan, this makes it the world's first ICV simulation testing, verification, and evaluation tool chain to obtain the highest level of functional safety certification.

With the deepening development of the autonomous driving industry, SiMu Technology's revenue has gradually increased. From 2021 to 2023 (hereinafter referred to as the reporting period), Saimu Technology achieved revenue of about 107 million yuan (unit: RMB, same below), 145 million yuan, and 176 million yuan respectively; total profit and overall revenue for the same period were approximately 375.71 million yuan, 486.86 million yuan, and 53.431 million yuan, respectively.

According to the Zhitong Finance App, even though it is the leading domestic ICV simulation test, Saimu Technology does not have a strong voice.

As reflected in business, Saimu Technology is addicted to major customers.

The company mainly provides ICV testing, verification and evaluation solutions to state-owned enterprises, government departments, and private sector automobile manufacturers and technology companies. Most of its revenue comes from a limited number of customers.

During the period, the revenue of Saimu Technology's largest customers was about 41.7 million yuan, 35.5 million yuan, and 40 million yuan, respectively, accounting for 39.0%, 24.4% and 22.8% of its total revenue; while revenue from the top five customers was approximately 99.9 million yuan, 97.8 million yuan and 98 million yuan respectively, accounting for 93.4%, 67.2% and 55.8% of its total revenue, respectively. Although the proportion of revenue contributed by these customers has declined, more than 50% of revenue still comes from the top five customers.

Client dependency is very demanding on the company's cash flow because accounts receivable will accumulate, putting pressure on the capital side.

Judging from the prospectus, Saimu Technology's cash flow has already seen a large outflow of cash. In 2021-2022, the company recorded net cash used in operating activities of about 1.8 million yuan and 6.4 million yuan respectively. Mainly due to the increase in unsettled revenue from customers at the end of the year, the company's trade receivables increased sharply from about 49.4 million yuan on December 31, 2021 to about 166 million yuan on December 31, 2023. In the same period, the company's trade receivables had turnover days of approximately 113.2 days, 237.8 days and 317.5 days, respectively. If large amounts payable to the company are not settled on time or cause significant depreciation, Saimu Technology's performance, liquidity and profitability will be adversely affected.

“Money-burning” R&D and operating costs are rising year by year

During the reporting period, Saimu Technology's cumulative net profit was 140 million yuan, which was lower than the company's cumulative R&D expenses. Under these circumstances, Saimu Technology will continue to “burn money” in research and development.

According to the prospectus, during the reporting period, Saimu Technology's R&D expenses (including R&D costs capitalized as intangible assets) were 27.1 million yuan, 38.8 million yuan, and 76.4 million yuan respectively, with a cumulative R&D cost of 142 million yuan over three years.

Not only are R&D costs high, but it is also necessary to generate a large amount of costs in the operation process of competition technology.

During the reporting period, Saimu Technology's operating costs increased year by year. As a percentage of total revenue, they were approximately 42.5%, 43.7% and 62.9%, respectively. The increase in operating costs has also greatly affected the company's profits.

It is worth mentioning that customers of the company's large-scale ICV simulation test platform and ICV data platform usually require Saimu Technology to provide a performance guarantee of 5% to 10% of the contract amount when signing the contract as a guarantee for the company's performance. Therefore, the company also needs to advance a large amount of capital in advance, which also places higher demands on the company's financial situation.

However, in the long run, there is still room for growth on the racetrack where Saimu Technology is located.

First, the penetration rate of autonomous driving continues to increase, and simulation testing technology establishes a safe bottom line for the commercialization of autonomous driving products.

As the penetration rate of intelligent connected vehicles continues to increase, it is expected that the demand for the autonomous driving simulation testing industry will continue to rise. According to Frost & Sullivan data, it is estimated that the market size of China's ICV testing, verification and evaluation solutions industry will increase to about RMB 27.9 billion in terms of revenue by 2030, at a rapid compound annual growth rate of about 33.6% from 2023. In the future, with the increase in ADAS penetration rate and the implementation of high-level autonomous driving, the market size of the ICV simulation testing industry is growing at an accelerated pace. It is worth mentioning that the scale of ICV simulation testing tools and platforms in the segment will account for more than 50% of the overall market size starting in 2023, and is expected to further increase to 60% by 2030.

Second, looking at the competitive landscape, SiMu Technology is continuously exploring the application of large model technology in the field of ICV simulation testing, including simulation scenario construction, sensor modeling, automatic data standards, etc., to help commercialize autonomous driving. Moreover, Saimu Technology is the only Chinese market participant among the five major market players in this market in 2022, so it is more competitive in the domestic market.

The market size of China's ICV simulation testing software and platform market will reach approximately RMB 1.7 billion in 2023. In terms of revenue, the top five market players contributed approximately 25.7% of the overall market. Saimu Technology ranked first in China's ICV simulation testing software and platform market in 2023, with revenue of approximately RMB 101 million.

In summary, the Zhitong Finance App believes that for autonomous driving companies, they can certainly achieve rapid growth by deeply binding large customers in the early stages. However, with the further development of the enterprise, dependence on major customers will become a major obstacle to development. For example, Saimu Technology, which is a leader in the industry, does not have a strong voice, and its development is still not healthy. Therefore, how to balance the supply risks and account negotiation challenges brought about by highly concentrated customers and suppliers will be a major hurdle to overcome.