Image credit: Visual China

By Blue Whale Finance reporter Wang Jianwen.

On May 29th, Beijing Smarteye Technology Co., Ltd. (referred to as 'Smarteye Technology') submitted its third application for listing on the main board of the Hong Kong Stock Exchange, with Guoyin International as its exclusive sponsor.

Under the background of the accelerated development of new energy vehicles, companies along the automobile industry chain have pushed forward the process of capitalization. In the race among automakers, the launch of new vehicle models relies heavily on a large number of tests. Smarteye Technology is a company that has developed mainly in the field of ICV (Intelligent Connected Vehicles) simulation testing products, and the shareholder list includes Huawei's non-automobile capital.

The car simulation test company invested by Huawei is going public.

Saimee Technology was established in 2014 and is a technology company focused on innovation in simulation technology. It is mainly engaged in the design and development of ICV (Intelligent Connected Vehicles) simulation testing products and provides related testing, verification, and evaluation solutions.

Automotive simulation testing refers to the use of simulation technology to build relatively realistic driving scenarios to test and verify the functionality and safety of vehicles in a simulated testing environment. The development and breakthrough of simulation technology have significant implications for the design, development, and manufacturing of smart cars. Since the early stages of the industry's development, the Chinese automotive simulation industry has been dominated by simulation solution providers from Germany and the United States.

Saimee Technology's business is mainly divided into product categories and service categories. The product category includes ICV simulation testing software and platforms, ICV data platforms, and other products; the service category includes ICV testing and related services, consulting, and other services.

According to Frost & Sullivan data, based on the 2023 revenue, Saime Technology is the largest market participant in China's ICV testing, verification, and evaluation solution industry, with a market share of approximately 5.3%. It is also the largest market participant in the Chinese ICV simulation testing software and platform market, with a market share of approximately 5.9%.

From 2021 to 2023, Saime Technology recorded revenues of 10.7 million yuan, 14.5 million yuan, and 17.6 million yuan; recorded annual profits of 37.571 million yuan, 48.686 million yuan, and 53.431 million yuan; with gross profit margins of 59.9%, 65.6%, and 70.9% respectively.

Its leading position in the industry and continuously growing performance have made Saime Technology favored by many investors.

In 2021, Huawei acquired a 2.8% stake in Saime Technology through its investment company Huawei Habo, and signed a strategic cooperation agreement with Saime Technology, conducting research and cooperation on the testing systems and related standard specifications for smart connected vehicle simulation tools, test verification methods, in-vehicle operating systems and in-vehicle smart computing platforms.

From 2020 to 2022, Saemu Technology completed three rounds of financing, with investment partners including CITIC Securities, Zhongguancun Science City, GQJH, Beijing Shunyi, Beijing Cornerstone, and Weihe Run, and the company's valuation increased from 105 million yuan to 2.332 billion yuan, a 21-fold increase in valuation.

Currently, Saemu Technology's controlling shareholders are "Kongge Technology" and the employee incentive platform "Tongda", both of which are concerted actors, with a combined equity of approximately 45.5%.

Relying too much on major customers puts pressure on cash flow, actively seeking a second growth curve.

China's intelligent driving technology is relatively new, and the ICV testing industry is still in the early stage of development with limited customer base, resulting in high customer concentration for Saemu Technology.

From 2021 to 2023, the revenue from the top five customers accounted for approximately 93.4%, 67.2%, and 55.8% of the total revenue respectively; the revenue from the largest customer accounted for approximately 39.0%, 24.4%, and 22.8% of our total revenue respectively.

This has put significant pressure on the operating cash flow of Saicome Technology.

Saicome Technology stated that the company usually grants customers a credit period of up to 180 days, but from 2021 to 2023, the company's trade accounts receivable were 49.4 million yuan, 0.14 billion yuan, and 0.166 billion yuan respectively. The turnover days of trade revenue receivables were 113.2 days, 237.8 days, and 317.5 days, far exceeding the credit period. The trade accounts receivable with an age of over one year were 8 million yuan, 13.6 million yuan, and 45.4 million yuan respectively.

Saicome Technology stated that due to the growth of trade accounts receivable, there was a significant cash outflow from operating activities in 2021 and 2022, amounting to 1.8 million yuan and 6.4 million yuan respectively. With the collection of payments from customers, the net cash generated from operating activities in 2023 was 50.46 million yuan.

As of the end of 2023, Saime Technology holds cash and cash equivalents of 0.118 billion yuan, a decrease of 32.61 million yuan from the end of 2022. The total amount of current liabilities is 57.25 million yuan.

To alleviate pressure, Saime Technology is on the one hand expanding its customer base and market coverage, and on the other hand trying to explore monetization channels and find new business opportunities to continuously improve its service-related business.

In terms of customer expansion, the company plans to expand to Hefei, Jinan, Xiamen and other places where multiple participants in the automotive and ICV industry are located, supported by local laws, regulations and policies for industry development. At the same time, Europe is the world's second largest automotive market and the region where ICV has developed early. Therefore, the company plans to expand its business scope to Europe and capture the growing market opportunities in that region.

In terms of business expansion, from 2021 to 2023, the proportion of Saime Technology's product business revenue has decreased year by year, accounting for 96.1%, 82.9%, and 68.5% respectively. The proportion of service business revenue has significantly increased, accounting for 3.9%, 17.1%, and 31.5% respectively.

Specifically, on the product side, ICV simulation testing software and platform still occupy the main position, accounting for 57.2% of total revenue in 2023. Since 2022, the scene library no longer generates revenue; the proportion of ICV data platform and other products has decreased from 39.2% to 11.3%, with revenue dropping from over 40 million to over 10 million RMB.

Simulation testing can be described as a 'profitable' business. In 2023, the overall gross margin of the product side and the service side remained stable at 71% and 70.6% respectively. Within the product side, the gross margin of the ICV data platform is 94.5%; within the service side, the gross margin of consulting and other services is 82%.

However, its R&D expenditure is not considered high. From 2021 to 2023, the total R&D expenses incurred by Simu Technology were approximately 27.1 million yuan, 38.8 million yuan, and 76.4 million yuan respectively. In this IPO, the funds raised by Simu Technology will mainly be used to enhance R&D capabilities, including upgrading existing products and services, penetrating new industries such as drones, digital twin cities, intelligent agriculture; enhancing marketing capabilities, general corporate purposes, and operational funds.