On June 28, Botai Vehicle Networking Technology (Shanghai) Co., Ltd. officially submitted a prospectus to the Hong Kong Stock Exchange.

As a domestic supplier that also provides smart cockpits and intelligent connectivity solutions, Botai Vehicle Networking has attracted the attention of many Tier 1 capital.

Less than a month before the IPO, the company had just completed a round of financing of RMB 1,047 billion, with a post-investment valuation of RMB 8.572 billion.

As competition in the smart driving industry is still fierce, most manufacturers are still burning money to seize the market. This year, listing and supplementing the market has become a must-have option for intelligent driving solution providers, not just Botai Auto Network.

Since the end of last year, Hong Kong stocks have had Zhixing Technology, Youchao Innovation, My Little Pony Zhixing, and Wenyuan Zhixing, which have successively sprinted to the Hong Kong Stock Exchange.

1. Two major intelligent driving tracks enter at the same time

Botai Auto Network, founded in 2009, has now successfully become the second largest independent local supplier of smart cockpit solutions for Chinese OEMs, providing corresponding services for more than 200 models of more than 40 car brands.

Currently, Botai Auto Network provides two solutions in the field of intelligent driving — smart cockpit solutions and intelligent connected solutions.

(1) Smart cockpit solutions

The smart cockpit solution business is the absolute core business of Botai Internet of Vehicles, and it continues to grow at a high level in terms of product sales volume and OEM customer development progress.

In terms of product sales, the number of smart cockpit units delivered by Botai Connected Vehicles increased from 500,000 to 1.2 million from 2021 to 2023, with a compound growth rate of 55%. In the first five months of this year, Botai Auto Network also delivered 610,000 smart cockpit units, a sharp increase of 140% over the previous year.

In terms of OEM customer development, by the end of 2023, Botai Auto Network had successfully passed the qualification review for smart cockpit suppliers by 22 automotive OEMs, including 15 Chinese OEMs (3 of China's top 5 OEMs), 5 joint venture OEMs, and 2 international OEMs. In the first five months of this year, Botai Auto Network once again obtained 17 new targets from 7 OEMs.

The double increase in product sales and number of customers helped Botai's smart cockpit solution business increase its revenue from 740 million yuan in 2021 to 1.35 billion yuan, and its share of total revenue also rose steadily to over 90% to 90.4%.

(2) Intelligent networking solutions

As the first enterprise to enter the field of intelligent connectivity, Botai Auto Network has never relaxed its R&D and investment in this field. By the end of 2023, Botai Auto Network ranked first in the number of patents related to registered inventions (5,777 patents) among domestic intelligent connectivity solution providers.

Currently, intelligent connectivity solutions are also the second largest business of Botai Internet of Vehicles, including operation services, cloud application services, and maintenance of connected vehicle systems. Although the overall revenue scale is far less than that of the smart cockpit business. From 2021 to 2023, revenue only increased from 100 million yuan to 120 million yuan, but since the fee for the smart connectivity solution business is a one-time R&D fee, and each vehicle is subsequently charged an annual service fee, the revenue scale will continue to grow as the scale of service models expands in the future, and there is plenty of potential.

2. Star capital is supporting one after another, with a valuation of 8.6 billion yuan

Being on the two most popular intelligent driving tracks, Botai Auto Network also continues to attract the attention of the Tier 1 market. In June of this year, Botai Auto Network carried out the final round of financing of 1,047 billion yuan before the IPO, and the post-investment valuation reached 8.572 billion yuan.

Since the establishment of Botai Auto Network, it has received nearly ten rounds of financing, including star institutions such as Shanghai Guosheng Capital, Jianxin Trust, and Jinggangshan Investment, as well as leading industrial companies such as Xiaomi, FAW, and Dongfeng.

In terms of equity structure, the top five shareholders of Botai Auto Network are founders Ying Yilun (23.95%), Luquan Rundong (7.47%), Xinchang Venture Capital (5.83%), Tianjin Jinmi (Xiaomi indirectly holds 5.75%), and Guangzhou Ping'an and Gongqingcheng Shanyuan (4.33%).

It is worth noting that although Ying Yilun, the founder of Botai Auto Network, previously transferred 11.38% of his shares to the employee incentive platform, the platform is still controlled by founder Ying Yilun, and the actual controller has 35.33% voting rights.

3. Net loss has subsided, but cash flow is clearly tight

From 2021 to 2023, benefiting from increased product sales, Botai Auto Network saw continuous high annual revenue growth of 864 million yuan, 1,218 million yuan and 1,496 billion yuan respectively, with a compound growth rate of 32%.

In the same period, the gross margin of Botai Auto Network also stabilized at around 15%. From 2021 to 2023, gross margins were 21.3%, 14.1%, and 15.4%, respectively.

However, like most companies in the field of intelligent driving, it is still in the process of burning money. From 2021 to 2023, Botai Auto Network's net losses were 370 million yuan, 450 million yuan, and 280 million yuan respectively. Due to more cost control, the company's losses subsided in 2023.

From 2021 to 2023, Botai Auto Network's three expenses were 565 million yuan, 638 million yuan, and 611 million yuan respectively, accounting for 65.3%, 52.4%, and 40.9% of total revenue. Judging from the trend, the share of Botai's connected car fees in revenue is gradually declining. In 2023, the R&D expenses of Botai Internet of Vehicles dropped sharply, leading to a narrowing of overall losses.

As Botai Auto Network's development of new customers accelerates further, its customer concentration has been declining for three consecutive years. From 2021 to 2023, the revenue of the top five customers reached 750 million yuan, 1.02 billion yuan, and 970 million yuan respectively, accounting for 86.5%, 83.6%, and 64.6% respectively. This means that the risk of Botai Auto Network's dependence on a single major customer is gradually decreasing.

However, Botai Auto Network still faces a common problem among industry companies — tight cash flow.

From 2021 to 2023, the net cash flow generated by Botai Auto Network's operating activities was -680 million yuan, -460 million yuan, and -270 million yuan, respectively. Although the margins have been declining for three consecutive years, they are still negative.

By the end of 2023, Botai Auto Network's cash and cash equivalent balance was 257 million yuan. Based on the net operating cash flow of Botai Auto Network in 2023, it was not enough to maintain it for one year. However, the company had completed a round of financing of RMB 1,047 billion in June, so the company's cash flow was still abundant.

Botai Auto Network continues to grow in product sales and number of customers, paving the way for its listing on the Hong Kong Stock Exchange. However, in a situation where the industry is becoming more and more popular, whether Botai Auto Network can truly gain a foothold in the future market still depends on its future performance under harsh market competition after ammunition is replenished.