Shulou(Shulou.com)06/03 Report--

(with pictures from Canva)

On July 21, the 9th Intelligence officially entered the stage of submitting registration. If there is no accident, the day of the 9th Intelligent Landing Division creating a board will also be approaching. For No. 9 intelligence, the most familiar to the outside world is its cooperation with Xiaomi's "Mi family electric scooter" and "No. 9 balance car" series products. Like Yunmi, Huami and Stone Technology, No. 9 Intelligence is closely related to Xiaomi.

According to its latest prospectus, Intelligent IPO on the 9th is expected to raise a total of 2.08 billion yuan for intelligent electric vehicle projects, annual production of 80, 000 off-road recreational vehicles, R & D center construction projects, intelligent distribution robot research and development and industrialization projects.

From the perspective of the use of IPO funds, Smart 9 intends to use new business as a starting point to pry its future growth potential, but judging from the existing core development data, Intelligence 9 has slowed down. Moreover, Smart 9, which takes a diversified product line, also has to face more powerful competitors after IPO, and there is a lot of pressure on growth.

The halo of "millet ecological chain" disappears.

"Xiaomi Ecological chain" is a consensus reached between Xiaomi and supply chain enterprises many years ago. Huami, Yunmi and Stone Technology, which have been listed on the market, have experienced explosive growth for a period of time through the popular style effects inspired by the economy of Xiaomi fans. But in terms of listing, the aura of "Xiaomi ecological chain" does not seem to work well, as evidenced by the performance of Yunmi, Huami and Stone after IPO.

Yunmi listed on NASDAQ in September 2018 at a price of $9, but now it has fallen to about $7. Stone Technology made its debut in February, rising 84% on its first day, but its share price has been falling ever since. Huami has performed relatively well and its share price is now about 40 per cent higher than its offering price, but its market capitalization has been difficult to break through $1 billion and stabilize.

It seems that the label of "Xiaomi concept stock" has not significantly added to them. after all, Xiaomi itself has not performed well since its listing. A few days ago, Xiaomi's share price was ridiculed by many people that "it can finally be released."

Intelligence 9 is so concerned about this that it even explains in detail the difference between it and Xiaomi ecological chain enterprises in the prospectus, and explicitly denies that it is not a typical millet ecological chain enterprise.

In fact, from the listing of several Xiaomi ecological chain enterprises, the label of "Xiaomi ecological chain" will not have an obvious positive bonus to the listing of No. 9 intelligence. Therefore, not to mention the "millet ecological chain", or not to position themselves as a "millet ecological chain enterprise" may be a better choice.

Slowing down is fatal.

The fact that No. 9 Intelligence has lost money year after year has been criticized by the outside world. According to the prospectus, the total net profit of Smart 9 from 2017 to 2019 is-2.886 billion yuan, which is interpreted as "caused by book losses caused by convertible bonds and preferred shares measured at fair value".

The net profit after deduction may be more convincing. According to the prospectus, the net profit of No. 9 Smart deduction was 544 million yuan and 101 million yuan in 2018 and 2019, respectively. Obviously, No. 9 intelligence has reached the profit stage and has a certain profitability.

But there is an unfriendly problem with Intelligence 9, that is, the growth rate has obviously slowed down. According to the prospectus, revenue was 4.586 billion yuan in 2019, 4.248 billion yuan in 2018 and 1.381 billion yuan in 2017. On this basis, revenue increased by 7.96% year-on-year in 2019 and 207.6% in 2018.

Year-on-year growth fell by nearly 200 percentage points. To make matters worse, due to the impact of the epidemic, the revenue growth of Smart 9 in the first half of this year is not very optimistic. According to the prospectus, Smart 9 forecasts a year-on-year change in revenue of-13.22% to 6.06% in the first half of 2020.

For the decline in the growth rate in the first half of this year, Smart 9 may still be able to attribute it mainly to the epidemic, but the revenue performance in 2019 may have proved to some extent that the growth of Intelligence 9 is relatively weak, which is related to the growth ability of Intelligence 9 itself.

Even if it is profitable, it is difficult for capital markets to offer a good price if it stalls. Given the current growth performance, "slow down" will be a fatal wound to Smart 9, which is likely to influence its stock price after IPO, causing it to perform as poorly as Stone Technology and Yunmi.

Diversification is not simple.

Under the strategy of short transportation, No. 9 Intelligence, which is always concerned about "de-mileization", has been enriching its product SKU and category. Judging from the current product category richness, No. 9 Intelligence's diversification strategy is successful.

However, in terms of revenue share, Smart 9's diversification strategy is not yet successful. In 2017, the revenue of intelligent electric balanced vehicle series accounted for 74.49%, and that of intelligent electric scooter series accounted for 24.78%. In 2019, intelligent electric balanced vehicle series accounted for 21.71% of revenue, and intelligent electric scooter series accounted for 70.46% of revenue.

From 2017 to 2019, although the balance car and scooter account for more than 90% of the total income, although the proportion of income of the balance car and scooter has been switched. It is worth noting that revenue from the 2019 series of smart electric balanced vehicles also showed a 19.6% year-on-year decline.

According to the prospectus, smart electric vehicles, all-terrain vehicles and intelligent service robots will be the focus of its future diversification, with a planned capacity of 1 million smart electric vehicles per year and 80, 000 all-terrain vehicles per year.

But these three businesses are either in the early stages of development or mediocre. The smart electric car was put into trial production on a small scale at the end of last year, but the results were not very satisfactory, with a production and sales rate of only 35%. As for the service robot, the first "Lumeng" launched by Intelligent 9 was mass-produced as early as 2018, but the revenue of the intelligent service robot business accounted for less than 0.1% in 2019. As for the all-terrain car, it is still in the stage of not actually selling.

The intelligent two-wheeler market is extremely competitive now, and the distribution service robot market is now in the early stage of development. All-terrain vehicles have to compete with many powerful competitors around the world in the future, and the diversified road of No. 9 intelligence is more difficult than expected.

Challenges after IPO

When smart electric vehicles and motorcycles were released at the end of last year, Gao Lufeng, No. 9 intelligent CEO, said that making electric motorcycles is a long-term investment, and that No. 9 smart cars have sufficient funds and are not afraid of a large amount of capital investment. However, in less than half a year, Intelligence 9 started the listing process, raising 2 billion yuan.

According to the prospectus, at the end of 2019, Smart 9 had a balance of 990 million yuan in cash and cash equivalents. In addition, its main business is not profitable in the first place, so it is difficult to support Smart 9's future ambitions in smart electric cars and motorcycles, as well as service robots. Therefore, listing financing has become a matter of course.

The money may not be bad for the time being, but the 9th intelligent IPO will face two very direct challenges. First, how to make smart electric cars and smart motorcycles become explosions like No. 9 balance cars. After all, these are their own products. Without Xiaomi's halo blessing, it is difficult for smart two-wheeler business to rapidly expand its sales scale. In addition, the smart two car market has Yadi, Mavericks and other strong competitors, they are the biggest breakthrough resistance.

Second, how to optimize the comprehensive gross profit margin to improve profitability and industry competitiveness. Due to the influence of Xiaomi, the gross profit margin of the two main businesses of Intelligence 9 has not been high. According to the prospectus, the gross margins of the two main businesses were only 21% and 25% respectively in 2019, compared with 40.99% for intelligent service robots and 66% for other businesses.

Despite vehemently denying that it belongs to the "Xiaomi ecological chain enterprise", Smart 9 cannot get rid of this label in a short period of time unless Xiaomi's income contribution is reduced to 10% or even less than 5%. However, for the upcoming No. 9 intelligence, it is urgent to return to the state of high growth, otherwise IPO may become an encumbrance.

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