On October 26th, iFlytek released its 2020 third quarter financial report. Financial report data shows that the third quarter revenue of iFlytek was 2.935 billion yuan, an increase of 25.16% over the same period last year; net profit was 296 million yuan, an increase of 60.79% year-on-year.
Affected by the third-quarter financial report of HKUST Xunfei, as of the close of A-shares on October 27th, the stock price of HKUST Xunfei rose 2.15% to 36.06 yuan, with a total market value of 72.955 billion yuan.
It can be seen that the capital market is still very optimistic about the A-share AI leading stock iFlytek. Based on the analysis of the financial report data, how does the company perform? Let us find out.
To get rid of the "haze" of the epidemic, is it a sign of better performance?
Established in 1999, HKUST iFlytek is a technology company specializing in intelligent voice and language technology research, software and chip product development, and voice information service technology. The company's overall revenue in the first three quarters was 7.284 billion yuan, an increase of 10.82% over the same period last year.
In terms of net profit, in the first three quarters, the net profit attributable to shareholders of listed companies and net profit after non-recurring gains and losses were 550 million yuan and 83.95 million yuan, an increase of 48% and 20% respectively over the same period of the previous year. From this, it can be seen that iFLYTEK’s financial report has both increased revenue and net profit, and handed over a satisfactory answer to the capital market.
During the COVID-19 pandemic, in the first quarter of 2020, iFLYTEK suffered a loss for the first time in 12 years after its listing, achieving revenue of 1.4 billion yuan, a year-on-year decrease of 28.06%. The net profit attributable to the parent after deduction fell to a negative number of -135 million yuan.
According to the Q3 financial report data of this quarter, it can be said that iFLYTEK has quickly emerged from the "haze" of the epidemic. What caused it?
The announcement shows that the main reason for this performance increase is due to the continuous development of the artificial intelligence industry, and the company's source technology-driven strategic layout results continue to appear. In addition, the announcement also stated that changes in the fair value of the investment in Sanxing and Cambrian will have a certain impact on profit and loss.
But in this three quarterly report, the company did not disclose the specific revenue of each business line. In detail, the performance of iFlytek is still highly dependent on government subsidies.
In the first three quarters of this year, iFLYTEK achieved non-recurring gains and losses of 470 million yuan, accounting for 84.84% of net profit; mainly including government subsidies of 203 million yuan, accounting for 36.64% of net profit, except for the company’s normal business operations. In addition to the effective hedging business, the investment income held was 409 million yuan.
Moreover, looking at HKUST's annual performance, revenue has continued to grow, but the net profit growth rate has fluctuated up and down, and the trend is unstable, which shows that the company's profitability is not strong. According to the financial report, from 2018 to 2020, HKUST's non-net profit growth rate will be -25.83%, 83.52%, Q3 in 2020 will be -76.53%, and Q2 in 2020 will be 100%.
With the unstable construction of technical barriers and the multi-faceted attack by giants, where should iFlytek go?
First of all, under the intelligent voice track, under the multi-faceted attack of the Internet giants, the crisis of iFlytek is imminent. Baidu, Tencent, and Ali have all stepped up into the smart voice track and chose self-developed voice recognition technology. This is not a small pressure for iFLYTEK.
While iFLYTEK’s lack of profitability and its main products are facing challenges from multiple giants, the company also exposed defects in its technical barriers.
According to the financial report, the research and development expenses of the parent company of HKUST Xunfei during the reporting period were 1.634 billion yuan, which accounted for 22.43% of revenue. This is not much different from the proportion of research and development investment of HKUST Xunfei in recent years; and an increase of 36.13% over the same period last year. , Explained in the financial report as mainly due to the increase in amortization of R&D capitalization.
Since last year, there have been many doubts in the market, discussing that the sales expenses of iFlytek are higher than the research and development expenses; the sales expenses this time are 1.283 billion yuan, which is lower than the research and development expenses. The reason is, on the one hand, the pressure of multi-party containment, and on the other hand, the doubts from the market.
The advantage of iFlytek lies in the customization and development of intelligent voice. The research and development of technology is destined to invest a lot of research and development expenses. IFLYTEK’s investment in research and development costs is still small, which will inevitably affect the implementation of the technical scene, resulting in unstable construction of technical barriers and losing its leading advantage under the increasingly competitive intelligent voice track.
Secondly, pay attention to technology and talent investment, which may be the future of technology companies. The larger the scale of artificial intelligence and big data will be based on a solid cloud computing base, and the R&D investment in cloud computing will have very strict requirements on talents, capital and hardware, and it is inevitable to realize intelligence in large-scale scenarios in the future. Need to increase investment in the underlying technology and compete for talent.
For iFLYTEK, the first stock of artificial intelligence, it has already lost the support of investment funds in this battle, and it has also missed the cloud service market.
In the strong AI cloud service of HKUST, its position is being leveraged by giants. According to IDC’s Semi-annual Research Report on China’s AI Cloud Service Market, Alibaba Cloud and Baidu have the highest market share in the voice AI market. Among them, Alibaba Voice AI ranks first in six dimensions in three areas: intelligent voice, conversational AI, and machine learning. First, with 44%, 57%, and 29% market share, it ranks first in the three major markets.
However, iFLYTEK's talent investment is far behind the layout of giants. It is understood that Alibaba has previously stated that it will recruit 5,000 technical talents in the field of cloud computing this year and invest another 200 billion yuan in the next three years. With a total market value of only 79.2 billion HKUST iFlytek, such a large amount of capital investment is unsustainable.
In addition, iFlytek also faces many challenges in the field of domestic intelligent customer service. It is understood that iFlytek was "pryed" away by a Baidu company as a major customer of Unicom, and further cooperation with mobile and telecommunications led to the withdrawal and contraction of related business departments of iFlytek.
Finally, regarding the reduction of shares held by HKUST iFLYTEK shareholders, before HKUST iFLYTEK’s semi-annual report this year, an announcement showed that China Mobile, the largest shareholder of HKUST iFLYTEK with a shareholding ratio of 12.23%, held shares for seven years. After reducing its holdings for the first time, it will reduce its holdings of 1% of the company's shares within half a year from August 24. In the third quarter, China Mobile's shareholding ratio was 12.03%.
Finally, continue to use artificial intelligence, the scene landing is the key? All the above indicate that iFLYTEK is under the pressure of investors and capital investment. In the future, iFLYTEK will accelerate the competition, rebuild its own technical barriers, and accelerate the implementation of artificial intelligence in multiple scenarios.
Therefore, before the third-quarter financial report, iFlytek held the Global 1024 Developers Day, repeatedly emphasizing the value of artificial intelligence, and this was once a brilliant performance for this financial report. On the Developer Day, Hu Guoping, President of the Consumer Business Group of HKUST Xunfei said, “In the next three years, HKUST Xunfei will have greater opportunities in education and healthcare. In addition, there will be smart cities, smart transportation, smart justice, and smart hardware. ."
In this financial report, iFlytek also disclosed that the artificial intelligence industry continues to develop, and the company's source technology-driven strategic layout results continue to appear. In addition to the previous impact of the epidemic, the current track business such as education and medical treatment is maintaining healthy development, and various businesses driven by the company's core artificial intelligence technology are accelerating.
The commercial value of artificial intelligence depends on application scenarios. According to the current focus of HKUST Xunfei, the implementation of these scenes is still in the early stage, and this company also faces the same challenges as Internet giants and AI companies.
In addition, there is also a research report issued by Guosheng Securities Institution, which stated that "Intensified market competition, backward technology research and development and under-investment, impact of the new crown epidemic, brain drain, increase in accounts receivable, and under-receipt by customers The risk that the cost investment may be further increased" expressed concern.
Conclusion
After HKUST Xunfei released its third-quarter financial report, Essence Securities maintained the “Buy-A” rating of HKUST Xunfei with a 6-month target price of 45 yuan.
In addition, the securities released a research report that "As a leading domestic artificial intelligence company, the application of artificial intelligence in various industries is advancing by leaps and bounds. The company is entering the artificial intelligence 2.0 strategic stage, and the per capita benefits are expected to increase significantly." This financial report from Xunfei.
However, iFLYTEK, which has always been placed high hopes by the market, should have a mature business model in the past ten years of listing. However, its profitability is still insufficient and its rolling price-earnings ratio is still as high as 107.25. How to return investors’ expectations and reactions In terms of performance, it is still worth studying.
Author: Yexiao An
Article source: Songguo Finance, please indicate the copyright