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What You Need to Know About SenseTime Group Inc. (00020.HK) IPO?

SenseTime Group Inc. (00020.HK) has started its IPO project and expected to list in Hong Kong Stock Exchange on Dec 30, 2021. Underwriters including China International Capital Corporation Hong Kong Securities Limited, Haitong International Capital Limited, HSBC Corporate Finance (Hong Kong) Limited. What is SenseTime Group Inc. ? Here are the summary your should know about this company.

What is SenseTime Group Inc. (00020.HK) )?

SenseTime Group Inc. is a leading AI software company with a focus on computer vision technologies, serving a broad range of industries. In terms of revenue in 2020, it was the largest AI software company in Asia, and, with a market share of 11%, the largest computer vision software provider in China, according to Frost & Sullivan. As of June 30, 2021, its software platforms had been used by over 2,400 customers, including over 250 Fortune 500 and other publicly-listed companies, 119 cities and over 30 automobile companies, while empowering over 450 million mobile phones and over 200 mobile apps.

SenseTime Group Inc. business model are consist of four business units, which focusing on Smart Business, Smart City, Smart Life and Smart Auto. The company generate revenue primarily from sales of software platforms, comprising software licenses, AI software-embedded hardware and related services.

Market Opportunity

According to Frost & Sullivan, AI software is expected to be one of the fastest-growing business areas in this decade. The global AI software market size is expected to reach USD121.8 billion in 2025, growing at a CAGR of 31.9% from 2020. The computer vision software market in China is expected to grow at a CAGR of 43.5% from RMB16.7 billion in 2020 to RMB101.7 billion in 2025.

Financial Highlights

SenseTime Group Inc. achieved strong growth since 2014. Its revenue grew from RMB1,853.4 million in 2018 to RMB3,026.6 million in 2019 and further to RMB3,446.2 million in 2020, and from RMB861.2 million in the first half of 2020 to RMB1,651.8 million in the first half of 2021.

Gross profit margin grew from 56.5% in 2018 to 56.8% in 2019 and further to 70.6% in 2020, and from 72.1% in the first half of 2020 to 73.0% in the first half of 2021.

The research and development expenses in 2018, 2019, 2020 and the first half of 2021 were RMB848.7 million, RMB1,916.0 million, RMB2,453.9 million and RMB1,771.7 million, respectively.

However, net losses in 2018, 2019, 2020 and the first half of 2021 were RMB3,432.7 million, RMB4,967.7 million, RMB12,158.3 million and RMB3,712.9 million, respectively. The historical net losses were also largely attributable to the fair value losses of the preferred shares.

Lastest Development of U.S. Regulatory

On December 10, 2021, the U.S. Department of the Treasury designated SenseTime Group Limited as a Chinese Military-Industrial Complex company (“CMIC”) by adding it to the Non-SDN Chinese Military-Industrial Complex Companies List (the “NS-CMIC List”) under Executive Order 13959, as amended through Executive Order 14032 (the “Executive Order”), with an effective date of February 8, 2022.

The Executive Order prohibits United States persons as defined in Section 3(d) of the Executive Order, beginning on the effective date for the designation of a CMIC, from “the purchase or sale of any publicly traded securities, or any publicly traded securities that are derivative of such securities or are designed to provide investment exposure to such securities, of any person listed” as a CMIC (the “Relevant Securities”), unless licensed or authorized by the relevant U.S. government authority.

Conclusion

Even facing with highly uncertain political risk, SenseTime Group Inc. still showing strong growth through the past few years and maintain its leadership in Asia ‘s AI software sector. By adding SenseTime Group Inc. may help investor to share the future growth of AI software market. However, investor should also take the political risk for consideration and limit the investment size with own risk tolerance level.

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