in 2023, cambrian revenue was 0.709 billion yuan, down 19.648 million yuan or 2.70 percent from the same period last year. Net profit attributable to the parent company was -0.836 billion yuan, 33.50 lower than the loss in the same period last year

Punctuation Financial Researcher Xinyi

the fiery ChatGPT has brought artificial intelligence into public life, and the wave of AI technological innovation has also risen one after another.

recently, focusing on the research and development of artificial intelligence chip products and technological innovation, zhongke cambrian technology co., ltd. (hereinafter referred to as cambrian, 688256.SH), known as the "first share of AI chips", released its 2023 annual performance express.

Data show that in 2023, the Cambrian operating income was 0.709 billion yuan, a decrease of 19.648 million yuan from the same period last year, a year-on-year decrease of 2.70; the net profit attributable to the parent was -0.836 billion yuan, a decrease of 33.50 from the loss in the same period last year. And due to the narrowing of the net profit loss, Cambrian's basic earnings per share increased by 35.35 over the same period last year, from -3.14 yuan/share to -2.03 yuan/share.

Judging from Cambrian's performance since 2017, on the one hand, Cambrian's revenue has grown steadily, and there will be Dafu growth in 2019 and 2021 respectively. On the other hand, Cambrian's net profit continued to lose, with a cumulative loss of nearly 5 billion yuan from 2017 to 2023.

punctuation financial researchers note that Cambrian revenue is highly dependent on large customers, with the top five customers accounting for more than 80% of revenue from 2017 to 2022, while accounts receivable turnover days are increasing year by year, with accounts receivable turnover days reaching 307.06 days in 2022.

In addition, since 2023, Cambrian has suffered a liquidation reduction by many shareholders, and the actual controller has also issued an announcement promising not to reduce the company's shares.

7-year total loss of 4.954 billion yuan

Founded in 2016, Cambrian landed on the Shanghai Stock Exchange's CRE Board in June 2020 and is committed to building core processor chips in the field of artificial intelligence. The company's main business is applied to all kinds of cloud servers, edge computing equipment, terminal equipment in the development and sales of artificial intelligence core chips.

At present, the company has developed three types of chip products, namely, terminal intelligent processor IP, cloud intelligent chip and accelerator card, edge intelligent chip and accelerator card, and has developed a unified basic system software platform for all products of the above three product lines.

2023 is the first year of the "big model" outbreak. the hot ChatGPT at the beginning of the year makes AI technology more concrete in life, and AIGC (generative artificial intelligence) related applications continue to emerge. In the-share market, related AI concept stocks continue to rise, and Cambrian, as the "first share of AI chips", is no exception. The stock price has risen all the way, up to 271.47 yuan per share.

But Cambrian failed to keep the share price rising, and the company's share price began to fall in the second half of 2023.

The brief wave of AI mania did not make Cambrian take the opportunity to turn over, which may be related to the company's continued sluggish performance.

from 2021 to 2023, Cambrian's annual revenue was 0.721 billion yuan, 0.729 billion yuan and 0.709 billion yuan respectively. under the wave of AI in 2023, Cambrian's revenue declined instead. In addition, since 2017, the net profit attributable to the parent in each year of the Cambrian has been -0.381 billion yuan, -0.041 billion yuan, -1.179 billion yuan, -0.435 billion yuan, -0.825 billion yuan, -1.257 billion yuan and -0.836 billion yuan respectively, with losses for successive years and a total loss of 4.954 billion yuan for seven years. For not yet profitable and accumulated losses, Cambrian said it was mainly due to its small revenue scale and large R & D investment.

in the AI wave of 2023, the main competitor of Cambrian cloud smart chips and accelerator cards, artificial intelligence company NVDA (NVDA.us), took advantage of the wind and saw a sharp rise in performance. According to the data, NVIDIA's 2023 revenue was $60.92 billion, up 125.88 percent from $26.97 billion in 2022, and its net profit attributable to its parent was $29.76 billion in 2023, up 581.32 percent year-on-year. It can be seen that Cambrian still has a lot of room for improvement in revenue and net profit.

Cambrian recent stock price trend (yuan)

Data source: Dongfang Fortune

How to crack the "dependence syndrome" of major customers?

Looking at Cambrian historical data, punctuation finance researchers found that the company has a high concentration of customers and accounts receivable turnover days are increasing year by year.

public data show that in 2017, the top five Cambrian customers accounted for 100 per cent of revenue, and the proportion has declined year by year since then. From 2020 to 2022, the top five Cambrian customers accounted for 82.11 percent, 88.60 percent, and 84.94 percent of each year, respectively, and remained at a high level overall.

At the same time, the company's revenue is more dependent on the number one customer. In 2017, the company's largest customer was Huawei Haisi, accounting for 98.34 percent of revenue. After constantly expanding new customers, Cambrian's first largest customer is constantly changing, but it has not been able to change its dependence on the first largest customer. From 2020 to 2022, Cambrian's largest customer revenue accounted for 57.86 percent, 62.46 percent and 60.81 percent, respectively.

High dependence on large customers means that in the future, if the purchase volume of large customers is significantly reduced or the cooperation relationship with major customers is not maintained, it will have a significant adverse impact on the company's performance.

It is also worth noting that with the growth of revenue scale, Cambrian accounts receivable have gradually expanded, and the slow return of individual customers has led to a significant increase in the company's accounts receivable turnover days. The data show that in 2022, the turnover days of Cambrian accounts receivable were 307.06 days, compared with 39.43 days in 2019.

AI smart chips are more customized, and large models such as AIGC require the underlying support of high-process computing chips. The sustainable development of the chip industry is inseparable from high-quality R & D investment. Cambrian still vigorously raises R & D investment despite annual losses.

Since 2018, Cambrian R & D investment has increased significantly year by year; from 2020 to 2022, the annual R & D expenses were $0.768 billion, $1.136 billion, and $1.523 billion, respectively, with R & D expense rates of 167.32 percent, 157.56 percent, and 208.92 percent, respectively.

Sustained high R & D investment has enabled Cambrian to achieve certain results in patents. As of December 31, 2022, the company has 865 patents granted. In addition, Cambrian also has 63 software copyrights and 6 integrated circuit layout designs. However, the small scale of revenue and large-scale R & D investment have also become the main reason for the company's continued losses. This situation may be difficult to change in the short term in the future.

Cambrian R & D Expenses and R & D Expenses Rate from 2018 to 2022

Data source: based on public information

Shareholder liquidation

The Cambrian documentary controller is Chen Tianshi, who currently holds the position of chairman and general manager of the company. As of the end of the third quarter of 2023, Chen Tianshi's shareholding was 28.69 percent, making him the largest shareholder.

Chen Tianshi has served as a researcher (senior title) and doctoral supervisor at the Institute of Computing Technology of the Chinese Academy of Sciences, and has been engaged in basic scientific research in related fields such as artificial intelligence and processor chips for more than ten years. Cambrian also has a close relationship with the Institute of Computing Technology of the Chinese Academy of Sciences. The company's second largest shareholder, Beijing Zhongke Computation Asset Management Co., Ltd., is a wholly-owned company of the Institute of Computing Technology of the Chinese Academy of Sciences, holding 15.76 per cent of the shares of Cambrian.

Along with the continued decline in the share price, Cambrian also suffered a liquidation reduction by a number of shareholders. In 2023, Nanjing China Merchants Bank reduced its holdings of 3.1146 million shares; Hubei China Merchants Bank reduced its holdings of 1.5395 million shares; Paleozoic Venture Capital reduced its holdings of 5.9754 million shares; SDIC Venture Fund reduced its holdings of 7.3987 million shares. The total amount of the four shareholders to reduce their holdings is about 3.132 billion yuan. After the reduction is completed, they will no longer hold Cambrian shares.

In order to stabilize market confidence, Cambrian issued an announcement on September 26, 2023 that the actual controller voluntarily promised not to reduce the company's shares. From the announcement date to December 31, 2024, it will not reduce its holdings in any way. At the same time, Cambrian also carried out share buybacks, but still difficult to stop the company's share price downward trend.