The stock price keeps falling, is the "number one stock" AIGC of Hong Kong stock market "not living up to its name" MOBVOI?

Since its listing, the Hong Kong stock "AIGC First Stock" Mobvoi (02438) has presented a strong "contrast" to the outside world.

Before the listing, it was highly sought after by the market, with a public offering oversubscribed by 117.39 times and an international offering oversubscribed by 1.58 times. The oversubscription of over a hundred times reflected the market's expectations. However, after the listing, it "shocked the eye", not only encountering a break on the first day of listing, with the opening price falling more than 21% below the issue price and closing with a 3% decline. Since the listing, its stock price has been "halved", falling by over 50%.

On July 19, Mobvoi's stock price plummeted by more than 10 points at the close, with its price falling by 7.01% to HKD 1.46 at the close. On July 22, its stock price turned from red to green again, with a more severe decline at the beginning of the afternoon session. By the close, its stock price fell by 2.05% to HKD 1.43, with a total market value of HKD 2.148 billion.

From oversubscription by over a hundred times, to a break on listing, and then to a cumulative decline of over 50%, investors in the secondary market undoubtedly have a strong contrast in their attitudes towards Mobvoi.

As we all know, when considering the investment value of a company, it is nothing more than starting from the company's profitability and industry competitiveness. Nowadays, Mobvoi has been "voted with their feet" by the market after listing, which clearly reveals investors' "dissatisfaction" with it.

Therefore, what are the reasons that have led investors to change their attitudes towards Mobvoi?

Profitability "doubtful", cash flow increasingly tight

From the performance perspective, the fluctuating fundamentals and tight cash flow of Mobvoi may be one of the reasons that fail to convince investors.

According to the Securities Times APP, Mobvoi, founded in 2012, is a company with generative AI and voice interaction technology at its core, providing AI Generated Content (AIGC) solutions, AI enterprise solutions, and smart devices and accessories. Since its listing on the Hong Kong stock market on April 24, 2024, it has successfully taken the title of "AIGC First Stock" in Hong Kong.

However, while the title of "AIGC First Stock" may be easy to obtain, the strength of the "AIGC First Stock" is not easy to build.

It is reported that when founded in 2012, Mobvoi mainly focused on voice search software, such as releasing the first smartwatch TicWatch in 2015 and the TicWatch international version in 2016. In the following years, the company shifted its focus to smart hardware, and in 2019, it discontinued all businesses except for smartwatches and smart car-mounted devices.

From 2020 to the present, Mobvoi's main revenue source has shifted from smart hardware to software solutions. At that time, before the "big model wave" arrived, Mobvoi had developed the large model UCLAI, but due to the issue of "how to commercialize it", gradually shifted its research focus to AIGC, launching AI dubbing assistant "Magic Sound Studio", AI digital person "Wonderful Element", and so on In 2023, the wave of large-scale models officially arrived, and MOBVOI took advantage of its previous strengths to launch an upgraded version of UCLAI called "Sequence Monkey." This model not only has general language capabilities such as logic, reasoning, and dialogue, but also supports different tasks such as text generation, image generation, 3D content generation, voice generation, and speech recognition. As the saying goes, "It's better to be early than clever," MOBVOI has become one of the "earliest AI companies in China to enter the field of large-scale models."

However, amidst the fluctuating business shift, MOBVOI also presented a rather volatile "financial report card."

According to financial data, from 2021 to 2023, the company's revenue was 398 million yuan, 500 million yuan, and 507 million yuan respectively. While the revenue increased year by year, the company's losses also grew larger. The annual losses during this period were 276 million yuan, 670 million yuan, and 803 million yuan.

In 2022, MOBVOI recorded an adjusted net profit of 108 million yuan, turning losses into profits. However, in 2023, the adjusted net profit dropped to 18 million yuan, a significant decrease of 83.5%. Such volatile performance also highlights external doubts about its ability to sustain profitability.

The continuous losses may be related to the increasing research and development expenses, as well as sales and marketing expenses. From 2021 to 2023, MOBVOI's research and development expenses increased annually to 92 million yuan, 119 million yuan, and 155 million yuan. During the same period, sales and marketing expenses also continued to rise. In 2023, MOBVOI's sales and marketing expenses were 151 million yuan, a year-on-year increase of 55.67%.

With insufficient self-generation ability, MOBVOI's cash flow is visibly tight. By the end of 2023, the company's cash and cash equivalents were only 144 million yuan, while current liabilities amounted to 4.517 billion yuan. The net current assets were -4.121 billion yuan, indicating significant debt pressure.

From the performance perspective, MOBVOI's stock price has been fluctuating downward since its listing, which may be related to its lackluster fundamentals.

"Less than satisfactory," the need to strengthen competitive barriers

If we cannot determine MOBVOI's true strength from its current profitability, we can explore its investment value through indicators such as industry competitiveness.

According to a ZHUO Insight report, MOBVOI is one of the earliest and largest AI companies in Asia focused on generative AI. In 2020, MOBVOI launched the first AIGC dubbing platform "Magic Sound Studio" based on its independently developed AI technology, becoming the first commercial application of AIGC technology in China.

In 2022, the release of ChatGPT led to an explosion in the global AIGC industry, making AI a hotly contested track that attracted significant capital attention. With strong support from capital, the domestic AI industry has also entered the "fast lane." According to ZHISHI Consulting, based on revenue calculations, the size of the Chinese AI market has increased from RMB 56 billion in 2018 to RMB 194.2 billion in 2022, with a compound annual growth rate of 36.5% from 2018 to 2022. It is expected to reach RMB 644.8 billion in 2027, with a compound annual growth rate of 27.1% from 2022 to 2027.

An imaginative industry does not mean that there is no competitive pressure for Mobvoi, which entered the market early.

Data from ZHISHI Consulting shows that in 2022, Mobvoi only accounted for 0.3% of the overall AI market in China. In the field of speech and NLP software, its market share is 1.4%, ranking third. The industry is fragmented and highly competitive.

Furthermore, although Mobvoi has taken some advantage, its market influence and popularity currently lag far behind the industry leaders. According to the QuestMobile report, in 2024, in generative AI and AIGC applications, Douyin's "Dou Bao", Baidu's "Wenxin Yiyuan", Kunlun Wanwei's "Tiangong", DotC United Group's "Banban-AI Painting", and iFlytek's "Xunfei Xinghuo" ranked in the top five, with monthly active users of 17.57 million, 12.13 million, 8.01 million, 6.43 million, and 5.58 million respectively. In contrast, Mobvoi's AIGC business has 2 million monthly active users.

It is worth noting that in addition to facing intense competitive pressure, Mobvoi's competitive barriers are not strong enough.

Currently, Mobvoi's revenue mainly comes from AI software solutions and smart devices and other accessories, with revenue proportions of 67.7% and 32.3% in 2023, respectively. Among them, the company's AI software solutions are divided into AIGC solutions and AI enterprise solutions, with revenue proportions of 23.2% and 44.5% respectively during the same period.

In terms of AI software solutions, Mobvoi can provide AIGC full-stack solutions for C-end content creators, including the AI voice assistant "Moyin Workshop" and the overseas version "DupDub", the AI digital person providing virtual live broadcasts "Qimiao Yuan", and the short video AI generation platform "Yuanchuang Island". It can also provide AI software solutions for B-end customers (automotive, finance, TMT, and other industries), namely "Qimiao Wen", providing AI voice interaction solutions for scenarios such as in-car, AI anti-fraud, and intelligent customer service.

(Image Source: Mobvoi Prospectus) From the revenue structure perspective, MOBVOI's AIGC solution (23.2%) has not yet fully exerted its strength, and the AI enterprise solution remains the main source of income for the company.

However, it is worth noting that MOBVOI's AI enterprise solution is facing the risk of "major customer loss."

According to the prospectus, Company A, an automotive subsidiary, is MOBVOI's largest customer in the enterprise business in recent years, contributing revenue shares of 42.6% and 27.4% in the past two years, respectively. It is reported that the business between MOBVOI and automotive subsidiary Company A has a gross profit margin of over 90%, mainly due to the nature of intellectual property transfer in sales, and the project was completed with final delivery in June 2023. This means that there is significant uncertainty in maintaining revenue and gross profit for the enterprise business of MOBVOI in the future.

While the B-end has not established solid connections with more customers and accumulated more enterprise data, in addition to facing a clear bottleneck in the growth rate of C-end customers.

According to relevant data, MOBVOI has recorded over 10 million users of the AIGC solution globally since 2020. As of the fiscal years ending on December 31, 2021, 2022, and 2023, the company's AIGC platform has attracted approximately 1.5 million, 3.0 million, and 4.0 million users, respectively. Although the user base is impressive, the growth rate of registered users is gradually slowing down.

In addition to the mediocre fundamental performance, the company's ability to generate profits is also beginning to struggle. Coupled with the relatively weak industry competitive barriers, investors' concerns about holding it seem reasonable