Megvii Financials and Growth Examined

By Charles Rollet, Published Aug 30, 2019, 07:14am EDT

Megvii has already received more than a billion dollars in investment. Now, the company, a top China facial recognition provider, has filed for an IPO this week on the Hong Kong Stock Exchange.

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This 500+ page IPO document reveals significant details into the size, growth, and usage of AI inside of China.

In this post, we look at the firm's financials, growth, City IoT focus, and the possible competitive threat to Hikvision & Dahua, including:

  • Megvii Background
  • Deeply Unprofitable, Growing Fast
  • Principal Verticals
  • Main Customers Mostly Security/Surveillance SIs
  • Low International Presence
  • City IoT Largest Segment By Far
  • Covered Cities, Revenue Per Customer Booming
  • Capitalizing on AI Camera Switch
  • Threat to Hikvision and Dahua?
  • Alibaba Ownership Stake Impact
  • US Sanctions Risk
  • Conclusion

********

****** *** * **** reliance ** *** **** surveillance ******** (**** ~*/**** of ***** *******), *********** threatening ********* *** *****'* strong ********. *** ******* Megvii *** ********* ***** firms' ****** ******* ******* to ** ****, **** 95% ** ******'* ******** currently ** *****.

Megvii **********

******, ****-***** *** *******++********, ******** ****** *********** and ** ********* ** PRC *********** *** ********** sectors (***********, ******, *********** communities, ***.) ****** ** one ** *****'* **** face *** ******** - startups ****** **** $* billion - ***** ********,*********, ************. *** ****, **'* in *******, *** *,*** employees ** ** **** its *** ******.

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Fast *******, **** *** $***+ ******* ******* **** ****

**** ******** *******, *** **** *** 2018 ******* ** ~$*** million, **** ** **** revenue ********, ******* *** firm ** **** ** generate $***+ ******* ******* in ****.

** ******* ***** ************ AI ******* *** ******** near **** ***** ** revenue *** ******, **** even ****-***** *********** **** Briefcam ***** **** **** of ******** ** ******* per **** (*** ***** ******** ********).

************

**** **** ******** ****** is ************, ****** ****** half * ******* ******* last ****, ******** *********** this ** * ***-*** change ** *****-***** ************ and *&* ********.

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** *** ***** ****, their **** **** ****** rate (******** ******** *********) and ******* ******** ******* make ** ********** ** investors ** *** ******* scales **.

Low ************* ********

****** ***** **% ** its ******* ****** *****, the *** ******:

****** *** ***** ****** Period, ** ********* *.*%, 0.8%, *.*% *** *.*% of *** ******** **** markets ******* ** *** PRC ** ****, ****, 2018 *** *** *** months ***** **** **, 2019, ************."

**** ** *** ** a *********** ** ******* - *** ***'* ***** internal ******, *** *******'* mandate *** ********* ** / ****** *********** (******** ****** ***** ************ Guide: **** ****** ** Sharp ****), ****** ***'* ******* ** disadvantaging ** ******* *****.

Main *********

****** ******* *** ******** into * **** *********:

  • "******** ***" (*.*. ****** recognition ** ****** ***********)
  • "**** ***" (***** ******/****** surveillance *****, *********** *********)
  • "****** ***** ***" (***** logistics *** ******)

***** ** ***** ********* of ****:

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City *** ****** */*** ** *******

**** ****** ****** **** it ******** **** *** authentication ** "**** **% of *******-***** ***********" ** China **** ****, **** IoT ** ** *** its **** ********* *******, making ** **% ** its ******* *** *** first *** ****** ** 2019 (~$*** *******). **** IoT ******* **** **** quadrupled ****-**-****, ************* ****** growth **** *** ***** areas:

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Clients ****** ********/************ ***********

**** ** ******'* ******* are ******* *********** ** the **** ************ *** smart ********* *****:

** ****, *** *** five ********* ******** (*) a ****** ********** ** China *** ***** **** management *********, (**) * system ********** ** ***** for ***** **** ********** solutions, (***) * ****** integrator ** ***** *** smart ********* *********, (**) a ******** ** ****************** service ** ***** *** (v) * ****** ********** in ***** *** ***** logistics *********"

***** ******* *** **** clients ********* *** **% of ******'* ******* ** 2019.

Covered ****** & ******* *** ******** *******

** **** ***, ****** says ** *** ****** 112 ***** ******, ****** twice ** **** ** a **** ***:

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***** ***** ******** ********* declined **** *** ** the ***** ** *** year ** *** *****, average ******* *** ******** customer *** **** **** doubled ** ~$***,***.

*** *** ********* *** not ***** / **** which ***** ****** *** Megvii.

City *** ******* *******

**** *** ** * booming ******, **** ***** spending ** ***** ****** and "********* **********" (***** includes, *.*. ****-***** ****** control ** *********-*** ************) expected ** **** **** quadruple **** **** $* billion **** **** ** over $** ******* ** 2023:

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AI ******* ******** ** ***** ******* ******

****** ******* ** ********** on *** ****** ** AI ******* ** *****'* smart ******, ***** ** estimates **** * **% presence **** ****, ********** to **** **% ** 2023:

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********** ** ******* *** other ********,******* ** *** *** its "****-*****" (*.*. ***-**-***) offering ** "**-********* *** devices":

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****** ******* *** *** MegEye ******, ***** *** firm ****** *** "************** extract **** ***** ** features, ****** ***** *******, faces, ******** *** ******* plates, ** *** ***** end":

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**** *** **** ******** manufacturer ***** ******* *** did *** ******** ***** source *** ** ****** tell **** *** *********** we **** *********.

Threat ** ********* *** *****?

******'* **** *** ***** could ********* ***** *** Hikvision's ********* *****. *** firms ********* *** **** PRC ********** ************ *****, notably**** $*.* ******* ** Xinjiang *****.

****** ****** *** *** mention *** ********* ** its *** ******, ****** is **** ** **** its ****** ** "*** largest**-*********** *** ******** ********" [emphasis *****]:

****** **** *****, ** have ****** * *********** market ******** ** *****’* City *** ********, *****used ** ** ********* ** *********** ******** *************

****** *** ** ******** to *********/***** ** **** chart ********** "*** **-******* players" (****** *** *** respond ** *** ******* to ******* ****):

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**** *****'* ****** ************ switching ** ** *******, if ****** ******* ** capture **** ******, ** could **** * ****** threat ** * *** part ** *********/*****'* ********. There ** ** ********* of ****, *******, *** it's ***** ****** **** telecoms *********** *** **** *************** *** ********* **** video ************ ** ********* 'AI *******' ** ***** cities ** ***** *** the *****.

Alibaba ********* ****** ** ************

******* ** * '********* investor' **** ******, **** a **.**% ***** ** the *******. **** '***********', as **** ********, ***** have ** ****** ** their ********* **** ***** surveillance *** *********** **** surveillance **********. ******* ** a **** ***** *******, some ** ****** **** Hikvision, **** ********* ** expand **** ***** **** / **** ************. ********, recently,******* **** * *********** investment **** *******, *****'* **** ******* direct ******** **********.

*** *********** ** *******, Megvii, *** ******* *** the ********* ** ** a *********** ****** ** PRC ***** ************.

One *** ******'* ****** ********* ***** ** ********

************* *** *****, ****** *** ******** operations*** *** ***** ** Chinese ******* * '********* ******* unit' ** *** ******** Public ******** ***** **********. The **** **** ********* ethnicity ********* **** ***** PRC ****** ** ************* identify ******* ** ********* Uyghur ********,*** *** ********.

******* ** **** ****** was******** ********** *** ** sanctions, ***** **** ********* and ***** *** ***** China ************ *****. ********* on *** **** ** sanction, ****** ***** ** barred **** ***** **** US ********** (** ** is ***** ** *** '****** ****') ** ** ******* banned **** *** ** and *** ** ****** frozen (** *** **** of********* *********). ** ******* ****** has **** *** **** SoCs"*** ** *** *****"******** **************** ****** ********* *****:

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** *** *** ******, Megvii *** *** ******* Xinjiang, *** *** ******** that ********* ** ********* could:

***** ** ****** *** development ** *** **********, products *** *********, ****** the ********* ** *** supply *****, *** *** result ** ******** *********, require *********** ********** **** and ********* *** ******* us ** *****, ********* or ****** **** ** cease ** ****** *** existing ******** *********, *** of ***** *** **** a ******** *** ******* effect ** *** ********, financial ********* *** ******* of **********.

****** **** ********* *** creation ** ** "** Ethics *********" *****, *********, includes *** ***** ********** Officer ** ********* **************** ************ *** **** ***-*** member. ********** *** ** public ********** ** ************* *********-**********.

**********

****** ***** ********* ********* and *****'* ****** ******* model, ****** ** * protected **** ****** *** strong ******. ******* **** is ******** ** *** current *** ** **-***** tensions *** ************* *** surveillance ******** ******* ** be ****. ************, ******, by ******** ** **** IoT, ****** ***** * long-term ****** ** ********* and *****.

Comments (5)

***** **** *******! ******** great ******* **** *** market ** *****.

Agree
Disagree
Informative
Unhelpful
Funny

******'* ******* ********** ********* is ********** ***** ** do $*** ******* ******* in ****,*** *******:

******* *** **** ******* to ******** ** **** than ***% ****-**-**** ** around $*** *******, *** sources ******** **** *** matter ****.

*** *** ******** *** therefore ***** ** ** $1+ ******* ** ******* this ****, ***** ***** literally ** ** *** amount **** ***** ***-***** facial *********** / ***** surveillance ** ******** ******** will ** **** ****.

Agree
Disagree
Informative
Unhelpful
Funny

******:********* ******** ******** **** ** growth, "********* ** ********* ******* for *********" **** *** that:

**** ******* * **** 2.7% ** ****’* ****** half ***** **** **** tripling ***** ** *** first *** ****** ** the ****...

****** **** ***** ** its ****** *** *.* billion **** ($*** *******) ** ***** ** almost **%, * ****** familiar **** *** ****** said, ****** *** ** be ********** ********** ******** targets.

********* ***** ****, ************, that *********** ***** ******* are *** *** ******* stream *** *** *******.

Agree
Disagree
Informative
Unhelpful
Funny

****** ** ******* ** for * *** *** after ******* ** ****** through **** *** ******* when ** ******** *** first ********** **** ** August ****. ** ** currently ******* **** ****** will ****.

** ********* ****, ************ * ******* ********** agreement **** ***** ********** and ***** ** **** on *** **** ***** through ***** ********** ******** (CDR), ********* *** ************ *** ******* ********** Regulatory ****** ****** ** January **, ****. **** are **** ** ***** non-China-based ********* ****** *****. Megvii ** ********** ********** in *** ****** *******.

**** ************ *** *** updated **** *** **** recent ********* ****. **** will ****** *********** ** we ***** ******'* ***.

Agree
Disagree
Informative
Unhelpful
Funny

* ** ** ******* of *** **$$$ *********. Perhaps *** ******* ***** should ***** ********* ***** of ****** ************.

Agree
Disagree
Informative
Unhelpful
Funny
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