Core Insights - The revenue model of the company is highly dependent on hardware sales, with 99.5% of revenue in 2024 coming from this segment, while the PaaS platform "商米大程序" contributed only 0.5% of revenue, indicating a lack of sustainable software subscription model [1][7] - The total number of customers has decreased by nearly 10% over three years, and to maintain customer relationships, the company has extended credit terms, resulting in an increase in accounts receivable turnover days from 36 days in 2022 to 89 days in 2024, with accounts receivable accounting for 30.3% of total revenue in 2024, impacting cash flow and increasing bad debt risk [1][10][12] Group 1: Business Model and Financial Performance - The company is recognized as the "largest Android-based BIOT solution provider" globally, with a market share exceeding 10% and operations in over 200 countries [6] - Revenue figures for 2022 to 2024 are reported as 34.04 billion, 30.71 billion, and 34.56 billion RMB respectively, with net profits of 1.60 billion, 1.01 billion, and 1.81 billion RMB, indicating a slight recovery in 2024 but overall stagnation compared to 2022 [6][9] - The revenue is primarily derived from "smart device sales" and "PaaS platform and customized services," with smart device sales consistently accounting for over 98% of total revenue during 2022-2024 [7][9] Group 2: Customer Concentration and Credit Risk - The company faces challenges of high customer concentration and ongoing customer attrition, with the top five customers accounting for 42.3%, 28.8%, and 41.1% of revenue from 2022 to 2024, and the largest single customer contributing 19.3%, 16.5%, and 22.0% respectively [10][12] - The total number of customers has declined from 2506 in 2022 to 2262 in 2024, reflecting a loss of nearly 10% over three years [10] Group 3: Manufacturing and Cost Structure - The company relies heavily on OEM production, with over 90% of products manufactured by approximately 30 OEM factories, while its own production capacity accounts for only 3.3% of total output [2][16] - The reliance on OEMs has raised concerns about cost control, with the gross margin improving to 28.9% in 2024 but still below industry peers [2][17]

Core Viewpoint - Shanghai Shangmi Technology Group Co., Ltd. (Shangmi Technology), a provider of commercial Internet of Things (BIoT) solutions, is transitioning from the Science and Technology Innovation Board (STAR Market) to the Hong Kong Stock Exchange, backed by major investors like Ant Group, Meituan, and Xiaomi. The company has achieved profitability from 2022 to 2024, contrasting with its previous losses during its STAR Market application [1][3][4]. Financial Performance - Shangmi Technology reported revenues of RMB 34.04 billion, RMB 30.71 billion, and RMB 34.56 billion for the years 2022, 2023, and 2024, respectively, with net profits of RMB 1.60 billion, RMB 1.01 billion, and RMB 1.81 billion during the same period [4][6]. - Despite a decline in revenue and net profit in 2023, the company has significantly improved its financial performance compared to its previous application period [4][6]. Business Model and Revenue Structure - The company claims to be the "largest Android-based BIoT provider globally," but over 98% of its revenue comes from hardware sales, indicating a reliance on a single revenue stream [3][6]. - The revenue from smart device sales for 2022-2024 was RMB 33.89 billion, RMB 30.08 billion, and RMB 34.38 billion, representing 99.5%, 98%, and 99.5% of total revenue, respectively [6][10]. Production and Cost Structure - Shangmi Technology relies heavily on OEM and ODM manufacturing, with over 92% of its products produced by third-party manufacturers, which affects its cost control and quality management [7][8][11]. - The gross profit margins for 2022-2024 were 28.12%, 26.74%, and 28.85%, which are lower than the average gross margins of comparable companies [7][11]. Shareholder Activity - Prior to the Hong Kong IPO, existing shareholders, including Ant Group's Yunxin Investment, have begun to reduce their stakes, indicating potential concerns about the company's future valuation and performance [2][13]. - Ant Group reduced its stake from 29.99% to 27.27% as part of a share transfer, reflecting a strategy to realize returns after a prolonged wait for the company's IPO [13]. Market Challenges - Shangmi Technology faces significant challenges in transitioning its business model from hardware sales to a more diversified IoT ecosystem service, which will be crucial for its valuation in the Hong Kong market [12][13]. - The company must address concerns regarding its business moat and the sustainability of its growth strategy amid competition and market dynamics [13].