Summary of SenseTime Conference Call Company Overview - **Company**: SenseTime (0020.HK) - **Industry**: Artificial Intelligence (AI) and Cloud Computing Key Points and Arguments 1. **New Project Wins**: SenseTime has secured new generative AI projects from various sectors including education, healthcare, media, finance, and transportation, indicating a broad market appeal and demand for its solutions [1][2] 2. **Cloud Capex Spending**: The company anticipates accelerated project wins driven by increasing cloud capital expenditure in China, exemplified by a Rmb1 billion order from China Mobile for AI inferencing solutions [1] 3. **Comprehensive AI Solutions**: SenseTime offers a complete solution package that includes computing power, large-scale AI infrastructure (SenseCore), and AI foundation models (SenseNova 6.5), catering to both business-to-business (ToB) and business-to-consumer (ToC) applications [1] 4. **Project Value**: The average project value for industry clients is approximately US$390,000, showcasing the financial significance of these contracts [2] 5. **Diversification of Client Base**: The company has expanded its client base beyond technology and communication sectors to include various industries, enhancing its market presence [2] 6. **Focus on Large Projects**: SenseTime plans to concentrate on larger projects in the coming years to improve operational efficiency and revenue generation per employee [2] Financial Projections 1. **Earnings Revisions**: The net loss projections for 2026 and 2027 have been revised to Rmb951 million and Rmb194 million, respectively, reflecting improved expectations due to higher generative AI project revenues [6] 2. **Revenue Growth**: The company expects a revenue growth rate of 32% year-over-year for 2026-2027, indicating strong market demand and operational scaling [9] 3. **Target Price**: The 12-month target price is set at HK$3.53, with an implied EV/Sales valuation of 19x, reflecting a positive outlook based on historical performance and market conditions [8][21] Valuation Metrics 1. **Valuation Methodology**: The valuation is based on a two-stage discounted cash flow (DCF) model and an EV/Sales approach, with a WACC of 10.7% and a terminal growth rate of 2% [10][21] 2. **DCF Valuation**: The DCF value per share is estimated at HK$3.46, while the EV/Sales valuation is pegged at HK$3.60, indicating a robust valuation framework [10][12] Risks 1. **Market Risks**: Key risks include slower-than-expected adoption of generative AI by customers, lower-than-anticipated customer spending, and increased competition in the AI market [22] Additional Insights 1. **Project Breakdown**: A detailed exhibit lists key projects across various industries, highlighting significant contracts such as the AI city services empowerment project for Kunming Government valued at Rmb28.67 million [6] 2. **Financial Performance**: The company is projected to achieve positive EBITDA by 2026, with a gradual improvement in operational margins over the forecast period [19] This summary encapsulates the essential insights from the conference call, providing a comprehensive overview of SenseTime's current position, future outlook, and associated risks in the AI industry.

Core Viewpoint - The Hong Kong government is promoting AI development, which has positively impacted the stock performance of SenseTime, leading to a significant increase in its market valuation [1][3]. Financial Performance - SenseTime reported a revenue of 2.4 billion yuan for the first half of 2025, representing a 36% year-on-year growth, exceeding market expectations [3]. - The company's generative AI revenue surged by 73%, accounting for 77% of total revenue, indicating a successful strategic shift [3]. - Gross margin remained at 39%, with adjusted net losses narrowing by 50% and cash reserves improving to 13.2 billion yuan [3]. - Accounts receivable management showed a 96% increase in cash collection, with accounts receivable turnover days reduced by 49% [3]. Business Strategy - SenseTime's "one foundation, two wings" strategy has enabled its products to penetrate various industries, with over 3 million users for its enterprise service series [4]. - The company has established a commercial closed loop from "model" to "application" to "scenario," making generative AI a quantifiable and scalable business source [4]. Technological Advancements - SenseTime's AI infrastructure has achieved a total computing power of over 25,000 PetaFLOPS, with a 95% efficiency in heterogeneous training [7]. - The latest model, V6.5, has improved pre-training throughput by over 20% and inference throughput by 35%, significantly enhancing performance and cost-effectiveness [8]. - The automated data preparation process has reduced costs and accelerated model optimization, creating a competitive data barrier [8]. Market Outlook - Goldman Sachs has upgraded SenseTime's rating to "buy" with a target price of 2.72 HKD, indicating a potential upside of approximately 30% [10]. - The firm anticipates that generative AI revenue will account for 91% of total revenue by 2030, marking a significant shift towards industry leadership [10]. - Multiple brokerages have expressed optimism about SenseTime's growth potential, citing its strong market position and innovative capabilities [11]. Stock Performance - SenseTime's stock has risen nearly 80% year-to-date, with a peak increase of over 110%, reflecting strong market interest and trading activity [12].