WiMi Hologram Cloud Inc (WIMI)

[StockpickerCAPC]

The next 10-year trend, which company is heading for?

source
https://finance.sina.com.cn/stock/relnews/us/2021-04-09/doc-ikmyaawa8749770.shtml

April 09, 2021 16:47 Huasheng Information

Microsoft said on March 31 that the company won a contract to sell AR (augmented reality) headsets to the U.S. Army, and that the contract lasts for 10 years and is valued at 21.88 billion U.S. dollars. This makes the smart wearable industry that has been silent for a long time to boil again, and Microsoft's stock price has risen continuously in recent days and hit a record high.

Tianfeng International analyst Ming-Chi Guo published an article in March this year, saying that MR (Mixed Reality) and AR (Augmented Reality) are the next 10 years of major trends in the technology industry. Ming-Chi Kuo, who is known for predicting Apple products, is uniquely sensitive to trends in technological development. JPMorgan Chase analysts have revealed that Apple will officially release VR and AR products in the first quarter of 2022. In fact, Apple started researching AR technology as early as 2016, and CEO Cook said that he is optimistic about the development of AR in the long term.

With the rapid development and application of 5G technology, many industry verticals using VR/AR/MR related technologies are also developing rapidly. In addition to Microsoft and Apple, technology giants such as Facebook and Google have also participated in this track. Many small companies focusing on the AR technology segment have also emerged. Among them, WiMi Hologram (WIMI), known as the "first holographic AR stock", has surged 544% for two consecutive days in July last year, blasting the technology circle. However, the stock price fell rapidly afterwards, and the current market value is still less than $600 million.

What kind of company is WiMi Hologram? In the so-called general trend of the next 10 years, can WiMi Hologram lead the development of the trend?

1. Company Overview: "Advertising Company" with amazing gross profit?
Public data shows that WiMi Hologram was established in 2015 and has become a leading company in the AR segment in just a few years, and it will land on Nasdaq on April 1, 2020. From the company's prospectus, the company's main business is holographic AR advertising services and AR entertainment services.

The performance of the financial figures disclosed in the prospectus is very eye-catching. The company's revenue from 2017 to 2019 was 192 million yuan (the same unit below), 225 million yuan and 319 million yuan, an increase of 17% and 41.1% year-on-year. Obvious growth trend. Not only that, the company has already achieved profitability. The net profit for 2017-2019 reached 73 million yuan, 89 million yuan and 110 million yuan, respectively, and the growth rates were also as high as 22% and 24%.

Although the revenue is more eye-catching, but in specific terms, most of the company's revenue comes from AR advertising services, accounting for as much as 82.7%, while AR entertainment services account for 17.3%. It is worth noting that the company's gross profit margin is very high: AR entertainment projects are even as high as 90%, AR advertising business gross profit margin is also as high as 50%, and the overall gross profit margin is around 60%. It can be seen that WiMi Hologram relies heavily on the advertising business, which accounts for a large proportion of revenue, and was once ridiculed as an "advertising company."


2. The industry or the windward vent, obtains up to 170 million US dollars of investment
With the rapid development of 5G technology, AR application scenarios have become more extensive, and WiMi Hologram is gradually getting rid of the image of an "advertising company". Public information shows that WiMi Hologram currently has a number of patents in professional fields such as automotive AR holographic HUD, 3D holographic pulse LiDAR (lidar), head-mounted light field holographic equipment, holographic car navigation, etc., and has become an AR comprehensive technical solution provider.

At the same time, with the rapid development of new energy vehicles, autonomous driving technology has also become a battleground for military strategists. "Intelligent Connected Vehicle Technology Roadmap 2.0" pointed out that by 2025, the sales of L2 and L3 autonomous vehicles and conditional autonomous vehicles will account for more than 50%. To realize high-end autonomous driving technology, lidar is an indispensable component. Major car companies including Weilai, Xiaopeng and BMW have begun mass production of models equipped with lidar. The agency predicts that by 2025, the lidar market alone is expected to exceed US$10 billion.

On April 1, WiMi Hologram's electric vehicle holographic AR application product "WiMi HoloAR HUD" was approved to enter the US market. Prior to this, WiMi Hologram's head-mounted display product "WiMi Hologram Soft Light" also successfully entered the US market. AR-HUD can provide diversified information interaction, and is also the core configuration of the future autonomous driving field, which is needed by the majority of electric vehicle companies. WiMi Hologram's products can customize optical processing, image processing, voice interaction, augmented reality and other technologies according to customer needs to provide safe driving services for car owners.

Many capitals are optimistic about the development of the AR industry track. WiMi Hologram, which has been listed for only one year, has received investment of up to 170 million US dollars from many institutions such as Shengshijing Investment, Singapore UOB Ventures, and Weibo Investment. According to the survey agency's forecast, by 2025, the global holographic AR market size divided by revenue may approach 500 billion US dollars, with a compound growth rate of more than 65%.


3. Strong aid joins the core team, technology is expected to continue to lead
The founder of the company, Zhao Jie, is a professional with a master's degree from Tsinghua University. He once served as the software development work of AsiaInfo Beijing Co., Ltd., and later served as the director of Shenzhen Weixun Yitong Technology Co., Ltd., and the director of Xiamen Xiangtong Animation Co., Ltd.

The newly appointed CEO Shi Shuo has more than 4 years of experience in the company, and has more than 10 years of experience in sales, network management and cultural media. He has served as the secretary-general of the Shenzhen 3D Film Association and has a deep understanding of holographic imaging and other technologies.

Not only that, but at the end of last year, the company introduced three PhDs to the WiMi Hologram Academy of Sciences to further strengthen the technical team. Among them, Dr. Hu is a postdoctoral fellow from the Department of Electronics of Peking University and the leader of the 5G research team of Peking University Shenzhen Research Institute. He has many honors such as "Top Ten Nanshan Good Youths", applied for 17 invention patents, and participated in more than 10 national projects.

Dr. Yuan comes from the Institute of Electronics, Chinese Academy of Sciences and has a Ph.D. degree in communications and information systems. Participated in 5 key scientific research projects of the National Natural Science Foundation of China, the Natural Science Foundation of Hunan Province, and the Provincial Department of Education; 2 patents have been authorized; more than ten papers have been published in important academic journals at home and abroad, including SCI (Science Citation Index) ) Contains 9 articles.

Dr. Peng is a Ph.D. from Beijing Institute of Technology majoring in Electronic Science and Technology. He has long been engaged in research in the fields of electronic information, artificial intelligence, and medical signal processing. Dr. Peng has extensive research and development experience, published more than 10 papers, and applied for more than 20 patents.

CEO Mr. Shi Shuo commented: "With the rapid development and implementation of 5G technology, we hope to promote the rapid maturity of augmented reality, virtual reality and holographic technologies and be widely used in advertising, entertainment, tourism, medical insurance, and construction. As a result, we have established the WIMI Holographic Academy of Sciences. While promoting the development of holographic AR technology, we are committed to solving many technical bottlenecks including display mode, display size, resolution, and calculation. Looking forward to the future, we plan to use the college to continuously strengthen scientific and technological research capabilities and further enhance our leadership in the field of holographic AR technology."

4. Risks faced and investment advice
I
Financial data has deteriorated. Judging from the published data, WiMi Hologram's net profit in the first half of 2020 was 22.9 million yuan, while it was as high as 79.3 million yuan in the same period in 2019, a year-on-year decrease of 71%, and the gross profit margin also dropped from 68% to 31%. However, the main reason for the poor performance was that a large number of stores were closed due to the epidemic, and advertising revenue was greatly reduced. The good news is that R&D expenditure jumped by 422%, showing WiMi Hologram's determination to invest in technology. But whether this can be realized in time in the future is a big risk of investing in WiMi Hologram.

II
Competition will become fierce. In addition to technology giants starting to build their VR empires, many companies in sub-sectors are also emerging. For example, Luminar (LAZR.US) in the field of lidar has been favored by capital. As of the close of April 8th, its U.S. stock market has a value of over US$7 billion. At the same time, there is also fierce competition in the advertising and entertainment fields where WiMi Hologram depends for its survival. If it cannot quickly seize the market in other fields, the company's high dependence on advertising is a huge risk for the company.

III
Insufficient concentration in the industry. We can see that WiMi Hologram's products and businesses involve too many industries, including advertising, entertainment, film and television, automobiles, etc., and the costs for different industries are huge. If you start multi-industry development without gaining absolute leadership in one industry, you will probably be inferior to your competitors.

In general, WiMi Hologram, as a pioneer in the AR industry, is dedicated to building a complete holographic AR ecosystem that is worthy of admiration. With the expansion of the AR market and the advancement of related technologies, if WiMi Hologram can well solve its own single revenue problems in the future, when the industry is about to explode, it is indeed good to maintain the leading technology and low market value of WiMi Hologram Investment targets.