IPO outlook | Android Biot leader goes to Hong Kong for IPO, can Shangmi Technology support a valuation of 1 billion US dollars?

Recently, Shanghai Shangmi Technology Group Co., Ltd. (hereinafter: Shangmi Technology) submitted a listing application to the main board of the Hong Kong Stock Exchange. Deutsche Bank, Agricultural Bank International and CITIC Securities were co-sponsors.

This is not the first time that SUNMI Technology is seeking to enter the capital market. As early as June 2021, the company submitted a listing application to the A-share Science and Technology Innovation Board to raise 1 billion yuan. In March 2022, the company's IPO was terminated.

According to the prospectus, in April 2019, Shangmi Technology completed the final round of investment. At this point, the company's valuation exceeded 1 billion US dollars and officially joined the ranks of unicorn companies. As the leader of the Android BioT segment circuit, what are the new highlights of Shangmi Technology's listing in Hong Kong this time?

Both revenue and profit rebounded before listing

According to public information, SUNMI Technology is the world's leading provider of commercial Internet of Things (BioT) solutions. The company's solutions integrate intelligent hardware, software and data insights to enable many offline business scenarios to achieve digital transformation and improve the efficiency of core business operations processes (such as payment, membership management, order fulfillment, inventory control and employee management).

Judging from recent performance, the company experienced a decline in both revenue and net profit in 2023, but the 2024 performance rebounded. In 2022, 2023 and 2024, Shangmi Technology achieved revenue of about 3.404 billion yuan, 3,071 billion yuan, and 3.456 billion yuan respectively (the unit is RMB, same below); profits for the same period were approximately RMB 160 million, RMB 101 million, and RMB 181 million respectively.

The company's gross margin also fluctuated during the reporting period, falling from 28.1% in 2022 to 26.7% in 2023, and then rebounding to 28.9% in 2024. According to the company, the increase in gross margin in 2024 is mainly due to increased sales and strengthened cost management in Europe and other developed countries.

The Zhitong Finance App learned that Shangmi Technology's BioT solutions mainly include smart devices and BioT PaaS platforms. Each of the company's smart devices is supported by its professional commercial operating system (SUNMI OS), which enables merchants to efficiently manage and optimize their transactions and operations.

The company's BioT PaaS platform provides a unified software infrastructure with ready-to-use development tools to enable merchants and developers to efficiently develop, manage and upgrade software applications for specific vertical scenarios for smart devices.

Judging from the revenue structure, the company's revenue is more dependent on smart device sales, and the profit model is relatively uniform. From 2022 to 2024, Shangmi Technology's sales revenue of smart devices was 3.389 billion yuan, 3.08 billion yuan, and 3.438 billion yuan respectively, accounting for 99.5%, 98%, and 99.5% of the total current revenue, respectively.

According to the prospectus, Shangmi Technology mainly relies on OEM/ODM facilities to produce smart devices. In 2024, the company will maintain cooperation with about 30 third-party manufacturers to support production needs.

In 2024, the company's design production capacity was 289,300 units. In the same year, the total sales volume of the company's smart devices was 3.803 million units, and its own production capacity was less than 8% of sales. Since it is not an independent manufacturer, Shangmi Technology is relatively passive in controlling product quality. Furthermore, fluctuations in raw material prices and labor costs will also affect the company's profit performance.

In terms of expenses, the company's administrative expenses grew rapidly. In 2022, 2023 and 2024, administrative expenses were $90.7 million, $85 million and $135 million respectively, accounting for 2.7%, 2.8% and 3.9% of revenue respectively. The main reason for the increase in 2024 was a marked increase in employee expenses; R&D expenses were relatively stable. In 2022, 2023 and 2024, R&D expenses were 359 million yuan, 354 million yuan and 395 million yuan respectively, accounting for 10.5%, 11.5% and 11.4% of the company's overall revenue.

During the reporting period, the company's business spread all over the world. Among them, America and Europe accounted for 34.3% and 20.8% of revenue in 2024, respectively, contributing more than 50% of the company's total revenue.

Currently, the company's cash level is abundant. As of December 31, 2024, the company's cash and cash equivalents were $1,818 billion. However, there was a slight decline in the company's net cash flow from operating activities during the reporting period. Net cash flows from operating activities were 167 million yuan, 83 million yuan, and 156 million yuan, respectively. At the same time, the company's leverage ratio grew rapidly, from 17.9% in 2022 to 51% in 2024.

In addition, the company is highly dependent on major customers. In 2022, 2023 and 2024, the company's revenue from the top five customers was 1,439 million yuan, 885 million yuan and 1,421 billion yuan respectively, accounting for 42.3%, 28.8% and 41.1% of the company's revenue, respectively. Revenue from the largest customers during the same period was $656 million, $505 million and $759 million respectively, accounting for 19.3%, 16.5% and 22.0% of total revenue, respectively.

From hardware to software and services, how far is Shangmi Technology?

Driven by the multiple benefits of national policy support, technology iteration, and scenario implementation, China's IoT industry is showing a rapid development trend. According to data from the China Research Institute of Research and Technology, China's IoT industry reached 3.2 trillion yuan in 2024, an increase of 25% over the previous year, accounting for more than 30% of the global market share, and is expected to exceed 4 trillion yuan in 2025.

Among them, the Android BioT solution refers to integrating the Internet of Things, AI and big data technology into hardware and software systems for commercial use. At the Android BioT circuit where Shangmi Technology is located, the global market size is about RMB 32 billion in 2024, and is expected to reach approximately RMB 92 billion by 2029. The compound annual growth rate from 2024 to 2029 is expected to be 23.7%. The penetration rate of Android BioT solutions in the global market is expected to increase from about 14% in 2024 to around 29% in 2029.

According to Insight Consulting, in terms of revenue in 2024, Sunmi Technology is currently the world's largest Android BioT solution provider, accounting for more than 10% of the market share.

The Zhitong Finance App learned that the commercial landscape of Shangmi Technology has covered more than 200 countries and regions around the world, covering 15 major industries such as restaurants, supermarkets, sports and fitness, clinics, logistics and distribution, and more than 100 vertical segments. As of December 31, 2024, it has served about 58,000 business partners, including more than 70% of the world's top 50 food and beverage companies, and has achieved coverage of more than 70% of the top 100 restaurant brands and more than 60% of the top 100 chain stores in China.

According to the prospectus, as of December 31, 2024, the company recorded a cumulative number of app downloads in the Shangmi application market; the number of monthly active smart devices increased from about 3.2 million units as of December 31, 2022 to about 4.9 million units as of December 31, 2024.

However, behind leading market share, the company's current revenue still mainly depends on hardware sales, and its software service business has not formed a significant revenue scale.

Judging from the company's three-tier development stage, the company's main business is still in first-level smart devices, including more than 60 smart terminals with different models covering three categories, which can achieve steady communication in business scenarios.

According to the prospectus, the second level of the company's development stage is a low-code, modular BioT PaaS platform to build a standardized development template library for complex and differentiated business scenarios. More than 80% of software functions can be built through pre-configured modules in the BioT PaaS platform, the remaining 20% can be customized for scenarios, and the platform has core functions such as grayscale publishing, remote updates, and real-time data analysis, which can provide end-to-end support from R&D, deployment to operation in the software development life cycle.

Furthermore, the company has integrated the Shangmi application market, which can help merchants “use it right out of the box” and achieve digital transformation. As of December 31, 2024, the top 20 downloaded apps in the Shangmi app market covered various on-demand delivery solutions, payment solutions, merchant management solutions, self-service ordering solutions, B2B e-commerce solutions, etc., and were widely used in various industries.

In the future, the company will continue to upgrade AI capabilities, including AI algorithms, intelligent microphone arrays, edge AI chips and multi-sensor fusion design, and achieve real-time optimization of AI functions such as embedded speech recognition SDKs and product recognition APIs; develop generative AI tools based on PaaS infrastructure, and form business and operational insights on business partners through massive real business data analysis to help improve operational efficiency.

Overall, as the leader of the Android BioT segment, Shangmi Technology has stable profitability and also has a leading edge in the industry. According to the company's blueprint plan, in the future, Shangmi Technology is expected to become an IoT software service provider, and even expand its business into the industry ecosystem, with broad potential for growth. Whether this listing in Hong Kong can become the starting point for Shangmi Technology to begin a new stage of growth, the market can wait and see.