Event:

On April 18, 2025, Cambrian released its 2024 annual report and 2025 first quarter report:

In 2025Q1, the company's revenue was 1.111 billion yuan, +12.36% month-on-month and +4,230.22% year-on-year; net profit attributable to the parent company was 355 million yuan, +30.61% month-on-month, and -227 million yuan in 2024Q1; The net profit deducted from non-attributable to the parent company in 2025Q1 was 276 million yuan, and in 2024Q1, it was -261 million yuan.

In 2024, the company's revenue will be 1.174 billion yuan, a year-on-year increase of +65.56%; Net profit attributable to the parent company was -452 million yuan, compared to -848 million yuan in 2023. In 2024Q4, the company's revenue was 989 million yuan, a year-on-year increase of +75.51%; The net profit attributable to the parent company was 272 million yuan, a year-on-year increase of +768.58%.

Investment Highlights:

Continue to expand Internet and other markets to help the company's revenue grow significantly

In 2024, the company will continue to expand the Internet, carrier, financial and other markets with its excellent product strength, actively help the implementation of artificial intelligence applications, and achieve substantial growth in operating income.

In 2024, the company's cloud product line will grow more than 11 times year-over-year. The company's main product lines include cloud product line, edge product line, IP licensing and software. In 2024, the revenue of the company's cloud product line and edge product line will be 1.166 billion yuan and 6.54 million yuan respectively, a year-on-year increase of +1187.78% and -39.56%, and the IP licensing revenue will be 412,400 yuan, a year-on-year increase of +76.38%.

In 2024, the company's first customer is the company's long-term partner, whose purchase amount accounts for 79.15% of the company's total annual sales, mainly due to the continuous improvement of the competitiveness of the company's smart chip products and the recognition of customers in the long-term cooperation process.

Increase R&D to improve the product strength of training and inference chips, Siyuan 590 or benchmark A100

2025Q1, the company's gross sales margin is 55.99%, a year-on-year increase of -1.62pct, and the sales/management/R&D expense ratio is 1.29%/3.88%/24.53% respectively, a year-on-year increase of -49.44pct/-368.87pct/-636.30pct; The net profit margin was 31.96%, +4.51% month-on-month, turning losses into profits year-on-year. In 2024, the gross profit margin will be 56.71%, a year-on-year increase of -12.45pct, and the sales/administrative/R&D expense ratio will be 5.96%/15.37%/103.53%, respectively, a year-on-year increase of -5.61pct/-6.28pct/-54.00pct. Net profit margin was -38.91%, +84.87pct year-on-year.

The company continues to increase product research and development efforts to enhance the core competitiveness of core processor chips in the field of artificial intelligence. In 2024, the company's R&D investment will be 1.072 billion yuan, and the proportion of R&D investment in operating income will be 91.30%; The company has a R&D team of 741 people, accounting for 75.61% of the total number of employees.

In 2024, a new generation of intelligent processor microarchitectures and instruction sets is in development; At the same time, the company has also optimized and iterated the basic software system platform. The company continues to promote the research and development and improvement of the training software platform, and in terms of large models, the training software platform has added support for the training of mainstream models such as the DeepSeek series, Llama series, and Qwen series.

According to Sina Science and Technology News: Cambrian Siyuan 590 chip performance is benchmarked with A100. According to Baidu's internal test results, the Siyuan 590 supports most mainstream models. Performance varies across models, with overall performance roughly reaching 80% of the A100's.

2025Q1 inventory + advance payment increased by 2038% and 375% year-on-year respectively, laying the foundation for growth

Benefiting from the growth in demand for large model calls brought about by the release of DeepSeek, Internet companies such as Alibaba and Tencent, as well as operators such as China Unicom and China Mobile, continued to increase capital expenditure on computing power, bringing the prosperity of the domestic computing power industry upward. In addition, from April 14, the U.S. government restricted Nvidia's H20 exports to China (including Hong Kong and Macau) and D-5 countries; In FY2025, Nvidia's revenue in China will be $17.1 billion. H20 chips are limited, corresponding to or releasing 100 billion market space, the competition pattern is improving, and localization is expected to usher in an accelerated substitution window period.

As of 2025Q1, the company's inventory + advance payment increased by 2038% and 375% year-on-year respectively. As of 2025Q1, the company's inventory and advance payment were 2.755 billion yuan and 973 million yuan, respectively, an increase of 981 million yuan and 199 million yuan from 2024Q4, and a year-on-year increase of 2.626 billion yuan and 768 million yuan. In 2024, the inventory will be 1.774 billion yuan, of which raw materials account for 20% and commissioned processing materials will be 78%; The prepaid accounts were 774 million yuan, of which 99.78% were within one year, and the first supplier accounted for 67.40%.

We believe that the high growth of the company's inventory and advance payments reflects that in the context of the current instability of the chip supply chain, the company may have a good supply capacity and lay the foundation for future business growth.

Profit forecast and investment rating: The company is a world-renowned emerging company in the field of smart chips, which is expected to benefit from the computing power demand brought about by the development of large models and the continuous selection of the company's products.

It is estimated that the company's revenue in 2025~2027 will be 58.43/81.76/10.691 billion yuan respectively, the net profit attributable to the parent company will be 15.57/29.34/4.033 billion yuan, and the corresponding PS will be 47.83/34.19/26.14X.

Risk Warning: The macro economy affects downstream demand, the development of the large model industry is less than expected, market competition is intensifying, the Sino-US game is intensifying, the research and development of new products is less than expected, and the customer concentration is high.