Founded ten years ago, Cambrian (688256. SH) is finally profitable!

On the evening of April 18, the company disclosed its 2024 annual report and 2025 first quarter report. The loss in 2024 will decrease by 46.69% year-on-year, and the fourth quarter of 2024 and the first quarter of 2025 will be profitable consecutively, with profits of 272 million yuan and 355 million yuan respectively.

If you dig deeper into Cambrian's financial reports, you will find more highlights:

1. The main business is profitable.

In fact, on the evening of February 27, Cambrian disclosed its 2024 performance report, which was similar to the annual report, but the capital market did not buy it, and the stock price fell 7.61% the next day. Cambrian's performance improvement in 2024 relies heavily on non-recurring gains and losses such as "reversal of credit impairment losses", that is, adjusting the previously accrued accounts receivable to achieve increased profits, and the actual loss of the main business for the whole year was 865 million, and the loss was 2.4983 million in the fourth quarter.

However, in the first quarter of this year, Cambrian's profit was real, and the profit of its main business reached 276 million.

2. Revenue hit a new high.

In the fourth quarter of 2024, Cambrian's revenue was 989 million yuan, a year-on-year increase of 75.51%, a new high in a single quarter, and it increased to 1.111 billion in the first quarter of this year, a new high. It shows that the trend is very good, and the company's business volume is getting higher and higher.

3. The revenue figures in the second quarter will explode further.

Cambrian's inventory at the end of the first quarter of this year reached 2.755 billion yuan, 21 times that of the same period last year, with a year-on-year increase of 475% in advance payments and a 48.82% increase in accounts receivable. It shows that the company is tape-out and shipped on a large scale. The second quarter will form a performance transformation.

Cambrian 24 year at the end of the third quarter of the inventory of 1 billion, the next quarter of revenue of 989 million, the end of the fourth quarter of the inventory of 1.774 billion, the next quarter (that is, the first quarter of 25) revenue of 1.111 billion.

Now that the inventory at the end of the first quarter is over 2.7 billion, how much will the revenue reach in the second quarter?

What is the logic of Cambrian growth?

In addition to years of R&D investment finally "achieving positive results", the more important factor is domestic substitution + AI "arms race" of large manufacturers.

The United States announced export controls on high-end chips in 2022, and some of NVIDIA's products are among the restrictions. Under the chip ban in the United States, the Cambrian Siyuan 590 (80% of the performance of the NVIDIA A100) has become the "first choice for spare tires".

In April this year, Nvidia even customized H20 for the Chinese market was restricted by the United States. It is foreseeable that the demand for Cambrian products will be stronger in the short term.

Cambrian's main customers include Alibaba, Baidu, Byte, Tencent, etc. Since last year, major technology companies have set off an AI arms race, and in February this year, Alibaba announced that it will invest more in cloud and AI infrastructure in the next three years than in the last decade combined. The agency predicts that domestic Internet giants have a demand for hundreds of thousands of AI servers, and the market space in the short and medium term can reach 100 billion yuan.

According to a previous report by the Securities Times, Cambrian Siyuan 590 will pass the test of major Internet customers in the second half of 2024, and 2025 is the accelerated shipment period.

However, there are still concerns about the current Cambrian.

1. The competition is becoming more and more fierce.

Huawei's Ascend 910B has achieved mass production, with measured performance exceeding Cambrian by 10%, and the ecosystem is more complete. Haiguang Information's "Deep Calculation No. 3", which is being developed, claims to be expected to catch up with NVIDIA.

Cambrian's performance explosion, is it a "temporary procurement" of giants, or a long-term technical recognition? It remains to be tested by time.

2. The customer concentration is too high.

Cambrian's top five customers contributed 94.63% of the revenue, and the first largest customer directly contributed 79.15% of the revenue. This is too risky. Now Alibaba, Baidu and other major technology companies are also developing their own AI chips, once the customer self-research is successful, Cambrian orders will fall off a cliff.

3. The financial pressure is still huge.

Despite the explosive results, Cambrian's short-term financial position has not improved.

In the first quarter of 2024 and 2025, operating cash flow will be negative, at -1.618 billion yuan and -1.399 billion yuan, respectively.

In 2024, the company's cash on the books will be 1.972 billion, a year-on-year decrease of half, and it will be reduced to 638 million in the first quarter of 2025.

The company's R&D expenses are extremely high, exceeding operating income all year round, and the R&D expenses in the first quarter of 2025 are as high as 272 million, and the company's current cash position can only support more than two months of R&D investment.

Cambrian must improve its financial position as soon as possible and convert orders into real cash, otherwise it will lose its future if it affects the pace of R&D and falls behind in the fierce competition for innovation.

Finally, despite being profitable, Cambrian's valuation is still too high.

At present, the company's total market value is close to 280 billion yuan, and Nvidia, the most mature in the industry, has an average price-earnings ratio of 54.39 times in the latest year. In other words, against NVIDIA, Cambrian's annual profit must reach 5.1 billion yuan to match the current market value, and the net profit in a single quarter will increase to more than 3 times.

And one more question:

At present, the innovation of domestic substitution of AI chips is endless, once China catches up with the whole industry chain, will AI chips still be scarce at that time? Referring to the current new energy vehicles, will it roll into the price of cabbage?

(Redirected from: Bubble Finance).