Foreword: Any wave of technology is both full of beautiful imagination and uncertainty. How to choose a decisive fulcrum in a segment is the most critical issue in leveraging AI investment opportunities.
In 2023, ChatGPT came out of nowhere, making the world reunderstand the value of AI. Entering 2024, we see that everything related to generative AI is still developing at an accelerated pace: first, Sora became the global focus, and then the domestic market also welcomed Kimi, a big domestic long text model.
From now on, it seems that GM's big models have all appeared in front of the world in an astonishing manner, making it difficult to predict. The vertical model field, on the other hand, is quite different, because it requires not only massive, open Internet material, but also relatively rich data governance capabilities in closed-loop business scenarios — this requires relevant manufacturers to step in and cultivate.
Among them, Xuanwu Cloud (2392.HK) has become one of the leading enterprises in the domestic vertical field. In 2023, the company's big model and AIGC applications in vertical consumer fields have been substantially implemented. Recently, the company also announced its 2023 results. During the reporting period, Xuanwu Cloud's overall revenue increased steadily. In particular, the SaaS sector, which benefited from the AI+ Xinchuang wave, not only achieved revenue growth of more than 20% in the current period, but various product applications such as AIGC, DI Smart Store, and DMP released by the company in the current period will also help it maintain its leadership in future market competition.
Taking advantage of AIGC and Xinchuang, SaaS customers grew by nearly 30%
According to the results announcement, in 2023, Xuanwu Cloud achieved revenue of 1,281 billion yuan, an increase of 22.8% over the previous year, showing an accelerated growth trend. Among them, driven by AI and Xinchuang, the company's SaaS revenue reached 591 million yuan, an increase of 24.6% compared with the same period last year. At the same time, the number of SaaS customers increased 28.9% year-on-year to 2120, and the per capita customer contribution value (ARPU) increased 12.3% year-on-year to 2.4 million yuan.
In a year where the enterprise service market faced major tests, Xuanwu Cloud was able to maintain a steady upward momentum, which is closely related to the company's progress in the fields of AI and innovation.
In terms of AI, in 2023, Xuanwu Cloud will continue to build a large consumer data advantage, and has a product library with 300,000 SKU categories and 10 million+ characteristics. Based on this, Xuanwuyun released the first domestic multi-modal large-scale model, codenamed “Xuantao”, perpendicular to the big consumer industry. Xuantao's high recognition accuracy and strong generalization ability can efficiently handle complex scenarios such as mass product identification, multi-industry applications, and rapid product changes, bringing more substantial value to customers.
When ChatGPT was first launched, the market frequently mentioned the idea that “the big model will reshape all industries”. Xuan Wuyun was the first to hand over answers to specific questions such as “what to reshape” and “how to reinvent”. Regarding the first question, Xuanwuyun chose to reshape the big consumer sector first, because the big consumer sector is not only an area of advantage for the company, but also because the big consumer industry has a wealth of data, urgent demand for digital intelligence, and there are many potential opportunities to reshape the value chain with AI.
In the financial report, it's not hard to find out how Xuanwuyun dealt with the second problem, and how the company was reshaping the big consumer industry chain —
On the one hand, the company uses large models and AIGC technology to enhance product applications. During the reporting period, Xuanwuyun launched a series of AIGC applications, such as “Display Commander” and “Visit Summary Assistant”. Take Display Commander as an example. It combines multi-modality and AIGC capabilities to help FMCG brands to quickly inspect stores in terminals, automatically detect and generate sales value for terminal stores, and provide suggestions for current product display improvements and product quantity increases or decreases, thus helping brands build “perfect stores”. The industry experience and data accumulated here can also later provide data support for brands' terminal expenses and marketing strategies, providing customers with important AI value-added functions. In addition, products such as AIoT smart freezers launched by the company provide customers with digital marketing solutions that can help increase terminal sales.
On the other hand, Xuanwu Cloud is also promoting the continuous evolution of the AI ecosystem. In 2023, Xuanwu Cloud and HUAWEI CLOUD reached an ecological cooperation. The two sides will jointly build a big model for the consumer goods industry based on the Pangu Big Model. At the same time, the two sides will also jointly explore future-oriented business models, explore potential business opportunities, and achieve a win-win situation for both parties through multi-level cooperation in resources and technology. In addition, products such as Xuanwu Cloud AIoT Smart Freezer, DI Smart Store, ICC, and LTC have all been listed on the HUAWEI CLOUD ecosystem channel and sales orders have been reached. In addition, the company has also developed various forms of ecological cooperation with manufacturers such as HUAWEI CLOUD, Tianrun Cloud, and Gaode Map.
Continued ecological growth and evolution will bring about a virtuous cycle. Through feedback and self-enhancement, the benefits of the entire ecosystem will continue to be amplified.
On the side of Xinchuang, Xuanwu Cloud's marketing cloud actively lays out the smart finance field around the localization replacement of Xinchuang, and is committed to achieving digital and intelligent marketing upgrades for customers in the financial, government and enterprise industries. Its core product, ICC (Integrated Communications Center), has completed a total of 13 localization applications for Xinchuang, achieving the localization adaptation of the entire chain. At the same time, Marketing Cloud also further focuses on financial solutions in the field of precise marketing, and has launched a data management platform (DMP) with the goal of accurate delivery, intelligent management, and increased conversion rates. The continuous expansion of product application scenarios also means that Xuanwu Cloud will provide more value to customers in the business chain, which will help further enhance customer stickiness.
Develop more scenario-based AI products and increase overseas layout
Vigorously promoting the construction of a modern industrial system and speeding up the development of new quality productivity were highlighted in this year's government work report. Unlike traditional productivity, one of the cores of new quality productivity is to integrate the application of scientific and technological innovation into the industry to help the industry upgrade and improve quality. Obviously, the functional value of all Xuanwu Cloud smart CRM products is also following this development direction.
At Xuanwuyun's 2023 annual results conference, Chen Yonghui, chairman of the board of directors and CEO of the company, said that one of the most important keywords in the CRM we provide is intelligence, which is the technical ability of AI and DI. In particular, the application of AI technology can really help enterprises greatly improve efficiency, and also help them reduce costs and increase revenue in business.
“Currently, whether it is the revenue growth of our existing AI visual recognition products, new breakthroughs in AIGC applications, or the implementation and verification of the AIoT smart freezer business benchmark customers, it can show the market potential of AI commercialized applications in the consumer goods industry. Therefore, Xuanwu Cloud will continue to invest in AI in the future and launch more scenario-based AI products suited to customer needs, as well as other new combinations of digital intelligence tools to serve customers in the consumer, financial, government and enterprise industries.” Chen Yonghui further pointed out.
Furthermore, in the 2024 company outlook, Xuanwuyun also highlighted that it will also accelerate the expansion of overseas markets and continue to deepen strategic cooperation with other manufacturers to create a win-win ecosystem.
In response, Xuanwu Cloud's management also gave more detailed answers at the performance meeting: on the one hand, the company's existing customers also need the company's cloud communication services after going overseas, which also means that Xuanwu Cloud already has certain potential customer resources to develop overseas markets; on the other hand, there is still plenty of room for improvement in the internet-based or informatization capabilities of overseas markets such as Southeast Asia and the Middle East, and Xuanwu Cloud's mature products can help reinforce this capability.
The management mentioned above said that although we are currently still in the process of exploring overseas markets, the company already had a certain income and customer base in 2023, which indicates that the service value has been verified to a certain extent. This year, we will also step up our overseas market expansion efforts.
While clarifying this year's strategic development priorities, Xuanwu Cloud also gave performance guidelines for the full year of 2024. Specifically, Xuanwu Cloud's overall revenue scale will grow by more than 20%, while sales cloud revenue, which is the company's second growth curve, will maintain a growth rate of more than 30%. At the same time, sales cloud will also narrow the loss margin. Furthermore, in terms of profit and loss, the company will achieve an overall business-level break-even balance in 2024, and sales cloud in 2025.