With personal investment from Alibaba's CEO, Youjia Innovation shifts to Hong Kong stock IPO | Jianzhi Research

After ten years of entrepreneurship, YooJia Innovation, focusing on autonomous driving, officially submitted its prospectus to the Hong Kong Stock Exchange at the end of May.

In August 2023, YooJia Innovation's listing counseling filing was accepted by the CSRC, and 10 months later, the company chose to move to Hong Kong, just one month after suspending its A-share IPO plan.

In December last year, ZhiXing Technology successfully IPO'd in Hong Kong, becoming the first stock of intelligent driving in the Hong Kong stock market. In addition to YooJia Innovation, other intelligent driving solution providers such as XiaoMa ZhiXing, WenYuan ZhiXing, etc., are also sprinting for the Hong Kong Stock Exchange.

The first half of the new energy era is electric evolution, while the second half is intelligent revolution. By 2023, the global penetration rate of advanced driver assistance systems (L2 and above) has exceeded 50%, highlighting the importance of intelligent driving solutions.

1. Three major intelligent driving tracks are progressing simultaneously

Founded in 2014, YooJia Innovation is a developer of intelligent driving solutions, positioned in the downstream of the intelligent driving field.

YooJia Innovation currently offers three solutions combining software, hardware, and algorithms—intelligent driving solutions, intelligent cockpit solutions, and vehicle-road collaborative business.

(1) Intelligent Driving Solutions

Intelligent driving solutions are the core business of YooJia Innovation, with products including three series—iSafety, iPilot series, and the iRobo solution (L4 level, under development). As of January 2024, YooJia Innovation has successfully provided intelligent driving solutions to over 20 car manufacturers including NIO, Changan, Geely, and NIO, for more than 60 models, with sales of intelligent driving solutions exceeding 780,000 sets.

From 2021 to 2023, for three consecutive years, the revenue share of YooJia Innovation's intelligent driving solution business exceeded 80%, with a year-on-year growth rate consistently above 45%. Based on the revenue from L0-L2++ level intelligent driving solutions, YooJia Innovation ranks third among all emerging technology companies in China.

(2) Intelligent Cockpit Solutions

YooJia Innovation's intelligent cockpit solution business includes two products, DMS solution and OMS solution, focusing on tracking driver behavior to enhance safety and improve user entertainment experience.

However, compared to intelligent driving solutions, YooJia Innovation's intelligent cockpit solutions have not yet achieved economies of scale. As of January 2024, the number of car manufacturers conducting designated project collaborations is still below 10. This has kept the revenue share of YooJia Innovation's intelligent cockpit solution business relatively low, accounting for only 3.8% in 2023.

Fortunately, YooJia Innovation's intelligent cockpit solutions are priced competitively, with an average unit price of only 330 yuan, offering good value for money. Therefore, the revenue growth rate far exceeds the core business, with a year-on-year growth rate of 1070% in 2023 （3）Vehicle-Road Cooperative Business

With the development of intelligent transportation facilities and smart cities, vehicle-road cooperation has become an indispensable part of smart cars. The sensor devices in YOUDRIVE Innovation's vehicle-road cooperative business, such as radar and cameras, as well as algorithms, are mostly independently designed, so they can be updated more in line with the needs of customers in the field of transportation infrastructure, thus more closely meeting the core needs of customers.

Currently, YOUDRIVE Innovation's vehicle-road cooperative business is mainly applied in highway and intersection management, as well as industrial parks and parking lot management. As of January 2024, YOUDRIVE Innovation has been involved in 13 vehicle-road cooperative projects in China. The growth of YOUDRIVE Innovation's vehicle-road cooperative business is also very rapid. In 2023, the revenue share exceeded that of intelligent cockpit solutions, reaching 15%, becoming the second largest business of YOUDRIVE Innovation.

2. Continuously Supported by Star Capital, Valuation Exceeds 5.3 Billion RMB

YOUDRIVE Innovation's product sales are accelerating, and end customers are continuously expanding. Along the way, the company continues to attract attention from the capital market.

From 2015 to 2023, YOUDRIVE Innovation has received a total of 17 rounds of financing, including investments from Huazhi Xingrui Fund, National Manufacturing Transformation and Upgrading Fund, and Guangzhou Production Investment, with listed company NavInfo also joining in.

It is worth noting that the current CEO of Alibaba, Eddie Wu, personally invested 4.5 million RMB in YOUDRIVE Innovation in 2015, and his founded Yuanjing Capital participated in two rounds of financing for YOUDRIVE Innovation in 2021.

After the final round of investment and financing in November 2023, the overall valuation of YOUDRIVE Innovation has reached as high as 5.348 billion RMB.

In terms of equity structure, the top five shareholders of YOUDRIVE Innovation are Dr. Liu Guoqing, the founder (9.52%), Beijing NavInfo (9.06%), Shenzhen Zeyi (5.95%), National Manufacturing Transformation (5.71%), and China Gold Capital (totaling 5.55%).

Although Dr. Liu Guoqing actually owns only 9.52% of the shares issued, due to the existence of a concerted action group, the Liu Guoqing team currently effectively controls 24.35% of the voting rights of the company.

3. Burning Cash is Inevitable, High Costs and High Investments are the Main Reasons

From 2021 to 2023, YOUDRIVE Innovation's annual revenue has continued to grow, reaching 175 million, 279 million, and 476 million RMB respectively, especially achieving a growth rate of 70.4% in 2023.

During the same period, YOUDRIVE Innovation's gross profit margin has also continued to increase, rising from 9.7% to 14.3% Yoojia Innovation has been unable to achieve profitability due to high costs and high operating expenses. From 2021 to 2023, Yoojia Innovation's net losses were 140 million yuan, 221 million yuan, and 207 million yuan respectively.

From a cost perspective, the sales costs of Yoojia Innovation in 2021 to 2023 were 158 million yuan, 246 million yuan, and 408 million yuan respectively, accounting for 90.29%, 88.17%, and 85.71% of total revenue. In 2023, the cost growth rate exceeded the revenue growth rate.

From an investment perspective, the operating expenses of Yoojia Innovation from 2021 to 2023 were 180 million yuan, 258 million yuan, and 370 million yuan respectively, accounting for 102.3%, 92.2%, and 62.4% of total revenue. The proportion of operating expenses to revenue is decreasing, indicating a gradual narrowing of the company's overall losses.

With the rise of domestic new energy brands, the customer concentration of Yoojia Innovation has been decreasing for three consecutive years. From 2021 to 2023, the revenue of the top five customers accounted for 78%, 42.7%, and 37% respectively, indicating that the risk of relying on a single major customer is gradually decreasing.

However, the competition in the intelligent driving industry is becoming increasingly fierce.

In this IPO, Yoojia Innovation plans to raise funds to enhance research and development capabilities, recruit and retain related R&D talents, improve production efficiency, and enhance solution competitiveness.

It is worth noting that from 2021 to 2023, the net cash flows generated from operating activities of Yoojia Innovation were -252 million yuan, -255 million yuan, and -276 million yuan respectively, all negative and expanding year by year. As of the end of 2023, Yoojia Innovation's cash and cash equivalents balance was 198 million yuan. Based on the net operating cash flow in 2023, the company's cash flow is very tight.

Intelligent driving is the second half of new energy, but the increasingly obvious homogenized competition is intensifying the overall competitiveness of the industry. When the operating cash flow can turn positive and self-generate, it becomes a common issue faced by industry players