On September 18, Beijing Fourth Paradigm Intelligent Technology Co., Ltd. (listing name: Fourth Paradigm) announced its prospectus announcement on the Hong Kong Stock Exchange.。According to the announcement, the company will open its public offering in Hong Kong at 9 a.m. on Monday, 18 September 2023 and close its subscription at 12 noon on Thursday, 21 September 2023.。

According to the document, Fourth Paradigm intends to issue approximately 15.81 million shares, of which 183 are for sale in the Hong Kong SAR..960,000 shares (10%), international offering 1,655.640,000 shares (90%) at issue price of 55 per share.6-61.HK $16, 100 shares per lot, expected to be listed on September 28。

It is worth noting that in this Fourth Paradigm offering, Xinhua Capital Management Co., Ltd., Beijing Zhongguancun Science City Technology Growth Investment Partnership (Limited Partnership) and Montage Technology Holdings Company Limited (a wholly owned subsidiary of Lanqi Technology) will participate as cornerstone investors, with a cumulative subscription amount of approximately $100 million.。

In addition to the above three cornerstone investors, including Sequoia China, Boyu Capital, Guoxin Enlightenment, Beijing Innovation, Haitong International and other well-known investors to participate.。

After a successful listing, Fourth Paradigm will be the first AI unicorn to land on the HKEx since Shang Tang Technology at the end of 2021。

          

Company Profile

              

According to the prospectus, Fourth Paradigm provides platform-centric artificial intelligence solutions to enable enterprises to achieve rapid scale transformation of artificial intelligence, discover hidden laws of data and comprehensively enhance their decision-making capabilities.。

Currently, Fourth Paradigm provides solutions across a wide range of industries, including but not limited to: finance, retail, manufacturing, energy and power, telecommunications, transportation, technology, education, media, and healthcare。From 2021 to 2022, the company will have 75 and 104 benchmark users, respectively, i.e. Fortune Global 500 companies and publicly listed companies.。In the first quarter of 2023, the company had 62 benchmark users。In 2020-2022, the net income expansion rate of benchmark users will be 167%, 140% and 126%, respectively.。

The Prophet Platform is the backbone of the company's solutions。The platform includes the following:

• Sage AIOS is an artificial intelligence operating system with user-friendly interface, standardized data processing, automated resource management and configuration, and full compatibility of intermediate software, which is comparable to personal computer operating systems。

• The HyperCycle series with code-free development tools and the Sage Studio series with low-code and code-free development tools are the company's core artificial intelligence solutions that enable users to quickly and easily deploy large-scale artificial intelligence applications。

In addition, Fourth Paradigm provides ready-to-use AI applications that users can deploy directly and use to optimize their marketing, wind control, operations and other business processes.。The company also helps users develop customized AI applications on the Prophet platform to meet their specific business needs.。In June 2021, the company launched an enterprise-class artificial intelligence application store to provide users with a choice of artificial intelligence application market.。

Depending on user needs, Fourth Paradigm also offers optional supporting infrastructure, primarily software-defined "all-in-one" (AIO) solutions for its SageOne pre-installed Oracle platforms and products on servers and other related hardware.。

The fourth paradigm believes that they provide AI solutions that are more "sophisticated" than other companies in the industry.。Fourth Paradigm said in its prospectus that they focus on providing decision-making AI solutions in a platform-centric manner, while the company's main competitors offer a hybrid solution portfolio, and a large portion of AI-related revenue comes from visual, voice and semantic AI solutions, as well as platform-independent AI applications.。

              

Market size

               

According to a report by Insight Consulting, a consulting firm in the investment and financing sector, global spending on artificial intelligence reached $199.7 billion in 2022 and is expected to rise to $562.9 billion in 2027, with a CAGR of 23.0%。The report states that artificial intelligence is expected to drive more than 15% of global GDP by 2030.。

According to the report, China's AI spending reached 225.5 billion yuan (RMB, the same below) in 2022 and is expected to grow to 691 billion yuan in 2027, with a compound annual growth rate of 25.1%, exceeding growth in global AI spending over the same period。And, whether in terms of the number of AI patent applications, or in terms of the number of AI journal publications and AI journal citations, China has been the world's number one since 2016.。China also has one of the world's largest talent pools of top AI researchers。

At present, China's artificial intelligence industry can be divided into four categories according to application areas: decision-making artificial intelligence, visual artificial intelligence, voice and semantic artificial intelligence and artificial intelligence robots.。Among the above categories, decision-making artificial intelligence is expected to be the fastest growing category, according to the Insight Consulting report.。In 2022, the size of China's decision-making AI market will reach 53.2 billion yuan, of which the platform-centric decision-making AI market will reach 12.8 billion yuan in AI spending, and is estimated to be 42..The compound annual growth rate of 3% will increase to 74.9 billion yuan in 2027, exceeding the overall growth rate of the decision-making artificial intelligence industry.。

According to the report, Fourth Paradigm is China's largest platform-centric decision-making AI provider by 2022 related revenue, with a market share of approximately 22.6%, ranked first。

The report also notes that the main competitors of Fourth Paradigm are integrated Internet companies.。These companies generally offer AI solutions only to improve business diversity, and AI solutions are only part of their broad business scope.。

          

Financial Overview

              

According to the prospectus, Fourth Paradigm's revenue comes primarily from the Prophet platform and products, as well as application development and other services.。

2020-2022 Fourth Paradigm revenues were 9.4.2 billion yuan, 20.1.8 billion yuan (up 114% YoY.2%), 30.8.3 billion yuan (up 52% YoY.7%)。In the first quarter of this year, Fourth Paradigm's revenue grew 33.6% to 6.4.4 billion yuan。

Currently, the fourth paradigm is still in the red。For 2020-2022, the Company's operating losses were 5.600 million yuan, 11.7.3 billion yuan and 10.2.6 billion yuan。Net loss of 7.5 billion, 18.02 billion and 16.5.3 billion。In the first quarter of this year, the company's operating loss was 1.2.5 billion yuan, a net loss of 3.04 billion yuan。

Gross profit, on the other hand, expanded, but at a slower pace.。2020-2022, the gross profit of the fourth paradigm is 4.300 million yuan, 9.5.4 billion yuan (up 121% YoY.9%) and 14.8.7 billion yuan (up 55% YoY.9%)。In the first quarter of this year, the company's gross profit was 2.8.2 billion yuan, up 19.9%。In 2020-2022, the Company's gross margins were 45.6%, 47.2% and 48.2%。In the first quarter of this year, the company's gross margin slipped to 43.7%。The company explained that it was due to the lower gross margin of SageOne and the increase in revenue contribution from application development and other services.。

In terms of R & D investment, in 2020-2022, the fourth paradigm's R & D expenditure was 5.6.6 billion yuan, 1.2.500 million yuan and 16.500 million yuan, accounting for 60% and 61% of revenue for each period, respectively..9% and 53.5%。In the first quarter of this year, R & D spending was 2.4.2 billion yuan, accounting for 37% of the period's revenue.5%, compared to 2.2.6 billion yuan, accounting for 46% of the period's revenue..8%。The company said it will continue to prudently invest resources in platform and infrastructure research and development.。

            

Use of funds

                    

Based on the prospectus, it is assumed that the offer price is 58 per share..HK $38 (median offer price), the Company expects to receive approximately 8.HK $8.5 billion。

The company says it expects 5.HK $3.1 billion (about 60% of the total amount) will be allocated over the next three years to strengthen basic research, technological capabilities and solution development; 1.HK $7.7 billion (about 20% of the total amount) will be allocated over the next three years to expand products, build brands and enter new industry sectors;。