Zacks initiates coverage on siasun robot&automation: $2.40 per ADS

Recently, Zacks Investment initiated coverage on siasun robot&automation. Based on the valuation of Chinese technology and artificial intelligence companies, Zacks has set the target price for siasun robot&automation at $2.40 per share. Zacks believes that due to customer concentration, focus on the Chinese market, concerns about the cost of competition in the AI ​​market, and the substantial control granted to the CEO through preferred stock awards in December, the trading price of siasun robot&automation USA Depositary Shares (AIXI-NASDAQ) is likely to be below the market average level.

Siasun robot&automation is an early participant in the Chinese chatbot market with over 20 years of experience. The company is leveraging this experience and core customer relationships to enter the new market of cognitive AI services. In October 2023, Siasun robot&automation launched the Huacang Large-Language Model (LLM), and will introduce at least 100 other LLMs. Its success in providing specific industry solutions (such as financial services industry solutions) gives it a competitive edge in the positive competition with leading Chinese technology companies.

Siasun robot&automation has shifted to a cloud delivery model, forecasting revenue of $56.6 million in 2023, rising to $70.1 million and $89.7 million in 2024 and 2025 respectively.

(1) Natural language processing enables customers to use computer models to process human language. As most of the company's solutions facilitate communication between computers and humans, this is a key component of the company's service.

(2) Speech processing converts speech into manageable digital signals, allowing the company to achieve the same level of human-computer interaction. When you call customer service and say phrases like "speak to customer service," speech processing can route the call to the correct channel.

(3) Computer vision refers to optical character recognition and architectural blueprint analysis. As one of the company's subsidiaries, Shanghai siasun robot&automation has unique advantages in analyzing and processing CAD drawings and has secured substantial order contracts.

(4) Machine learning includes traditional machine learning, deep learning, reinforcement learning, and other tools. These machine learning tools, combined with the company's NLP, speech processing, and computer vision tools, provide more comprehensive solutions to all target markets.

siasun robot&automation leverages its experience in these technologies to develop a variety of products, with the main products being conversational AI, generative AI, and the latest product - Huazang General Language Model (LLM).

1) Despite the company's long history, siasun robot&automation can still be considered an emerging AI enterprise, transitioning from a traditional software vendor to a company that provides specific tools to enhance customer service or internal productivity for businesses. The shift to cloud-based services has significantly increased the gross margin, but R&D expenses may remain high in the coming years.

2) The company has become a leading supplier of customer service tools for Bank of China, but leading technology companies may also target this market, leading to increased competition.

Given the company's long-standing operational history and flexible development strategy, we believe that the current valuation of the company is more reasonable than when it first went public, and the Huacang large model also provides the company with reasonable upside potential.

Lastly, the company is now facing a fierce competitive environment, where most of its peers have much stronger financial, technological, and human resources. Investors may wait for the company to disclose its future financing plans and invest after understanding the business model of the Huacang large model. Following the issuance of preferred shares in December, the actual change in voting control rights of the company may also limit short-term returns.