NEWS WRAP: Unisound IPO offers up vertically integrated AI stack for investors

The provider of AI services for a wide range of business customers raised $41 million in its Hong Kong listing, and could raise more in the coming months with secondary share sales

By Doug Young

Unisound AI Technology Co. Ltd. (9678.HK) made its Hong Kong trading debut on Monday, offering investors a new artificial intelligence (AI) choice with a fully integrated product boasting a diverse customer base, speaking to its wide range of potential business users.

The company raised HK$206 million ($26 million) by selling 1.56 million shares for HK$205 apiece, with about a third of those going to three cornerstone investors. The shares for sale represented a relatively small 2.2% of its share capital, suggesting Unisound could sell more stock in one or more secondary offerings in the months ahead if demand is strong.

The stock opened flat at HK$205 when trading began, valuing the company at HK$14.5 billion.

Unisound is one of the older players on China’s AI scene, founded more than a decade ago in 2012 by Huang Wei and Liang Jia’en, both of whom come from scientific backgrounds. Backed by strong technological capabilities and its accumulated research in speech recognition and cognitive intelligence, the company has developed dozens of vertically integrated AI products and solutions. These are primarily sold to enterprise clients across sectors such as healthcare and insurance, daily life services, and transportation.

Underpinning its AI services, which help customers run their business processes more efficiently, is Unisound’s Atlas Infrastructure, which it began building in 2016. That’s the foundation for UniGPT, a proprietary 60 billion-parameter large language model (LLM) that the company launched in 2023. UniGPT is the core algorithm for the company’s customer-facing Unibrain central technology platform.

Unisound’s revenue grew 29% last year to 939 million yuan ($131 million) from 727 million yuan in 2023. It breaks that figure into two main categories, healthcare and daily life. The daily life segment accounted for about 80% of its revenue last year, covering enterprise clients from the smart mobility and smart living sectors.

Notably, the company’s top five customers accounted for just about a quarter of its revenue last year, a relatively low figure. That shows it has a large customer base – a relative rarity among some Chinese AI companies that often rely on just a small number of clients for most of their business.

The company’s gross profit margin stood at a relatively high 38.8% last year. But its heavy R&D spending, which is quite common for companies in the AI space, caused its adjusted net loss to widen by 22% last year to 168 million yuan from 137 million yuan in 2023. The company’s cash also fell to 156 million yuan by the end of last year, though the new infusion of IPO funds should help as it sets its sights on eventually becoming profitable.

At its IPO price, the company trades at a price-to-sales (P/S) ratio of 14, which looks quite strong compared to some of its Hong Kong-listed peers. By comparison, the larger SenseTime (0200.HK) and Fourth Paradigm (6682.HK) trade at P/S multiples of 12 and 4.3, respectively.

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