FY25 results beat on solid Gen AI business and enhanced operating efficiency

FY25 results beat on solid Gen AI businessand enhanced operatingefficiency Target PriceHK$2.50(Previous TPHK$2.45)Up/Downside30.9%Current PriceHK$1.91 SenseTimeannounced FY25 results:total revenue grew by 33% YoY toRMB5.01bn, 3% aheadofBloombergconsensus estimate mainly thanks to thestrong momentum of Generative AI business.Adjustednet loss narrowed by54% YoY to RMB1.96bnin FY25, also better than consensus estimate ofRMB2.29bn, primarily due to the effective control in opex (-11% YoY) and theoperating leverage. Looking ahead, thecompanywill continue to improve itsmultimodalcapabilitiesand enhance model costefficiencyto capture the GenAImonetization opportunities. We lift our FY26-27E total revenue forecast by 3-6%given the strong Generative AI business. We now expect total revenue to growby 27% YoY to RMB6.39bn in FY26E, driven by 35% YoY growth in GenerativeAIrevenue. We raise our target price to HK$2.50 based on 12x FY26E EV/sales(previous: HK$2.45 on 12x FY26E EV/sales). Maintain BUY. China Software & IT Services Saiyi HE, CFA(852) 3916 1739hesaiyi@cmbi.com.hk Wentao LU, CFAluwentao@cmbi.com.hk GenAI business maintained strong momentum.Revenue fromGenerativeAI businessincreased by 51% YoY to RMB3.63bn in FY25 (72%of total revenue), primarily driven by the robust demand formodel trainingand inference. SenseCore’s totaloperationalcompute power increased to40,400 PetaFLOPS in Mar 2026, compared to 25,000 PetaFLOPS in Aug2025. On the AI applications front: 1) in office scenarios,SenseTimeRaccoonhas served over 15mn individual users and thousands ofenterprise customers, with MAU up byseven-foldin 2025; 2) in contentcreation scenarios,SenseTime launched Seko in 2025,a short dramacreation agent, whichattracted over300kcreators within a few months fromlaunch.Looking ahead, the companyplansto launcha new model basedon the second-generation NEO architecture in2Q26,whichshouldfurtherenhance multimodalcapabilitiesof AI agents and drive growth of the GenAIbusiness. Ye TAO, CFA(852)3850 5226franktao@cmbi.com.hk Shuyin GUO(852) 3916 3716guoshuyin@cmbi.com.hk Computer Vision business to enter second growth phase.Revenuefrom Computer Vision business grew by 3% YoY to RMB1.08bn in FY25(22% of total revenue), mainly driven by the solid growth in overseas marketand the recovery of domestic demand.The Computer Vision business hastransited toasecond growth phase through multimodal vision agents, withtheshare of projects adopting multimodal and agent capabilitiesupfrom 0%in 2024 toc.60% in 2025.Revenue from Xbusinesses declined by 6% YoYto RMB302mn inFY25, primarily attributable to the deconsolidation ofAutonomous Driving business in August 2025. Margin expansion on improving operatingefficiency.GPMdeclined by1.9ppts YoY to 41.0% in FY25,mainly due to the increased revenuecontribution of AIDC-related business. Adjustednet margin improved by75pptsYoY to-39% in FY25, mainly supported by the operatingleverageand effective control in opex (-11% YoY).Looking into FY26E, we expectthe company to achieve breakeven on adj. EBITDA level, and adjusted netloss to further narrow by 66% YoY. Source: FactSet Valuation We valueSenseTimeat US$2.50per share based on12xFY26E EV/sales. Our targetEV/sales is at a premium to the sector average (5x),primarily due to SenseTime’sleadership in China’s Gen AI cloud servicesmarketand strong AI infrastructure. Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, in whole or in part, certifies thatwith respect tothe securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to thedate of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3) serve as an officer of any of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies coveredin this report.CMBIGM or its affiliate(s) have investment banking relationship with the issuers covered in this report in preceding 12 months. CMBIGM Ratings : Stock with potential return of over 15% over next 12 months: Stock with potential return of +15% to-10% over next 12 months:Stock with potential loss of over 10% over next 12 months: Stock is not rated byCMBIGM BUYHOLDSELLNOT RATED :Industry expected to outperform the relevant broad market benchmark over ne