Investors are closely watching the strategic moves of Nexwise Intelligence China Limited (SZSE: 301248). The company recently announced plans to procure up to 10 billion yuan worth of IT equipment and components from multiple suppliers to advance its artificial intelligence strategy and business transformation.
The company is aggressively increasing its investment in AI and cloud computing services. This shift comes as its traditional digital intelligence solutions segment has contracted significantly. However, its internal cash generation is insufficient to cover the massive expenditures required for building computing power clusters. To bridge this funding gap, the company has relied heavily on borrowing, leading to a rapid escalation in its debt levels and a substantial increase in its asset-liability ratio.
Financial Performance Under Pressure
The push to construct intelligent computing cloud clusters has resulted in a sharp rise in interest expenses and depreciation costs for the first half of the year. Consequently, the company's net profit attributable to shareholders has swung from profit to loss compared to the same period last year. To alleviate financial strain and further expand its computing capacity, the company has proposed a private placement of nearly 2 billion yuan. However, the additional depreciation and amortization from the new projects funded by this placement could further weigh on its profitability.
Traditional Business Declines, Core Operations Struggle
Public information shows that Nexwise Intelligence is a provider of AI products and application solutions. Its business covers three main segments: digital intelligence solutions, AI plus cloud computing, and AI plus security. Against the backdrop of a shrinking industry for digital intelligence solutions, the company has focused on developing its "AI+Cloud Computing" and "AI+Security" businesses to accelerate the transformation of its legacy operations.
In detail, revenue from the digital intelligence solutions business declined significantly last year, falling 16.8% year-over-year to 534 million yuan. This segment still accounted for over 82% of total revenue at the time. The contraction in this core business dragged down the company's overall revenue, which fell 24.47% to 644 million yuan. This business line saw a further revenue decline to 420 million yuan the following year, a drop of 21.35%, influenced by both shrinking market demand and the company's strategic shift in focus.
During the same period, the "AI+Cloud Computing" and "AI+Security" businesses experienced rapid growth, with revenues reaching 127 million yuan and 291 million yuan, respectively, showing substantial year-on-year increases. In the current year, the company has continued to advance its AI transformation strategy, focusing on the computing power infrastructure market. Preliminary first-half results indicate that the "AI+Cloud Computing" business has grown to 204 million yuan, contributing to a year-over-year increase in total operating revenue. However, due to heavy investments in building intelligent computing cloud clusters and developing related services, interest expenses and depreciation costs rose sharply, leading to a net loss for the period.
For the first half, the company's EBIT and EBITDA were 44 million yuan and 141 million yuan, representing year-over-year growth of 130% and 340%, respectively. Despite this, both net profit and net profit after deducting non-recurring items turned from profit to loss compared to the prior year. The estimated net loss attributable to shareholders is between 2.2 million and 4.4 million yuan, while the estimated loss from core operations is between 6.5 million and 8.7 million yuan.
An increase in credit impairment losses has further squeezed profit margins. As a reference, based on the first-quarter report, the company increased provisions for bad debts for certain clients and long-aged projects due to a prudent accounting policy, causing expected credit losses to surge 365.1% year-over-year to 17.22 million yuan.
Examining a longer timeframe reveals that Nexwise Intelligence's profitability has been unstable in recent years. From 2023 to 2025, net profit attributable to shareholders was 6.62 million yuan, a loss of 79.98 million yuan, and 13.67 million yuan, respectively, indicating a loss occurred in 2024. Further analysis shows that profits have largely been supported by non-recurring items such as government subsidies, gains from changes in the fair value of financial assets, or investment income. The company's core operating profit, measured by net profit after deducting non-recurring gains and losses, has been negative for three consecutive years, at losses of 11.42 million yuan, 92.01 million yuan, and 585.4 thousand yuan, signaling weak profitability from its main business operations.
Interest-Bearing Debt Doubles, Private Placement Sought for Relief
To capitalize on the window of opportunity presented by exploding demand for intelligent computing, Nexwise Intelligence is accelerating the construction of its computing clusters. In January of this year, the company announced plans for IT equipment procurement not exceeding 4 billion yuan. In July, it announced further procurement plans for IT equipment and components not exceeding 10 billion yuan. The company has already established or is building multiple computing power clusters in regions like South China, North China, and East China, providing computing services to clients such as large model developers and internet companies.
To support this large-scale construction of new computing clusters, the net cash flow from the company's investing activities in the first quarter was negative 1.791 billion yuan, turning from positive to negative year-over-year. In contrast, net cash flow from operating activities for the same period was 122 million yuan. Since internal cash generation cannot cover the costs of equipment procurement and cluster construction, the company has turned to external borrowing to fill the funding gap. It is reported that the company has sought shareholder authorization to apply for credit facilities totaling 20 billion yuan and has secured nearly 10 billion yuan in credit lines from multiple banks and non-bank financial institutions. Consequently, the net cash flow from financing activities surged to 2.414 billion yuan in the first quarter.
Nexwise Intelligence's debt burden has risen in tandem. Its interest-bearing debt increased sharply from 1.176 billion yuan at the beginning of the year to 2.998 billion yuan by the end of the first quarter, a jump of 154.93%. The asset-liability ratio also climbed from 53.37% to 73.77%. Simultaneously, the company faces pressure on its short-term solvency. Its monetary funds stand at 1.28 billion yuan, while short-term borrowings and non-current liabilities due within one year amount to 1.553 billion yuan, indicating that cash on hand is insufficient to cover short-term obligations.
The construction of computing clusters has not only increased debt but also led to a significant rise in inventory. As of the end of the first quarter, the company's inventory value reached 473 million yuan, a 69.42% increase from the beginning of the period, primarily due to new purchases of IT equipment and components to advance its AI strategy.
To ease funding pressures and further expand its capacity to provide high-reliability, high-security intelligent computing services, the company has initiated a new financing plan. The private placement proposal indicates the company plans to issue A-shares to no more than 35 specific investors, aiming to raise up to 1.965 billion yuan. The funds are primarily intended for an Intelligent Computing Cloud Service Center Construction Project, an AI+Security Equipment R&D and Industrialization Project, and supplementing working capital.
The Intelligent Computing Cloud Service Center project is slated to receive 1.48 billion yuan of the raised funds, accounting for 75.32% of the total and representing the key investment of this placement. This project aims to build an intelligent computing cloud service platform to meet the infrastructure needs for AI computing power and industry-specific AI application demands, serving vertical industries requiring cloud computing and large model technologies. The AI+Security Equipment project is mainly for the research, development, and production of embodied intelligent units and security defense systems and equipment for public safety scenarios.
It is noteworthy that upon completion of these funded projects, the company's asset scale will expand significantly. The corresponding increase in depreciation and amortization will raise the company's costs or expenses, which is expected to impact its profitability.