The world's second largest Bitcoin mining machine company applied for listing on the New Third Board, with a revenue of 1.2 billion and a gross profit margin of 50%, making huge profits beyond imagination

Although China is still a long way from being a world leader in integrated circuit technology, the world's top three digital currency mining machine manufacturers are all in China, namely Bitmain's Antminer, Canaan Creative's Avalon, and Ebang Technology's Ebit.

Today we are going to introduce Canaan Creative, the world's second largest Bitcoin mining machine manufacturer, which makes nearly 100% of its revenue from mining machine sales . As of the end of April 2017, the company had sold a total of about 160,000 Avalon series mining machines, accounting for 22% of the global Bitcoin computing power market.

Small mining machines have created huge wealth. In 2015, Canaan Creative's annual net profit was 2.24 million yuan, and in 2017, the annual net profit reached 300 million yuan, an increase of 125 times in two years. The company submitted an application in August 2017. Once listed, it will become the purest digital currency concept stock in the world.

/ 01 /

Avalon: The world's first commercial Bitcoin mining machine

Bitcoin mining farms can be said to be the perfect investment attraction for local governments. Mining farms solve the problem of oversupply of electricity that has plagued provinces such as Sichuan and Yunnan, boost local consumption and employment, and are neither polluting nor disturbing to residents. They also do not require government loans, and are deeply loved by local governments.

Thanks to the Bitcoin mine, the payback period of this small hydropower station in Tengchong, Yunnan, was shortened from 20 years to 1 year

Cryptocurrency mining machine

The era when home computers could mine Bitcoin has long ended. To mine Bitcoin, you must build a mining farm and buy a large number of professional mining machines. Avalon is the world's first commercial Bitcoin mining machine. Compared with Avalon, home computers are like broiler chickens.

The Avalon 1st generation was first available for pre-order on Taobao at a price of 9,200 yuan. According to the computing power level of the entire network at that time, an Avalon mining machine could mine more than 10 coins per day on average. According to the market conditions at that time, the investment could be recovered in two or three days. As a result, the Avalon mining machine was later sold by others and was once sold for 400,000 yuan per unit.

The first generation of Avalon had a simple and rugged appearance, and all designs were used to improve computing. In line with its appearance, there were also the reservation terms proposed by "Pumpkin Zhang" (founder Zhang Nangeng) at the time: no promise of delivery date, no sales service, no change of delivery address, and no refund even if the product was not delivered in the end.

Despite such overbearing terms and the pre-sale model, where customers pay in full and the company promises to ship within a certain period of time, it has not been able to stop the increasing number of orders.

Computing power is productivity. The greater the computing power, the more bitcoins can be "mined". Subsequently, the company successfully developed the A6, A7, and the world-leading A8 series, reaching a computing power of 13T, and the A921 to be launched by the company will reach at least 15T computing power.

Avalon Miner

According to the public transfer instructions, the prices of Canaan Creative's several mining machines are between 3,000 and 4,500. Compared with peers in the same industry, the prices are relatively low and the cost performance is high. It can be said that the company's mining machines have Apple's technology but the prices of Xiaomi.

As the price of Bitcoin rises, the price of mining machines also changes. The A741 mining machine is priced at 15,000 yuan on the official website of Bitmain, and it is sold out. Its biggest competitor, Bitmain's Antminer, currently has the three best-selling mining machines priced at 17,500 yuan, 24,900 yuan and 33,500 yuan respectively.

/ 02 /

A valuation of 3 billion is not enough, and it needs to enter the capital market

In just three years, the company has grown from a "small workshop" founded by a few technology geeks to a world-renowned Bitcoin mining machine company.

In April 2013, tech geeks Zhang Nangeng (Pumpkin Zhang) and Li Jiaxuan invested 100,000 yuan to found Canaan Creative in Beijing. In four years, through 10 capital increases, the company's registered capital was changed to 300 million yuan, a 3,000-fold increase. When the wind blows, even pigs can fly. An equity transfer in April 2017 showed that Canaan Creative's valuation had reached 3 billion yuan.

Today, Canaan's valuation should be far higher than this valuation, because in 2017, the company continued to explode, with revenue increasing by 3 times and net profit increasing by 4 times.

With leading technology and highly competitive prices, Canaan's revenue has grown rapidly. In 2017, the company's revenue exceeded 1.2 billion yuan and its profit exceeded 300 million yuan. Compared with 2015's revenue of 5.5 million yuan and profit of 2.5 million yuan, it increased by 20 times and more than 100 times respectively.

With rapid revenue growth and faster profit growth, the expansion of sales scale has diluted R&D expenses, and the company's gross profit margin has increased rapidly. In 2015, the gross profit margin was 26%, in 2016 it was 43%, and from May to September 2017, the gross profit margin had reached 50%.

In September 2017, Canaan Creative achieved a monthly revenue of 220 million yuan, and its performance was still on the rise, with a debt ratio of less than 1%. With such good performance, it would be a pity not to enter the capital market. In fact, the company has already been planning.

In 2016, Luyitong (300423) announced the acquisition of Canaan Creative at a valuation of 3.06 billion. Canaan Creative promised that the net profit from 2016 to 2018 would be no less than 180 million yuan, 260 million yuan and 350 million yuan respectively, and a total of no less than 790 million yuan. Now it seems that Canaan Creative has easily fulfilled its bet promise. However, this acquisition was aborted due to high valuation, high performance promises, and suspected evasion of backdoor listing. The world is really full of magic.

What is even more magical is that most of Canaan's main customers are individuals. The company's largest supplier is a Taiwanese company, TSMC. At least half of Canaan's earnings go to this Taiwanese company.

/ 03 /

Individual customers become the mainstream, and TSMC becomes the biggest winner

The company has as many as 400 customers, among which individual customers account for a high proportion, with more than 97% coming from China, mainly distributed in areas with abundant power resources such as Sichuan, Yunnan, and Inner Mongolia. Only Guangzhou Jiesai and Tianjin Garment Import and Export provide resale services, while the rest are individual customers.

Canaan Creative adopts the industry's common fabless business model, focusing on design and sales, and leaving the main links of production and manufacturing to wafer foundries and professional packaging and testing manufacturers. The core manufacturing link is handed over to the world's leading chip foundry, TSMC.

TSMC is a global chip foundry giant that has a monopoly on the iPhone's new chip foundry. In order to obtain the best chip manufacturing and achieve the fastest computing speed, Canaan Creative spent a lot of money.

In 2015, the company's revenue was 55.31 million, and it paid 58.12 million to TSMC, which exceeded its total revenue. In 2016, its revenue was 316 million, and it paid 186 million to TSMC, accounting for 58% of its total revenue. In 2017, it is estimated that about 500 million was paid to TSMC.

By this calculation, TSMC alone earned more than 700 million yuan from Canaan. The second largest supplier, ASE, is also a well-known chip packaging giant in Taiwan. Most of Canaan's revenue was earned by these two Taiwanese companies.

New Bitcoin investors are being harvested by old investors, old investors are being harvested by mining farms, mining farms are being harvested by Canaan Creative, and Canaan Creative is being harvested by TSMC. Without a core foundation, even Bitcoin traders will be harvested. How miserable.

The Chairman’s teaching is correct: we must take core technologies into our own hands.