Kudan (4425) | First Look

Updated: Jun 21, 2021

Share price: ¥3,960 | Market cap: $300m | EV/Rev: 225x




Kudan is a leader in Computer Vision and is a developer of Artificial Perception (AP) technology solutions. AP will be the basis for a broad range of industries such as autonomous driving, robotics, drones, arial surveillance, and mapping.



What is AP and SLAM?

AP acts as the eyes of machines, allowing them to perceive and understand.


AP complements and operates in unison with artificial intelligence to allow a range of machinery to move and function autonomously.

Although the commercial aspect of the business is still in its infancy, the company has been pushing the boundaries of research in computer vision with a focus on Simultaneous Localization and Mapping (SLAM).


SLAM software allows machines and devices to understand where they are, how they are moving, and the structure of their environment. AP algorithms are able to process information from various sensors to accurately map the external environment and, combined with AI, bring machines closer to interacting with the world as humans do.




In 2020, Kudan acquired Artisense, a German firm computer vision firm for EU55mn. This purchase secured a strong team of 20 AI engineers, led by Professor Daniel Cremers. Dr. Cremers is a globally recognized and published leader in AI, computer vision, and autonomous driving research.


With the acquisition of Artisense, Kudan believes it has solidified its leadership in SLAM Technology. SLAM breakthroughs will require merging SLAM technology with Deep Learning, where Kudan is now a major player with 30 AI engineers.




The MODEL


Kudan is all about long-term opportunities. Current revenues for FY3/21 were just over $1m, with an operating loss of -$4m. However, the long-term market opportunity for the company is considerable. Sales will likely pick up over the next 3-5 years, but the real opportunity is more likely a decade away.

The business model is conceptually similar to ARM (acquired by NVIDA from Softbank for $40b) or to a biotech company. After the product is commercialized, the bulk of the revenues comes from licensing fees.



Kudan works with clients on a project basis, with these broken down into evaluation, R&D, and product commercialization. As a project moves into commercialization, revenues will come via license agreements and expansion of the penetration of customer products. At present, the company has 108 projects, of which 65 are under evaluation, 42 are in the R&D stage, and one is commercial. By 2030, the company targets 200 projects, of which 50 are expected to be commercial – i.e., generating licensing revenue.


The company works with leading companies both within and outside of Japan. The table below shows a list of partners with the potential for future commercial licensing revenue.




Over the next five years, the product launch timeline will span autonomous driving, mobile robots, AR/VR, mapping, and surveying applications.




Over the next decade, Kudan will focus on scaling and expanding recurring revenues, from the commercialization of products using the group’s software.



MANAGEMENT


The founder and current CEO, Tomohiro Ohno, set up the company in 2011. As an alumni of the University of Bristol, the company was founded in the UK, before moving the HQ to Tokyo, ahead of a TSE Mothers listing in 2018. Ohno retains a 49% ownership of the company, with other members of the Kudan team taking management control to over 50%. The company has decided to stay independent as they believe they have genuine technical leadership with excellent commercial prospects over the medium term.

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