Report on Business Model Sustainability Analysis of AURORA Optoelectronics (600666.SH)

I have now obtained sufficient information to conduct a comprehensive analysis of the business model sustainability of AURORA Optoelectronics Co., Ltd. (600666.SH).

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AURORA Optoelectronics Co., Ltd. (Stock Code: 600666.SH) is a comprehensive enterprise in a

. According to the company’s official website, its business covers two core segments [1]:

Business Segment	Main Products/Services	Business Status
Sapphire Business	Sapphire single crystal furnaces, sapphire products (LED ingots, substrates, optical lenses), LED filaments	Sustained losses, in the process of light-asset transformation
Integrated Computing Power Services	Intelligent computing power leasing, integrated “invest-build-operate” for intelligent computing centers, AI application investment and cooperation	High-growth period, incubation stage

The company’s development strategy is to build a

structure: with computing power services as the core engine and sapphire materials as auxiliary support [3].

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Based on the 5-year average financial indicators from DCF valuation analysis [4]:

Key Indicator	Value	Evaluation
Revenue Growth Rate (CAGR)	-8.4%	Continuous decline
EBITDA Margin	-35.0%	Severe losses
EBIT Margin	-54.0%	Severe operating losses
Net Profit Margin	-88.5%	Extreme losses
Capex as a Percentage of Revenue	37.4%	Heavy capital expenditure
Free Cash Flow	-RMB 241 million	Continuous cash outflow

These data indicate that the company’s core business has not yet achieved self-sufficiency in cash flow.

Valuation Scenario	Intrinsic Value	Gap from Current Price
Conservative Scenario	$0.40	-89.1%
Base Scenario	$0.55	-85.2%
Optimistic Scenario	$0.84	-77.2%
Weighted Average Valuation	$0.60	-83.8%
Current Stock Price	$3.68	—

The current stock price has a

compared to the DCF intrinsic value, and market expectations are severely divorced from the company’s fundamentals [4].

The company’s annual report clearly states: “Affected by the transmission of competitive pricing caused by overcapacity in the downstream structure, coupled with fierce industry competition, product prices continue to be under pressure, and the company’s sapphire business has been losing money for many years” [3].

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According to the company’s disclosure [3]:

• In 2024, the scale of China’s intelligent computing power reached
  725.3 EFLOPS
  , a year-on-year increase of
  74.1%
• Driven by both policies and capital,
  over 100 listed companies
  have engaged in the computing power leasing concept
• Scenarios such as large model training, autonomous driving, and scientific computing have spawned huge demand for computing power

The company’s 2024 business performance [3][5]:

Business Segment	Operating Revenue	Gross Profit	Gross Profit Margin
Sapphire Business	RMB 249.5334 million	RMB 18.3725 million	7.4%
Integrated Computing Power Services	RMB 116.4328 million	RMB 31.4148 million	27.0%

The gross profit margin of the computing power business (27.0%) is significantly higher than that of the sapphire business (7.4%), reflecting better profitability.

• The first phase of the “Silk Road New Cloud Green Computing Power Center” co-built with Karamay Cloud Investment has been put into operation
• The operated Silk Road New Cloud Computing Power Cloud Platform has been officially launched
• Computing power clusters Phase I, II, and III have been deployed
• Successfully introduced the DeepSeek-R1 series models
• Invested in and incubated AI innovation projects (such as Suanchang Technology)

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1. Track in Explosive Growth Period
   : AI computing power demand is growing rapidly, with strong policy support
2. Correct Transformation Direction
   : Transformation from traditional manufacturing to high-margin service industry
3. Light-Asset Strategy
   : Reduce heavy asset burdens through equity cooperation and asset restructuring
4. Accumulated Customer Resources
   : Established partnerships with multiple operators and leading generative AI enterprises

1. Questionable Profitability
   : The gross profit of each business segment is still insufficient to cover period expenses and impairment losses [3]
2. Tight Cash Flow
   : Sustained net outflow of free cash flow
3. Intensified Competition
   : “Demand surges, multiple players compete, pattern is undecided”, service prices may decline [3]
4. Valuation Bubble
   : The current stock price deviates greatly from the intrinsic value
5. Technology Iteration Risk
   : The computing power industry has rapid technology iteration, leading to investment uncertainty

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AURORA is in a critical period of

. Although the company has chosen the right track (AI computing power is in a period of rapid growth), its business model faces the following core challenges:

Dimension	Current Status	Sustainability Judgment
Profitability	Sustained losses	❌ Unsustainable
Cash Flow	Negative free cash flow	⚠️ Needs improvement
Valuation Rationality	Severe overvaluation of stock price	⚠️ High risk
Competitive Advantage	Unstable pattern in computing power industry	⚠️ To be observed
Strategic Direction	Correct and clear	✅ Positive

:

• The stock price has a downside potential of over 80% compared to the DCF intrinsic value [4]
• The 2024 performance forecast shows a full-year net loss of
  -RMB 90 million to -RMB 180 million
  [6]
• The transformation has not been completed, and the sapphire business is still dragging down the overall performance

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[1] Official Website of AURORA Optoelectronics Co., Ltd. (https://www.aurora-sapphire.cn/)

[2] Jinling API - Company Profile Data (600666.SS)

[3] 2024 Annual Report of AURORA Optoelectronics Co., Ltd. (https://stockn.xueqiu.com/SH600666/20250418970761.pdf)

[4] Jinling API - DCF Valuation Analysis (600666.SS)

[5] AURORA: 2025 Semi-Annual Report (https://money.finance.sina.com.cn/corp/view/vCB_AllBulletinDetail.php?stockid=600666&id=04974)

[6] AURORA (600666) - Performance Forecast (https://q.stock.sohu.com/cn/600666/yjyg.shtml)