The competition in the sweeping robot track has intensified, and the "tactical" advantage of stone technology's light assets has been highlighted

Affected by objective factors such as large-scale labor costs, raw material imports, and centralized land use, in recent years, the profit level of asset-heavy traditional home appliance manufacturing enterprises has been further suppressed. In sharp contrast, emerging smart home appliance manufacturers with the asset-light model as the core have regained market recognition and ushered in a "golden age".

The core competitiveness of asset-light enterprises lies in the rapid integration and application of assets and the speed of market response, and can maximize output with lower human capital input.

For example, Apple, a typical representative of the asset-light profit model, has achieved the ultimate in the research and development of the industrial chain and sales links, creating huge value for the company, not only occupying 90% of the profits of the global mobile phone market, with revenues as high as hundreds of billions of dollars, but also ranking first in the market value of listed companies in the world with a market value of 2.29 trillion US dollars, becoming a model for many technology companies to learn.

On the other hand, with the transformation and upgrading of China's manufacturing industry, more emerging smart home appliance companies combined with the Internet of science and technology have poured out and become followers of the asset-light profit model. One case is that Stone Technology, known as "sweeping the floor", has re-bet on high value-added R&D design in asset structure to seek a higher product premium.

According to public information, Stone Technology was founded in 2014 as a company focusing on the research and development and production of household intelligent cleaning robots and other intelligent electrical appliances, and its main products are intelligent sweeping robots, wireless handheld vacuum cleaners and scrubbers. On February 21, 2020, Stone Technology was listed on the Science and Technology Innovation Board of the Shanghai Stock Exchange.

In the context of investment, for intellectually intensive technology companies, corporate rule-makers who invest more energy in R&D and creation and efficiently carry out technological revolution are more likely to be regarded as a high-quality investment object with strategic vision.

As an A-share listed company, Stone Technology pursues an asset-light operation model, and its market value has doubled several times in just one year of listing. The performance report discloses that the production of stone technology products under the asset-light model all relies on commissioned processing, no self-built production base, and the main entrusted processing manufacturer is Sunwoda. The asset-light model enables the company to focus on research and development, and the asset utilization efficiency is high.

The opportunity of industrial value chain has shifted, and Stone Technology has accelerated its wild run

Judging from the tide of Upgrading China's manufacturing industry, the strategy of Stone Technology coincides with the transformation path of traditional Chinese manufacturing enterprises. As we all know, our country's manufacturing industry has been very mature, we have the most efficient supply chain and production line in the world, which is the characteristic of the Made in China 1.0 era. However, with the progress of scientific research technology, we have gradually entered the Made in China 2.0 stage characterized by scientific and technological innovation, and the current Chinese innovative products and business models lead the world. To a certain extent, the stone is the beneficiary and promoter of this new model and the new stage.

The "asset-light" operating model maximizes the competitiveness of enterprises by concentrating resources on the most critical industry competition points. This helps Stone Technology maintain strong enterprise competitiveness and industry advantages, and make steady progress in the fiercely competitive domestic market.

In fact, the "industrial smile curve" theory concludes that this is indeed the case. Usually, the high added value in the industrial chain often appears in front-end research and development, design, intellectual property rights and back-end brands, services, and channels, while intermediate manufacturing links usually have the lowest profits. The business of foundry enterprises is usually concentrated in mid-range manufacturing, resulting in small added value of their products, weak bargaining power and low profit margins.

Companies that want to improve profitability usually choose to develop at both ends of the "smile curve", that is, to strengthen technology research and development to create intellectual property rights to the front end, or to strengthen customer-oriented marketing and services to the back end. The transformation path of China's manufacturing enterprises can also be summarized as building their own brands, carrying out industrial upgrading, seizing the high end of the value chain, and changing from OEM manufacturers to original design manufacturers.

As far as the smart home appliance industry is concerned, based on China's factor endowment, domestic enterprises mainly complete product research and development, design, manufacturing and other links in the international industrial division of labor, and channel sales and services are mainly completed by overseas brands. The added value of the former is much lower than the latter, resulting in the general low profitability of small household appliance foundry enterprises in China.

As the world's largest manufacturing country, China's intelligent manufacturing scale, clustered industrial belt is enough to support large-scale orders. In contrast, it is more critical to strengthen independent research and development innovation, deepen supply-side structural reform, gradually transform "China's intelligent manufacturing", and accelerate towards the middle and high end of the global value chain.

Accelerating the transformation of its own business structure, Stone Technology shows high growth

In the subdivision track, intelligent sweeping robot companies such as Coworth and Stone Technology, which started as a foundry, have also adopted transformation strategies after accumulating certain technologies and experience. It is worth mentioning that after changing its own business structure (increasing the proportion of revenue of independent brands and reducing the proportion of foundry business), its profit level has been significantly improved. Taking Stone Technology as an example, the company started by producing OEM sweeping robots for Xiaomi, and launched its own brand sweeping robot in 2017, and the gross profit margin of the company's OEM/independent brand sweeping robot sales was about 15%/45%, which was a huge gap.

Looking at the span of the time line, benefiting from the transformation of the business structure, the scale of the independent brand sweeping robot business has risen, and the proportion of sales of stone private brand products in the first six months of 2021 has increased to 98.23%, and the company's overall sales gross profit margin has also climbed rapidly in the past 5 years, reaching 50.72% in the first half of 2021.

With the help of the analysis of various research institutions, we can also clearly see that Stone Technology still has growth potential: First, under the asset-light attribute, the overall profitability is significantly better than that of traditional home appliance companies, and if the company further increases the operation of the asset-light business model, there is still a lot of profit space; second, the industry leader.

From the perspective of the qualifications of the sweeping robot track, Stone Technology is an enterprise that popularizes LDS lidar technology on a large scale, and continues its technical advantages to become the fastest growing listed enterprise in the field of sweeping robots in China. From the perspective of business scale, the company's revenue scale, profit growth rate, market development, etc. are at the leading level in the industry, and it is expected to gradually establish sufficient industry competition barriers under the scale effect.

From the perspective of development investment, the opportunities in the industry value chain have clearly shifted to both ends of the upstream and downstream industries, and choosing an asset-light operating model will become a more profitable investment decision. As an industry leader, Stone Technology will inevitably accelerate its run in the high-growth emerging track and gain broader growth prospects or market share.