In the past few years, the stock market has not been doing well, and many stocks with good performance have also fallen sharply. Yansong Investment Research Circle has done many issues, focusing on high-quality companies that have fallen significantly in the past two years, and has made an in-depth analysis of these companies from the aspects of historical stock price trends, main business, development, and valuation.
Friends who don't know what the Yansong Investment Research Circle is, you can click the link here to see: our growth.
According to estimates, in the domestic sweeping robot market, Ecovacs and Roborock accounted for more than 6% of the total, respectively the industry leader and second, and the largest decline in the last two or three years has exceeded 80%. Let's take a look at the situation of these two companies today, we don't make future judgments, mainly use data to speak, by reviewing the historical market to sort out the logic behind the stock price, by the way, the company and the industry situation will be explained, just for your reference and learning.
1. Ecovacs
1. Historical stock price fluctuations
Ecovacs is a well-known bull stock in history, and from 2020 to 2021, the stock price has risen more than 10 times in more than a year. Since then, the stock price has adjusted since the second half of 2021, and in more than 2 years, the stock price has fallen by more than 86% at the maximum, and it is currently down by more than 80%.
2. Main business
The company's main products can be roughly divided into two modules, such as service robots and cleaning small household appliances, and the core products include sweeping robot DEEBOT series, window cleaning robot window treasure series, lawn mower robot GOAT, vacuum cleaner, etc., accounting for about half of the revenue.
3. Development history
Ecovacs' predecessor can be traced back to 1998 in Suzhou, which was a state-owned enterprise that produced the famous Chunhua brand vacuum cleaners at that time. After China's accession to the WTO in 2001, Ecovacs transformed into OEM services for overseas enterprises. In 2006, the company established "Ecovacs" and began to operate its own brand. From 2017 to 2018, Ecovacs rearranged its ODM business in order to develop overseas markets, and then found that the ODM business not only invested more, but also had a much lower profitability than its own brands. In 2019, Ecovacs made another strong strangulation on the ODM business.
According to Zhongyikang data, in 2019, in China's domestic market, the company's online retail sales accounted for 46.9% and offline retail sales accounted for 71.3%, occupying the position of the first brand in the domestic sweeping robot market for many years.
In addition to sweepers, Ecovacs has also launched intelligent lawn mower robots and commercial cleaning robots, extending the product scene from indoor to outdoor, and is leveraging its brand Timco to penetrate into the market of floor scrubbers and intelligent cooking machines with significant growth potential.
4. Industry development
The smart cleaning appliance industry is a technology-driven industry with growing market demand. Early sweeping machines mainly relied on gyroscopes and algorithms to build maps, which were expensive and "stupid". Around 2016, domestic manufacturers began to apply lidar navigation technology on a large scale, and the performance of navigation and intelligent obstacle avoidance was improved by leaps and bounds, and at the same time, the price of tens of thousands of yuan was lowered to the level of 1,000 yuan, opening a new era of household robots. GFK data shows that from 2012 to 2022, the compound growth rate of sales of clean appliances has reached 28%, the market size has risen from 2.9 billion yuan to 34.8 billion yuan, and sweepers have grown rapidly.
In the past two years, the functions of the sweeping machine have become more and more perfect, from the integrated sweeping and mopping integration, to the full-function foundation pile, adding the functions of rag self-cleaning, automatic dust collection, automatic drying, etc., and the cleaning power and use experience have been very high. The epidemic has also accelerated the market penetration of sweeping robots.
In 2022, the average number of vacuum cleaners per 100 households will be only 23.5, of which 5.1 will be the main category of sweeping robots and only 1.5 floor scrubbers, all of which are in their infancy. It is worth mentioning that,In fact,Compared with China,The penetration rate of overseas sweeping robots is higher,For example, in the United States market, it can reach about 15%,In Germany、JapanThe market can reach 8%,And in domestic coastal cities, it is about 5%.
GFK predicts that by 2030, the market size of clean electrical appliances will reach 60 billion yuan and about 40 million units. Floor scrubbers and robot vacuums are and will be typical categories.
5. Company development plan
According to the company's annual report, in the Ecovacs service robot sector, the company will continue to lead the industry reform and expand the market. Combined with the dual brand effect of Ecovacs and Yidian, we will accelerate the innovation of the head market, promote the expansion of the sinking market, and drive the market penetration of the sweeping robot industry. Continue to develop category changes and enrich the robot product matrix.
In the high-end smart life appliances segment of Timco, the company will continue to deepen the fields of household cleaning, cooking, healthy living and personal care, promote the consolidation of existing market segments, and build multi-category, multi-brand, multi-format upgrading and iteration of organizational capabilities.
6. Performance/Valuation
The company's historical performance has grown as a whole, with explosive growth in 2021, but it has been declining in the last two years.
From the perspective of single-quarter growth, starting from the third quarter of 2020, the company's single-quarter growth rate has maintained a triple-digit ultra-high growth rate, and the growth rate in the fourth quarter of 21 fell into double digits, with a high base and a decline in the industry's prosperity, the company has fallen into negative growth since the second quarter of 2022, and the single-quarter growth rate in the third quarter of 23 is -92%. And the funds with a keen sense of smell began to flee from the third quarter of '21.
The company expects that the net profit attributable to the parent company in 23 years will be 6-680 million yuan, a year-on-year increase of -59.96%~-64.67%, and the net profit attributable to the parent company will be 4.4-520 million yuan, a year-on-year increase of -68.27%~-73.19%. The level of profitability is basically back to 2020.
There are three main reasons for the decline in the company's performance:
(1) Affected by the downturn of the domestic industry, the gross profit margin of the company's sweeping robots and floor scrubbers has declined;
(2) The domestic consumption boom is weak, and the competition in the superimposed industry is intensified, resulting in a decline in the conversion efficiency of market input and an increase in the company's sales expenses;
(3) The company's new categories such as commercial cleaning robots, lawn mower robots, and Shiwan intelligent cooking machines are in the net investment period, and the investment in product research and development and marketing is significant, which has depressed the company's overall profit performance.
Let's take a look at the valuations
At the highest level in 2021, the company's valuation exceeded 100 times the P/E ratio, and after more than two years of adjustment, the current P/E ratio is 17.4, and the current P/E ratio is in the historical average: low area. The company's current market value is about 20 billion, and according to the median value of 640 million in the company's forecast, the current valuation is about 31 times the price-earnings ratio, which is higher than the historical undervaluation line of 23 times.
7. Summary
Finally, a brief summary:
- Smart cleaning appliances will continue to grow;
- The penetration rate of the domestic sweeping robot industry is still relatively low;
- The company is the industry leader, and its market share has remained the first in the industry for many years;
- Diversified product layout is conducive to the company to avoid the risk of dependence on a single product category;
- At present, the company's operation is affected by the industry environment and competitive factors.
2. Roborock
1. Historical stock price fluctuations
After Roborock went public, the stock price rose more than 3 times in more than one year from April 2020 to June 2021. In June 2021, it pulled back from its highs, and in more than a year, the maximum decline was nearly 83%, and it is currently down 47%.
2. Main business
The company's main business is clear, 93% of them are smart sweepers, and the remaining little is also handheld cleaning products, and there are no other miscellaneous things at all.
3. Development history
Roborock was founded late, the founder Chang Jing and a number of executives are all Internet companies, and soon after its founding, it became a Xiaomi ecological chain enterprise, OEM for Mijia sweeping robots. The development process can be broadly divided into three stages:
The first stage: from 2014 to 2016, Xiaomi started as an OEM.
Roborock was founded in 2014 and was an OEM for Xiaomi in the early days. In 2016, the first product, "Mijia Robot Vacuum Cleaner", was launched, which commercialized LiDAR navigation technology on a large scale and applied it to robot vacuum cleaners.
The second stage: 2017-2018, the establishment of its own brand;
Since 2017, the company has begun to transform from OEM to its own brand sales, with two brands, stone and small tile, which are sold through online platforms such as Tmall and Jingdong in China, and developed the American and European markets through online channels such as Amazon overseas.
The third stage: from 2018 to the present, vigorously develop independent brands and de-small millet
In 2018, Roborock's own brand revenue accounted for more than 50%, in 2020 it exceeded 90%, and in 2021, the company's private brand business accounted for 98.8% of the revenue.
4. Industry development
Roborock and Ecovacs belong to the same industry, so I won't repeat them here.
5. Company development plan
According to the description of the company's annual report, the company implements five strategies: technology strategy, market strategy, brand strategy, product innovation strategy, and talent strategy.
Technically, we will continue to deepen the research on the basic technologies of intelligent sweeping robots, including artificial intelligence, navigation algorithms, new sensors, etc., in order to further consolidate and strengthen its technological leading position. The product R&D plan will continue to be market-driven and user-oriented, and continue to iterate on new products. In terms of market, it adheres to the development strategy of being based in China and facing the world. At the same time, increase marketing and brand promotion efforts to enhance brand awareness.
6. Performance/Valuation
After two years of declining performance after listing, it will resume growth in 2023, with a compound growth rate of 27% in the last four years. From 2021 to 2023, Roborock's R&D investment will be 440 million yuan, 489 million yuan and 619 million yuan.
Stock price decline analysis
Roborock's sharp decline in this round is due to the factor of industry cycles. The small household appliance industry has also been adjusted since July 2021.
But the main reason is the decline in performance. Starting from the second quarter of 2021, the company's single-quarter profit growth rate fell from a triple-digit growth rate to around 0, followed by a negative growth rate for up to 7 quarters (positive in 22Q1), until the positive growth rate returned again in the second quarter of 23. During this period, the company's revenue continued to grow, and there was a brief decline in the first quarter of 2023, which is an increase in revenue but not an increase in profits.
Regarding the decline in performance, the company explained: the outbreak of the Russia-Ukraine conflict and the continuation of the new crown epidemic have had a certain impact on the consumer goods market and the demand of the company's industry. Affected by the drastic changes in the foreign exchange market, the company's income from forward foreign exchange lock-up decreased, resulting in a decrease in operating profit during the reporting period.
Finally, let's look at the valuation
At the high point in February 2021, Roborock's P/E ratio was as high as about 70 times, and at the lowest point, its valuation fell below 20 times P/E, and its valuation shrank by more than 70%.
With the resumption of performance growth, the company's stock price has continued to rise for nearly a year and a half, with a cumulative increase of 130%. At present, Roborock's market value is about 49 billion, corresponding to a profit of 2.051 billion in 23 years, which is about 24 times the price-earnings ratio, which is in the low area of the historical average. The market expects that the company's profit will maintain a growth rate of 20% in the next three years. The current valuation is also reasonable.
7. Summary
Finally, a brief summary:
- The penetration rate of domestic sweeping robots is still relatively low, and there is a large room for improvement;
- Roborock is the industry leader, and its market share will likely continue to increase;
- In the next few years, the overseas market will continue to maintain rapid growth;
- The current valuation is reasonable.
Finally, the situation of the two "sweeping monks" in the industry and company has been introduced, and as for whether the overall investment is suitable or not, everyone needs to evaluate it separately. If you have any opinions, you can also pay attention to the exchange together.