According to Ecovacs' annual report, the company's total revenue will reach 15.502 billion yuan in 2023, a year-on-year increase of 1.16%, but the net profit attributable to shareholders of listed companies will only be 612 million yuan, a year-on-year decrease of 63.96%. The performance in the fourth quarter became the trough of the whole year, although the operating income was as high as 4.97 billion yuan, but the net profit attributable to the parent was only 08 million yuan, and the non-net profit attributable to the parent was -38 million yuan, showing a substantial loss.
And in the first quarter of 2024, Ecovacs seems to have bottomed out beautifully. According to the financial report, Ecovacs' operating income in the first quarter was 3.474 billion yuan, a year-on-year increase of 7.35%; the net profit attributable to the parent company was 298 million yuan, an increase of 3449.73% month-on-month; deducted non-net profit of 287 million yuan, an increase of 842.72% month-on-month. This shows that the company is starting to return to growth after experiencing difficulties, but still faces many challenges.
Sluggish performance and intensifying competition
Ecovacs' stagnant growth may be due to several factors. First of all, the overall recovery of the domestic consumer market is weak, and secondly, the competition in the industry has intensified. China's clean appliance market is in a stage of rapid development, but the smoke of the price war is also permeating the entire industry. In 2023, the price of all-round sweeper products will be fully reduced, and the average retail price of online and offline will drop by about 500 yuan. As a result, the gross profit margin of Ecovacs' main business decreased by 4.11 percentage points to 47.5%, while the gross profit margin of Roborock, a competitor in the same industry, increased by 6 percentage points to 55.32%.
From the perspective of market share, Ecovacs will have a market share of 34.4% in online sales of sweeping robots and 70.6% offline in 2023.
Strategic Alignment and Global Market Expansion
In order to meet the challenge, Ecovacs began to adjust its strategy. The company said that it will focus on its main business and deepen its product layout; increase the investment of resources and energy in overseas markets; Enhance the Group's ability to compete at scale. Whether this strategic adjustment is effective or not needs to be verified by the financial report data. In the first quarter of 2024, Ecovacs' overseas business performed well and became the biggest bright spot. According to the financial report, in 2023, Ecovacs' overseas revenue will be 6.52 billion yuan, accounting for 42.07% of the total revenue, a year-on-year increase of 25.8%, and at the same time, the overseas gross profit margin will increase by 7.61 percentage points to 51.81%.
The growth of overseas markets brings hope to Ecovacs. The company has set up overseas headquarters to increase market share in the Asia-Pacific region and the world, and optimize the product structure for the needs of different regions. Through a variety of channels to expand overseas markets, Ecovacs has achieved good performance growth in the United States and Europe. Competitors such as Roborock have also gradually established distribution networks in the global market, which means that Ecovacs must continue to increase its investment in overseas markets.
Reasons for Ecovacs' poor performance in 2023
It is probably because of the misjudgment of Ecovacs' product strategy, which pursued the competition in the high-end market too much and ignored the layout of the middle and low price segments. In the high-end market, competitors have launched more cost-effective products, which has weakened Ecovacs' advantage in this field. And Ecovacs' high marketing expenses are also a problem. The selling expense ratio has been on the rise, from 21.58% in 2020 to 34% in 2023. High marketing costs are eroding a company's profitability.
Future outlook
The future development direction of Ecovacs is to continue to promote global market expansion, in-depth study of product strategy, and find a reasonable balance between marketing costs and profitability. In the face of changing domestic and foreign markets, Ecovacs needs to flexibly respond to market trends and find new growth drivers. Ecovacs has made certain achievements in the fields of floor scrubbers and service robots, and these businesses can bring more growth opportunities to the company.
Overall, Ecovacs faces many challenges in 2024, but there are also potential opportunities. To maintain growth, Ecovacs needs to continuously adjust its strategy, optimize its product mix, and continue to expand its global market. Only in this way can Ecovacs gain a firm foothold in the highly competitive clean appliance industry.