Source: Beast Finance Author: Beast Finance
Business and Financial Overview
Viomi Technology (VIOT) was established in 2014 and its first product was a water purifier under the Xiaomi (01810) brand launched in 2015. Over the next few years, the company grew rapidly, and its product portfolio now includes more than 60 IoT smart home products, such as refrigerators, dishwashers, washing machines, water heaters, robot vacuums, and air conditioners, among others.
Source: Yunmi Technology
The vast majority of Yunmi Technology's current revenue comes from the Chinese market, and in the third quarter of 2022, more than 60% of its sales will come from the Yunmi brand.
Source: Yunmi Technology
Viomi Technology was listed on Nasdaq at the end of 2018, and its revenue increased from US$45 million in 2016 to US$667.5 million in 2019.
Unfortunately for investors, the company's revenue has been severely impacted by the pandemic, and the restrictions caused its financial performance to deteriorate significantly as demand for many of its products disappeared.
In the third quarter of 2022, Viomi Technology's revenue fell by 35.1% year-on-year to 685.8 million yuan ($96.4 million). operating loss in dollars. Net income was also negatively impacted by the complete disruption in sales of Xiaomi-branded robot vacuums.
However, there is also good news. During this period, the number of household users continued to grow at a healthy rate, as did the percentage of households with more than one connected device.
Source: Yunmi Technology
Chen Xiaoping, founder and CEO of Viomi Technology, said at the third quarter financial report meeting in 2022 that the gross profit margin in the fourth quarter is expected to increase to about 20%, and the company has made good progress in product innovation, brand promotion and channel expansion. However, he also said that Yunmi Technology's sales in the fourth quarter of 2022 are expected to decline year-on-year.
Looking ahead, Boldbeast expects Viomi's sales and profit margins to improve significantly in 2023, as China fully lifted the epidemic restrictions in December last year after unprecedented epidemic restrictions.
Yunmi Technology has launched several new products in 2022, including the 1200G Quanxian AI water purifier, the Alpha 3 Pro AI sweeping robot and the Super 2 Max AI gas water heater.
Boldbeast Finance expects the market demand for its products to improve significantly in the coming months, and the company's financial performance will also get a boost from the strategic cooperation agreements signed with Tmall, JD.com and China Telecom in late 2021 and early 2022 , to promote its IoT home solutions.
In addition, Viomi Technology may also expand overseas sales, because the company will participate in IFA Berlin, one of Germany's largest electronics fairs, in 2022.
In terms of balance sheet, Mengshou Finance believes that Yunmi Technology is also very healthy. As of September 2022, the sum of cash, short-term deposits and short-term investments of Yunmi Technology is US$164.2 million, and the enterprise value is negative US$55.8 million. The company also barely has any debt as of this writing. The company's current market capitalization ($73.48 million) is also well below its cash position.
With so much cash on hand, Viomi announced in October that it had launched a $10 million share repurchase program, which could be an important catalyst for its share price in the coming months.
Overall, Boldbeast Finance expects that Yunmi Technology's annual sales will slowly return to the level of US$800 million, and its net profit will return to about US$40 million per year.
Although the past few years of Viomi Technology have been rough, with the full lifting of restrictions on the epidemic, the future of Viomi Technology looks bright.
According to Persistence market research, Viomi Technology is in an exciting field, as the global market for smart home cloud platforms is growing rapidly, and sales are expected to achieve a compound annual growth rate of more than 17% during this decade.
risk
Boldbeast Finance believes that Yunmi Technology is currently facing two major risks. For starters, if COVID-19 cases spike again, China could re-lock down, which could put pressure on Viomi's business again. Second, Viomi is a relatively small local company that relies almost entirely on the domestic market, and its market share may be eaten away by larger local competitors such as Tuya Smart (TUYA) and TP-Link.
Conclusion
Although Viomi Technology has a healthy balance sheet and more than US$160 million in cash, short-term deposits and short-term investments, its enterprise value is negative.
Mengshou Finance believes that Yunmi Technology's revenue in 2023 may improve significantly, and the company may return to profitability in the next few months.
Even if something goes wrong, downside risk appears limited given its strong cash position and share buyback program announced last year.