Beijing Roborock (.SS)_ Model Update

Summary of Beijing Roborock (688169.SS) Conference Call Company Overview - Company: Beijing Roborock Technology Co., Ltd. (688169.SS) - Market Cap: Rmb45,248 million (approximately US$6,191 million) [2] Financial Performance - 2022 Net Profit: Rmb1,183 million, with a diluted EPS of Rmb6.430, reflecting a decline of 15.6% [4] - 2023 Net Profit: Rmb2,051 million, with a diluted EPS of Rmb11.144, showing a growth of 73.3% [4] - 2024E Net Profit: Expected to be Rmb2,211 million, with a diluted EPS of Rmb12.011, indicating a growth of 7.8% [4] - 2025E Net Profit: Projected at Rmb2,509 million, with a diluted EPS of Rmb13.633, reflecting a growth of 13.5% [4] - 2026E Net Profit: Anticipated to reach Rmb2,974 million, with a diluted EPS of Rmb16.156, indicating an 18.5% growth [4] Sales and Growth Projections - Sales Revenue Growth: - 2022: Rmb6,629 million - 2023: Rmb8,654 million (30.5% growth) - 2024E: Rmb11,046 million (27.6% growth) - 2025E: Rmb13,714 million (24.1% growth) - 2026E: Rmb16,133 million (17.6% growth) [6] Market Dynamics - Sales Expectations: - Anticipated double-digit year-over-year sales growth in China due to government subsidies - Approximately 20% sales growth expected in APAC markets - Low-teen sales decline projected in European markets - Approximately 40% sales growth expected in the US for Q4 2024E [1] Valuation and Target Price - Target Price: Lowered to Rmb313.6 from Rmb335.7, based on a 23x PE for 2025E, reflecting a 10% discount to its 3-year trading average [1][9] - Expected Return: 28.0% from the current price of Rmb244.950, with a total expected return of 28.5% including a dividend yield of 0.5% [2] Risks - Downside Risks: - Global macroeconomic slowdown and weakened consumer spending - Unsuccessful product launches - Intensified industry competition, particularly price competition - Increased tariffs between China and destination countries - Material strengthening of the Renminbi (Rmb) - Higher-than-expected raw material costs [10] Strategic Focus - The company has shifted its strategic focus towards market share and scale, which has raised concerns about future profitability [1][9] Conclusion Beijing Roborock is positioned for growth in various markets, particularly in China and the US, but faces significant risks that could impact its performance. The lowered target price reflects a cautious outlook on profitability amid strategic shifts.