Crazy Stone Technology: Made in Xiaomi, but also in Xiaomi

Nearly a week after landing on the Science and Technology Innovation Board, Roborock Technology released a very dazzling “2019 Annual Results Express Announcement” on February 27.

The announcement shows that the total operating income in 2019 was 4.2 billion yuan, a year-on-year increase of 3.05 billion yuan in 2018, an increase of 37.81%; in terms of operating profit, it reached 920 million yuan in 2019, compared with 380 million yuan in 2018, In 2019, it reached 760 million yuan, an increase of 65.11% compared with 460 million yuan in 2018.

As the third listed Xiaomi ecological chain company, Stone Technology is the most impressive to Xiaomi. It not only has the shortest establishment time, but also has the highest market value.

In the eyes of most people, since it is in the Xiaomi ecological chain, Roborock Technology must have been “brought to fly” by Xiaomi’s support. Now the success of Roborock Technology is at least half of Xiaomi’s credit. The development of Stone Technology in the future will also be determined by the development of Xiaomi, especially the sales of ecological chain products.

In fact, this is not entirely accurate. From the prospectus of Stone Technology and its strategic direction in recent years, Stone Technology, which is backed by the “big tree” of Xiaomi, does not want to be branded as a “Xiaomi Ecological Chain Enterprise” by the outside world. deep imprint.

Stone Technology, whose “wings” are getting harder and harder, has been thinking about how to get rid of Xiaomi’s shackles in order to seek a higher development space and prove its independent ability.

“Crazy Stone”

The American irobot home robot company established in 1990 has a current market value of only 9.1 billion yuan (as of March 6). Ecovacs, which was established in Suzhou in 1998, did not land on the Shanghai Stock Exchange until 2018, with a current market value of about 13 billion yuan.

On the other hand, in less than 6 years, Stone Technology has created a growth myth that the predecessors never imagined. From the launch of the first product to the capital market, Stone Technology actually took less than 4 years. Moreover, the issue price of Roborock Technology on the first day of listing rose from 271.12 yuan to 500.1 yuan, an increase of 84.46%, and set a record for the highest share price on the Science and Technology Innovation Board.

Whether it is the growth rate or the price given by the capital market, Stone Technology is “crazy”, developing wildly, rising wildly, and attracting attention wildly. Behind all this is supported by crazy financial data. Only by penetrating the financial report of Stone Technology can we find the reason for the madness.

1. Soaring revenue and profits

In the past four years, Roborock Technology’s revenue and net profit have shown a trend of soaring.

According to the prospectus, the revenue in 2016, 2017, 2018, and the first half of 2019 was 183 million yuan, 1.119 billion yuan, 3.051 billion yuan, and 4.205 billion yuan, respectively. In less than 4 years, the revenue of Stone Technology has increased by more than 20 times. Moreover, Stone Technology has also achieved qualitative changes in profits. In 2016, Stone Technology was still at a loss. By 2019, Stone Technology had achieved a net profit of 756 million yuan.

The reason why Roborock Technology has achieved a rebirth in terms of profitability in just four years is that its star products have been greatly welcomed by the market. Although Roborock Technology has only two categories of products so far, namely intelligent sweeping robots and handheld wireless vacuum cleaners, it is these two types of explosive products that have become the core engines for Roborock Technology to harvest the market and consumers.

In 2016, Roborock’s first explosive product sold more than 150,000 units in less than half a year, and the market price at that time was 1699 yuan; Further improvement has rapidly increased the revenue of Stone Technology by more than 5 times; in 2018, the total sales volume of Stone Technology’s three products exceeded 2.1 million, and the revenue increased by nearly 172% compared with 2017, exceeding 3 billion yuan; in 2019 In the first half of the year, the total sales volume of the four products of Roborock Technology exceeded 1.47 million.

It can be said that Roborock Technology has always relied on “explosive products” all the way to the top. Almost every year, new products can create extremely high sales and have a very good market. At the same time, the gross profit of these explosive products is also relatively high, so Roborock Technology is like a rocket, and its revenue and profits have soared.

2. Market share increasing at the speed of light

Explosive products not only brought a lot of gold to Stone Technology, but also made the young Stone Technology become a leading company in the industry.

According to the data from Zhongyikang quoted by Stone Technology in the prospectus, in the first half of 2019, Stone Technology’s entire product line ranked second in the domestic market share, at 23%; it ranked second in the domestic online market share , was 26%.

Looking at the changes in the market position of Stone Technology in recent years, it can be found that Stone Technology has almost occupied the intelligent cleaning robot at a rate of increasing its market position by an order of magnitude a year. In the second year after the official launch of Stone Technology products, Stone Technology has ranked third in the online field with the “Mijia” explosive products, accounting for 10.3%.

From another point of view, the stone technology that chooses to make the intelligent cleaning robot is going faster and faster on the road of catching up with the big brother Ecovacs, and the market share gap with Ecovacs is getting smaller and smaller.

In just a few years, Stone Technology has transformed from a little-known entrepreneur to one of the leading companies in the segment. For the improvement of market position, Stone Technology explained in the prospectus: “Because of the excellent quality and reliable price of the products, the market share has been continuously increased.”

In the view of Stone Technology, impressing consumers with good products is the fundamental reason for it to stand in the first echelon. And judging from the current trend, Stone Technology still has great ambitions to increase its market share. In the future, it will accelerate the layout of new projects, product technologies, channels, etc., which means that Stone Technology still has a certain increase in market share. space.

Cheng Yu Xiaomi

Without millet, no stone can be made. Today’s stone technology is supported by Xiaomi. On the day that Stone Technology landed on the Science and Technology Innovation Board, Xiaomi founder Lei Jun congratulated him on multiple social platforms, saying that “The listing of Stone Technology once again confirmed the success of Xiaomi’s ecological chain model.”

Xiaomi series, Xiaomi ecological chain, Mijia products… There are a lot of Xiaomi labels branded on Stone Technology. In Stone Technology’s prospectus, the word “Xiaomi” was mentioned 807 times.

Perhaps in the eyes of many people, Stone Technology, as a Xiaomi ecological chain, is like a subsidiary of Xiaomi. From breeding to feeding, it is all done by the “mother” of Xiaomi. This kind of relationship is quite special. It is closer than a close partner. The two parties have a very close relationship in business, channels, and even equity.

Stone Technology, which originated from Xiaomi, mainly obtained two powerful springboards from Xiaomi.

1. Capital blood transfusion

The capital related to Xiaomi runs through almost the entire development cycle of Stone Technology, and necessary and timely capital transfusions are carried out for it.

When Stone Technology was established in 2014, there were only four shareholders, namely Chang Jing, Ding Di, Mao Guohua, and Wu Zhen, but soon after the first capital increase of Stone Technology, Xiaomi’s capital began to intervene and became a shareholder of Stone Technology.

During the first capital increase in March 2015, Tianjin Jinmi, which is controlled by Xiaomi Corporation, first appeared among the capital increasers, accounting for 30% of the total investment; The proportion of Mi’s investment accounted for 13.32%: In March 2016, Shunwei appeared in the list of transferees of the equity transfer, accounting for 0.3% of the shares.

Tianjin Jinmi and Shunwei both participated in the subsequent capital increase and equity transfers initiated by Stone Technology. According to calculations, Tianjin Jinmi Heshun has invested more than 6 million in Stone Technology over the years. Before the listing, Shunwei and Tianjin Jinmi ranked second and third in terms of shareholding ratio of Stone Technology, holding 12.85% and 11.85% of the shares respectively.

From the perspective of the entire equity relationship development process of Stone Technology, the capital of Xiaomi has entered the market relatively early. Tianjin Jinmi and Shunwei both invested before Stone Technology had operating income. Although we have not verified the specific details of Xiaomi’s investment in Stone Technology, the assistance of Xiaomi’s capital to Stone Technology mainly comes from two aspects.

First, it is the endorsement effect of capital; second, it is the support of operation and development funds, mainly the early research and development expenses. Since the capital that supported the operation of Stone Technology in the early days actually did not come entirely from Xiaomi capital, the real benefit of Xiaomi capital to Stone Technology at the capital level came from the endorsement of the first point.

After Tianjin Jinmi took a stake in Stone Technology in March 2015, Gao Rong, Qiming, GIC and other capitals were listed on the list of capital increase in the following year and officially became shareholders of Stone Technology. At this time, the first product of Roborock Technology has not yet been launched, which is enough to show the ability of Xiaomi to “carry goods”.

In fact, this is not difficult to understand. In many investment cases, we can see the presence of Shunwei, Qiming and other capitals. In the investment case of Stone Technology, it is not surprising that closely related capitals follow the Xiaomi capital, but for Stone Technology, the addition of more powerful capital means a stronger endorsement role. This kind of startup, without serious growth and survival issues, will benefit from it in the long run.

2. Channels and supply chain

For an intelligent hardware company such as Stone Technology, the supply chain is extremely critical. Good suppliers and abundant supplier choices mean that there is more room for hardware development, accurate positioning of market targets, and precise control of product costs.

Behind the launch of Roborock’s first product, there is Xiaomi’s full support in supply chain and channels. In terms of supply chain, Xiaomi has introduced strong high-quality suppliers to Stone Technology, such as Sunwoda, Nidec, Sharp, etc.

At the Xiaomi Ecological Chain 2016 Autumn Communication Conference, Stone Technology CEO Chang Jing once bluntly stated that Xiaomi has given support including supply chain, ID design, product definition, etc., saying that “without the support of Xiaomi Ecological Chain, we would not have reached today.”

Changjing clearly understands that for a startup like Stone Technology, a mature and reliable supply chain means half the battle, and it is ahead of its peers who have no or insufficient support at the starting line.

In terms of channels, since the first product is mainly built for Mijia, it can only be sold in official channels such as Xiaomi’s Mijia. It is worth noting that Roborock’s first self-owned product still relies on Xiaomi. In September 2017, Roborock’s intelligent sweeping robot started crowdfunding at Mijia. That year, Roborock’s product sold over 55,000 units. .

The huge traffic and exposure effect of Xiaomi’s channel can be said to have paved a good way for the growth of Stone Technology’s brand power. Stone Technology is like standing on the shoulders of a giant and overlooking, so it is not difficult to jump high.

Until now, although Stone Technology has its own official website, flagship store and other sales channels, Xiaomi still provides key channel support for Stone Technology in some regions, such as online and offline channels in Taiwan, China.

stuck in millet

The gene of Stone Technology is a Xiaomi ecological chain enterprise, but this gene traps the development of Stone Technology to some extent.

In Stone Technology’s prospectus, risk disclosures about Xiaomi accounted for more than half of all risks, focusing on equity, production, sales and other aspects.

For example, in the risk of related-party transactions, the total revenue of related-party transactions between Stone Technology and Xiaomi accounted for 100%, 90.26%, and 50.17% of Stone Technology’s total sales in 2016, 2017, and 2018, respectively. In the item of shared patent risks, the prospectus mentioned that by the end of the reporting period, Xiaomi and Stone Technology had a total of 59 domestic patents and 5 overseas patents, and in addition to Stone Technology, Xiaomi could also obtain these patents without the permission of Stone Technology. used in the past.

Relevant risks are one of the important information that must be transparently disclosed by companies going public. The purpose is to make investors aware of the inadequacies of the company and invest prudently. However, judging from the risks related to Xiaomi disclosed in the prospectus, Stone Technology is theoretically affected by the uncertain factor of Xiaomi in many core development and operation links.

Roborock is indeed very dependent on Xiaomi. Although Xiaomi has become a springboard for Roborock’s rapid development in the past few years, Roborock has to face some obstacles and hidden ceilings.

1. Cost-effective

One of the core labels of the Xiaomi brand is cost-effectiveness. As a Xiaomi ecological chain enterprise, Stone Technology has its own brands and products in recent years, but it has more or less the mark of cost-effectiveness.

It should be noted here that the cost performance is not necessarily bad, but making cost-effective products all the time will affect the development prospects of the company. Especially in terms of profit margin and market audience size, it is difficult for companies that focus on cost-effective products to make further breakthroughs. Take Xiaomi itself as an example. It has been trying to enter the high-end mobile phone market before. It is an unprecedented determination to launch the Xiaomi Mi 10 series this year, but there are still many voices that are not optimistic in the market.

Although Stone Technology has independent brands other than Mijia, Stone and Xiaowa, these two brands still have very obvious traces of Xiaomi.

The Roborock brand was launched in 2017, and the Xiaowa brand was launched in 2018. From the price point of view, the Roborock brand’s smart sweeping robots are on average a bit higher than Mijia’s smart sweeping robots, while Xiaowa is lower than Mijia. Therefore, taking Mijia as the standard, Stone Technology distributes its own brands on both sides of Mijia.

However, most of the series of products are actually similar to the 1699 yuan Mijia intelligent robot. Generally speaking, Roborock’s own brand has not broken through the mid-to-low-end market positioning, and even the highest-priced sweeping robot has not exceeded 3,000 yuan. Here you can compare the prices of peer products. For example, Ecovacs is currently selling the highest-priced products at 3,999 yuan, and Ecovacs has a number of products priced above 3,000 yuan.

Of course, from another point of view, it seems that Roborock Technology is currently difficult to deploy the high-end sweeping robot market. On the one hand, it is determined by the current market situation, that is, low-end and mid-end products are more popular with users and can better open up the market;

In addition, there is a key data for reference, that is, the average selling price. According to the prospectus, in the first half of 2019, the average selling price of Stone brand products was 1,926.8 yuan, and the average selling price of Xiaowa brand products was 1,114.31 yuan. Therefore, Stone Technology’s own brand is still generally welcomed by consumers in the low-end market.

2. Profit margin

Xiaomi has promised that the “comprehensive hardware profit margin” will not exceed 5%. This way of limiting the upper limit of profit margins also has some shadows on Stone Technology.

In the first half of 2019, Stone Technology’s comprehensive gross profit margin was 32.5%, slightly lower than Ecovac’s 37.28%. In the past four years, the comprehensive gross profit margin of Roborock Technology has been increasing, but it has not surpassed Ecovacs.

The Mijia brand is the biggest obstacle to the improvement of Stone Technology’s profit margin. Since the Mijia brand cooperates with Xiaomi, Stone Technology also mentioned in the prospectus that all related Mijia products are sold by Xiaomi, that is, the pricing power is in the hands of Xiaomi, so the profit margin is lower than the average level . Taking handheld wireless vacuum cleaners as an example, the gross profit margin in the first half of 2019 was 13.58%, far lower than the gross profit margin of comparable companies in the same industry from 2016 to 2018.

It is important to note that the gross profit margin of Mijia smart sweeping robots is still declining. In 2016, the product’s gross profit margin was 18.99%, and by June 2019, the product’s gross profit margin dropped to 13.91%. It is speculated here that the main reason is the product price reduction promotion, because the average price of the Mijia intelligent sweeping robot in the first half of 2019 is given in the prospectus, which is 1126.28 yuan, and the earliest market price of this product is 1699 yuan. .

However, Stone Technology’s own brand Xiaowa also lowered the comprehensive profit margin to a certain extent. In 2018, the gross profit margin of the Xiaowa brand was 23.96%, which was nearly 5 percentage points lower than the comprehensive gross profit margin. In the first half of 2019, the gross profit margin of the Xiaowa brand was 28.03%, still 4.47 percentage points lower than the comprehensive gross profit rate. percentage point.

“De-Mitting” is a long-term task

Stone Technology seems to be very clear that for future development, it cannot only be positioned as a Xiaomi ecological chain enterprise, so Stone Technology has been “de-Xiaomiization”.

In 2016, the revenue of Mijia brand products (excluding accessories) was 181 million yuan, accounting for 98.58% of the total revenue. By the first half of 2019, the revenue of Mijia brand products (excluding accessories) was 8.8%. .63 billion yuan, accounting for 40.59% of the total revenue; in terms of gross profit, in 2016, Mijia brand products (excluding accessories) achieved a gross profit of 34 million yuan, accounting for 97.43% of the total gross profit. By 2019 In the first half of the year, Mijia brand products (excluding accessories) achieved a gross profit of 120 million yuan, accounting for 17.31% of the total gross profit.

From the perspective of changes in the proportion of revenue and gross profit, Roborock Technology’s “de-milletization” has achieved considerable results. Specifically, Roborock Technology’s efforts in “de-milling” in the past four years are mainly summarized in three aspects.

First, the product and brand matrix “de-Xiaomi”. From only the Mijia brand to the three major brands of Mijia, Stone and Xiaowa, Stone Technology has achieved zero breakthrough in its own brand.

Second, profitability “de-milletization”. As mentioned earlier, the gross profit margin of Mijia products is generally lower than that of Stone’s own brand. In the past three years, the gross profit of Stone Technology’s own brand has been steadily increasing, far exceeding the gross profit rate of Mijia brand.

Third, the channel “de-milletization”. In the beginning, Stone Technology did not have its own sales channels, and all relied on the online and offline channels of Xiaomi official website and Xiaomi Home. Now Stone Technology has online and offline sales channels in most markets, completely independent in Xiaomi.

In the past few years, “de-milletization” has brought higher profits, larger transaction scale, and higher market visibility to Roborock Technology. This may be the core reason why Stone Technology, a young company, dares to “de-miize”. After all, it is difficult to make a lot of money by only making Mijia products.

Roborock Technology wants more room for growth. Now that it has been listed, it must operate and develop with a mentality of investing in the future. This means that Stone Technology will still need to “de-milletize” for a period of time in the future to further improve profit margins. and market position.

However, it is impossible for Roborock Technology to completely de-milletize, and even in the long run, the probability is not high. On the one hand, Stone Technology needs Xiaomi’s influence, supply chain resources, and even the support of fundraising in the later stage; on the other hand, Stone Technology has the huge task of building a vertical category ecology related to Mijia, and the construction of Mijia ecological chain also needs The support of stone technology.

So the key lies in the degree of “de-milletization”. Assuming that Stone Technology has completed about half of the process of de-milling, it has actually made great progress in profit and scale. It is necessary to further master this progress in the future before Stone Technology can achieve higher breakthroughs.

write at the end

In an interview at the end of 2019, Chang Jing defined the relationship between Stone Technology and Xiaomi as a “business strategic relationship”, saying that Stone Technology’s independent development and cooperation with Xiaomi are not in conflict, and will focus more on the development of its own brand in the future.

The listing of Stone Technology is actually a turning point in the change of its relationship with Xiaomi. Before listing, Xiaomi played an incubating role for Stone Technology. After listing, Stone Technology will become more independent and bolder.

The pursuit of independence and the pursuit of independent brands is actually an essential difference between Stone Technology and many other Xiaomi ecological chain enterprises. The fact that Stone Technology has achieved such an achievement in a short period of time is also related to this energy, which reveals ambition and wolfishness. In the prospectus, Stone Technology revealed its strategy of expanding overseas in the future, and has established related companies in Japan, Finland, the United States and other countries.

But Xiaomi may always need Stone Technology, especially the stronger and stronger Stone Technology, which may also make Stone Technology troubled by “sweet troubles”, adjust the strategy for Xiaomi, adjust the pace for Xiaomi, and improve the ecological chain of Xiaomi” Go through fire and water.”

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