Key points of investment:

Leading company for humanoid robots and intelligent service robots. Preferred Choice is a leading company of artificial intelligence-enabled robots in China. Its main products cover education, logistics, consumer-grade robots and solutions.

In 2022, according to revenue statistics, the company ranked third in China's intelligent service robots and solutions industry, and ranked first in the education segment. In December 2023, the company and Walker S robot jointly rang the bell and went public on the Hong Kong Stock Exchange. In February 2024, the company's industrial humanoid robot Walker S entered the assembly workshop of NIO's second advanced manufacturing base, enabling the world's first humanoid robot to collaborate with humans on an automobile factory assembly line to complete the quality inspection of an automobile assembly machine. The company's equity structure is stable, and the ultimate beneficiary is Mr. Zhou Jian, the chairman of the board of directors; the management background is diverse and can provide all-round support for the company's development.

Multi-scene business layout, humanoid robots open up incremental space. 1) Educational robots: The company's market share is 22.5%, ranking first in the country. The company's AI education products and solutions can be divided into two categories: basic education (K12) and higher vocational education. The core robot products in the education category include Alpha Mini Goku (education), Cruzr, Yanshee, and ukit Explore, which can meet the diverse needs of school talent development in all aspects. 2) Logistics robots: The industry CAGR reached 30.4% in 2022 to 2028, and there is plenty of room for growth. The logistics robot market pattern is scattered, and the company ranks 7th in market share. The core products include Wali series robots and automated warehousing systems (AS/RS). In 2022 to 2028, the logistics robot industry's CAGR is expected to be 30.4%, and the company's performance in this sector is expected to grow rapidly at the same time. 3) Humanoid robot: The company took the lead in commercialization and is in the first tier in China. Since 2023, domestic policies have been intensively introduced to support the development of humanoid robots. The company's Walker robot is the first commercialized biped humanoid robot in China. The Walker X robot is equipped with high-performance servo joints and a comprehensive sensing system such as multi-dimensional force, multi-dimensional stereo vision, omnidirectional hearing, inertia, and distance measurement. The whole body has 41 degrees of freedom, and can adapt to complex terrain and walk smoothly and quickly. 4) Others:

It has a broad layout in the direction of inspection, health care, consumption, etc. The company's inspection intelligent robots can be used in various indoor and outdoor environments; health-care intelligent robots are mainly used to meet the needs of the elderly and improve the service quality of health institutions and community centers. The company's consumer-grade robots are mainly suitable for different household application scenarios. The products are mainly divided into four categories: Alpha mini Goku (non-educational), building block series (non-educational), AirRobo air radish cat litter, and AirRobo air radish sweeper.

Continue to invest heavily in R&D, and build high product, technology and brand barriers. 1) Rich product types and diverse application scenarios. Up to the release of the company's prospectus, the company has launched 50+ products for different scenarios, and has sold over 760,000 robots. 2) Strong R&D strength and full-stack technical layout. The company has self-developed full-stack robotics and artificial intelligence technology, mainly including robotics technology, artificial intelligence technology, robotic artificial intelligence fusion technology and ROSA. As of June 30, 2023, the company has 717 R&D personnel and has more than 1,800 registered patents related to robots and artificial intelligence, of which 380+ are overseas patents, ranking among the highest in the industry. 3) Leading brand power and global layout based at home. In order to build brand power, maintain existing customers and expand new customers, the company actively carries out online & offline marketing activities, leading the company's brand power and brand awareness in the industry. Based on the domestic market, the company actively explores overseas markets, accounting for 26.7% of overseas revenue in the first half of 2023.

The company is a leading humanoid robot company in China. Its products mainly cover enterprise-grade intelligent service robots customized for education, logistics and other industries, as well as consumer-grade robots and electrical appliances. At this point, since humanoid robots are still in the early stages of industrialization, the company is experiencing an initial growth stage where R&D and other expenses are heavily invested. Looking forward to the future, we expect that within three years, the company's humanoid robots will take the lead in application implementation and continuous deployment in automobile factories; in addition, the company's product categories in other application scenarios will continue to be enriched, contributing to the company's performance growth and helping the company achieve break-even.

Risk warning: humanoid robot technology/industrialization development falls short of expectations, downstream demand falls short of expectations, risk of core technology leakage, intensification of industry competition, etc.