It is difficult to commercialize technology.

Investor net Wu Wei.

UBTECH (09880.HK) has recently signed a cooperation agreement with Dongfeng Liuzhou. In this cooperation, UBTECH's industrial humanoid robot, Walker S, will enter Dongfeng Liuzhou to carry out inspections of safety belts, door locks, and headlight covers during the automotive manufacturing process, as well as a series of work such as fuel injection, front axle distribution, and material picking.

In fact, before laying out industrial humanoid robots, UBTECH had been deeply involved in the field of humanoid robots for many years. The humanoid robots developed by the company have participated in the Spring Festival Galas of the Year of the Monkey in 2016, the Year of the Dog in 2018, and the Year of the Pig in 2019. The company has also attracted many investment institutions, including Tencent, iFlytek Co., Ltd. (002230.SZ), Golden Cotton, and Liuzhou State-owned Assets Supervision and Administration Commission. With a total financing of nearly 6 billion yuan, when the company increased its capital in 2021, its valuation once reached RMB 47 billion (approximately HKD 51.7 billion).

Although UBTECH was established as early as 2012 and developed its first robot Alpha in 2014, the company's commercialization path is still unclear. In addition to the recently entered field of industrial humanoid robots, the company is also involved in many fields such as education intelligent robots and logistics robots. As of the end of 2023, the company's revenue was only 1.056 billion yuan, a growth of 4.7% compared to 2022. Since 2020, UBTECH has accumulated losses of 3.838 billion yuan. Although the company has not yet been profitable, several executives of UBTECH have received more than ten million yuan in compensation in 2023.

Can UBTECH, which has an unclear main business and difficulties in product landing, support the company's market cap of 60 billion yuan that has been accumulated for a decade?

Difficulties in technology landing

"First, a robot may not injure a human being or, through inaction, allow a human being to come to harm. Second, a robot must obey the orders given it by human beings, except where such orders would conflict with the First Law. Third, a robot must protect its own existence as long as such protection does not conflict with the First or Second Laws." As early as 1940, science fiction writer Isaac Asimov imagined how humans and robots could coexist harmoniously, so he proposed the famous Three Laws of Robotics.

In fact, since Jules Verne's "Nautilus" and the moon cannon fantasy, after decades of development, many scenes in early science fiction novels have entered reality. The creation of humanoid, intelligent entities, whether it is "Frankenstein" or "artificial intelligence robots", has always been a dream of the science fiction and scientific communities.

As early as 1992, Boston Dynamics, founded by Marc Raibert, was developing robots, especially humanoid robots. Although the company has changed hands several times, Boston Dynamics has successfully developed BigDog, Cheetah and humanoid robot Atlas.

With the development of the domestic economy, domestic technical personnel are also unwilling to lag behind in advanced technology research and development. In 2012, UBTECH was founded by founder Zhou Jian and some technical big names, and began to research and design robots. In 2014, the company's first robot Alpha was launched; in 2016, the Alpha robot participated in the Spring Festival Gala. Since then, UBTECH has developed the education robot Alpha 1X, the walking robot Walker, and the industrial humanoid robot Walker S, which is an improved version of the robot Walker, which UBTECH and Dongfeng Liuzhou will cooperate in the field of industrial humanoid robots.

Similar to Boston Dynamics, although UBTECH has been deeply involved in the field of robots for many years, the commercialization path of UBTECH's robots has not been fully realized. As of the end of 2023, 32.9% of the company's revenue still came from education intelligent robots and intelligent robot solutions, but this product is more dependent on government or school procurement. In 2023, due to the delay in payment of receivables from individual government-related customers, the company calculated impairment losses of RMB 145 million that year, which increased by more than twice compared to RMB 46 million in 2022.

In addition to education intelligent robots and intelligent robot solutions, UBTECH has also entered many fields such as logistics, industry, health care, and consumer-level robots. In 2023, logistics intelligent robots and intelligent robot solutions provided the company with a revenue of 390 million yuan, but according to BCG Consulting's statistics, the global mobile logistics robot market size in 2023 was US$17 billion (approximately RMB 122.5 billion), and the overall sales scale of domestic mobile logistics robots reached 21.2 billion yuan, a year-on-year growth of 14.59%.

Affected by the significant reduction in the income scale of education intelligent robots and intelligent robot solutions, the company's revenue in 2023 was only 1.056 billion yuan, a year-on-year growth of 4.7%, while revenue from UBTECH's logistics intelligent robots and intelligent robot solutions and consumer-level robots had a significant year-on-year growth, but the growth rate of its revenue was the lowest in recent years.

In fact, due to current technological limitations, robots still cannot complete delicate movements such as picking up eggs as quickly as humans can. Therefore, how to commercialize robots is a common problem in the industry. Boston Dynamics, which was established in 1992, has changed hands multiple times due to the difficulty of commercializing its products. Its current products are mainly used in technology testing and development. Product structure, 10-30 billion yuan products operating income of 401/1288/60 million yuan respectively.

According to UBTECH's plan, the industrial version humanoid robot Walker S developed this time can achieve small-scale production and delivery by the end of 2024, and conduct a large number of real tests on the factory side through humanoid robots, preparing for the large-scale introduction of humanoid robots in the factory side in 2025 or 2026. At present, the BOM cost of UBTECH's industrial version humanoid robot is about 40,000 to 50,000 US dollars. Adding maintenance costs, can the industrial version humanoid robot really replace humans?

The company's losses have expanded.

The prospect of commercializing its robots is uncertain, and with the high R&D investment, UBTECH has still not been able to make a profit as of 2023. According to the company's disclosed data, UBTECH has accumulated losses of 3.838 billion yuan since 2020. Due to the increase in credit impairment losses in 2023, UBTECH's loss reached 1.234 billion yuan, which is a significant increase compared to the 975 million yuan in 2022.

Under the condition of long-term losses, as of the end of 2023, after successfully issuing and raising HKD 1 billion, UBTECH's short-term borrowings have an on-book balance of 777 million yuan, which is 1.4 times that of 2022's 325 million yuan. The on-book balance of long-term borrowings is 649 million yuan, which is 1.19 times that of 2022's 296 million yuan. At the same time, the on-book balance of cash and cash equivalents is only 521 million yuan.

It should be pointed out that UBTECH has not yet made a profit, but the company's executives, especially core executives, generally have high salaries. According to UBTECH's annual report, in 2023, among non-director executives, four people have an annual salary exceeding 10 million HKD, and among the company's directors and supervisors, two people have an annual salary exceeding 10 million HKD.

Although UBTECH's main business is still unclear, as early as 2015, the company attracted the favor of dozens of investment institutions including iFLYTEK, Tencent, Golden Field, and Liuzhou State-owned Assets Supervision and Administration Commission. Including the IPO fundraising, since 2013, UBTECH has attracted nearly 6 billion yuan in financing through equity issuance.

After long-term losses, as of the end of 2023, UBTECH's total equity attributable to the parent company shareholders was 1.96 billion yuan. This includes accounts receivable of 800 million yuan, construction in progress of 1.011 billion yuan, and intangible assets of 439 million yuan.

During the financing process, UBTECH's valuation once reached 47 billion yuan (approximately 5.17 billion HKD). On December 29, 2023, UBTECH issued approximately 11.282 million shares at a price of HKD 90/share. On the first day of listing, the company's stock price fell below the issue price, with a lowest stock price of HKD 69.8/share. In March 2024, the company was included in the Hong Kong Stock Connect, and combined with the hot concept of humanoid robots, UBTECH's share price only rose to the current HKD 150/share, and the company's market cap exceeded 60 billion HKD.

With the difficulties of implementing the technology and the company's continuous losses, can the development of the industrial version humanoid robots support UBTECH's market cap of 60 billion? (Produced by Thought Economics)