There is broad room for growth in lawnmower robots. The company already has a first-mover advantage. Maintaining the “buy” rating, the company launched borderless mowing robots in 2022, and the 2024Q1 launched a new i-series product and entered the US market. The strong competitiveness of the new products drove the European market expansion. Currently, the lawnmower robot industry is gradually upgrading from wire/random navigation/random collision products to borderless/planned navigation/VSLAM obstacle avoidance products, and the share of Chinese brands is rising. There is still a possibility that long-term lawnmowers will extend to scenes such as cutting grass on the edge and blowing leaves. Referring to the development path of sweepers since 2015, the industry penetration rate is expected to increase rapidly under the significant improvement in product performance and the Chinese brand, and the company has a first-mover advantage in products and channels, which is expected to benefit first. We maintain our profit forecast for 2024-2026. We expect net profit of 8.10/12.04/17.21 billion yuan for 2024-2026, corresponding EPS of 11.34/16.84/24.07 yuan. The current stock price corresponds to PE of 36.6/24.6/17.2 times. We are optimistic about the potential growth space and profit margin of lawn mowers. The overall profit elasticity of two-wheelers continues to be high, and the overall profit elasticity is high, and maintain a “buy” rating.

The industry is clearly in an iterative cycle. Referring to the development path of sweepers, the potential sales volume is expected to exceed 3 million units. Lawn maintenance is one of the main daily tasks of European and American households. In addition to purchasing tools for independent maintenance, a certain percentage of households still choose to hire people for maintenance. Mowing is the most valuable scenario in the field of lawn maintenance. Currently, the lawnmower market is still dominated by wire-embedded lawnmowers, and Fujiva and WORX account for the vast majority of the global market (Fujihua's volume exceeds 8 billion kroner in 2023). However, the industry is gradually upgrading from wire/random navigation/random collision products to borderless/planned navigation/VSLAM obstacle avoidance products (represented by Company 9, Covos, Mammoton, and Sunseeker), and the online Amazon share of Chinese brands has increased rapidly since 2023H2. From the perspective of penetration rate, the penetration rate of European lawnmower robots is relatively high (Northern Europe/Southern Europe/Western Europe), and the penetration rate of the North American market is still less than 5% (consumer education is still imperfect and complex grass conditions require targeted optimization of products). From an economic point of view, the cost of a lawnmower robot is between traditional lawnmowers and employee maintenance (labor cost of mowing+edge trimming or over 1000 US dollars), and the average payback period is 1.67 to 3.33 years. In terms of potential space, since 2023, the SKUs of wireless mowing robot products represented by Chinese brands have increased significantly, and core capabilities such as navigation planning/obstacle avoidance technology have all improved to varying degrees, or similar to the sweeper market since 2015. Referring to the path of increasing the penetration rate of sweepers since 2015, we expect the lawnmower robot industry to sell more than 3 million units in 2028.

The overall performance of the company's products is strong, and Europe's offline development capabilities are good. In terms of parameters, the company has both product competitiveness and price competitiveness (obstacle avoidance/anti-theft/human-computer interaction advantages are obvious); (2) Compared with Chinese brands, the company's price competitiveness is relatively strong, and each product has advantages in terms of performance. According to reviews, the company's products are superior in terms of edge mowing/after-sales service/materials/navigation obstacle avoidance, and there is room for improvement in signal stability under the RTK technology path. At the channel level, the total number of the company's offline outlets in Europe has exceeded 2,000. Large retailers are developing smoothly, and some stores have good exhibition areas, and their offline channel development capabilities are outstanding. The US market is limited by market development, and all offline channels are small in size, but with the expansion of online channels, there is plenty of room for offline professional distribution and large KA channels in the future.

Risk warning: industry competition intensifies, US market development falls short of expectations, channel expansion falls short of expectations, etc.