Diamond Equity Research Initiates Coverage on Viomi Technology Co., Ltd. (NASDAQ: VIOT)
NEW YORK, Nov. 15, 2023 (GLOBE NEWSWIRE) -- Diamond Equity Research, a leading equity research firm with a focus on small capitalization public companies has initiated coverage of Viomi Technology Co., Ltd. (NASDAQ: VIOT). The in-depth 31-page initiation report includes detailed information on the Viomi Technology’s business model, services, industry, valuation, management, and risks.
The full research report is available here. Highlights from the report include:
Comprehensive Smart Home Solution Provider - Viomi Technology is a well-known player in the IoT home devices market with the standout and Integrated “IoT @ Home Platform,” an ecosystem of innovative IoT home devices. As of June 2023, this platform has amassed around 8.1 million household users, with growing adoption rates indicative of potential scalability. Core to Viomi’s business approach are the two major components of this platform: the Viomi business, which primarily markets Viomi-branded products, and a strategic partnership with Xiaomi, a significant shareholder and customer. The company has consistently innovated, launching numerous smart products which leverage AI, 5G IoT technologies, and sensors, further strengthening the extent of IoT and smart technology integration within its product portfolio. Their products are categorized into four business lines: the IoT @ Home portfolio (comprising smart kitchen and other smart products), home water solutions (focused on water purification), essential consumables (water and air filters), diversified small appliances, and other services. A notable value-add is their integrated capabilities within IoT products that facilitate in-app consumer purchases based on real-time data analytics. For instance, their smart appliances can notify users about low supplies, such as laundry detergent, and can even auto-order replacements. The overarching goal is to provide consumers with an integrated, technologically advanced home experience, enhancing convenience and efficiency.
Viomi’s Emergence in Smart Home Market - Key to Viomi’s growth has been its commitment to innovation, evidenced by the doubling of its registered patents since 2021 and its strategic launches of state-of-the-art products featuring advanced technologies. The significant extent of IoT integration across the company’s products potentially creates a network effect, motivating consumers to purchase products across multiple segments. This is visible from an increasing number of household users purchasing at least two connected products. However, it’s not just innovation that defines Viomi’s emergence. The brand has created a vast distribution network, leveraging both online platforms, including partnerships with giants like JD.com and Tmall, and offline experience stores, bringing their smart offerings directly to consumers. Notably, while Viomi’s branded products form a substantial percentage of their revenues, their collaboration with Xiaomi isn’t just financial - it provides Viomi invaluable access to Xiaomi’s extensive ecosystem, sales channel, and data resources. The company has also broadened its presence across international markets through strategic alliances and product diversification. Moreover, the positive feedback from users globally underscores their ability to meet and often exceed customer expectations. Viomi’s prominence reflects a synergy of innovative product portfolio and design, a deep distribution network, and strong sales and marketing initiatives, allowing the company to meet global consumer needs in the smart home market.
Valuation - Viomi Technology, an emerging player in smart home appliances, boasts capabilities such as modern technology, strong finances, a deep distribution network, and a strong brand name. The company trades below its net cash position and below industry valuations. This gap hints at a potential market oversight or a potential overestimation of associated risks. We have valued Viomi using a blend of Discounted Cash Flow (DCF) and comparable company analysis with assumptions including a discount rate of 12.00%, terminal growth rate of 1.5%, and a Trailing Twelve-Month Enterprise Value to Sales of 1.2x. This blended approach resulted in a valuation of $4.93 per share, contingent on successful execution by the company.
Re-evaluating Market Focus - Viomi has historically showcased a period of strong growth aided by consistent increase in household users, widening of its product portfolio, deepening of its technological innovations, and robust product demand. Revenue grew from RMB 312 million in 2016 to RMB 5,825 million in 2020, representing a CAGR of 108%. The COVID-19 pandemic in 2020 brought with it significant challenges, leading to a subdued consumer outlook and supply chain disruptions exacerbated by increasing competition in a few product categories, which significantly impacted the industry and the business, necessitating a renewed focus. The company’s strategy seems to be shifting towards consolidating its market presence, while exploring untapped avenues. In the past six months, Viomi has initiated a shift to refine its product offerings, concentrating more on its core product categories, particularly the higher-margin water purification products. Furthermore, during this time, the company has also focused more on user experience, software integration, and enhancing product interoperability, creating a more unified smart home ecosystem. A potential shift could occur starting in 2024 as Viomi optimizes and refines its product portfolio and focuses on its strengths aligning with the broader economic recovery and accommodative regulatory policies.
Competitive Yet Rapidly Growing Home 4.0 - China’s smart home market is valued at RMB 651.56 billion and is characterized by the presence of multiple players with differentiated product offerings. Propelled by the development of 5G Infrastructure, rising disposable income, particularly among the middle-class population, supportive government policy for IoT devices, and rapid proliferation of smartphones and smart gadgets, the market is likely to continue its double-digit growth trajectory. China is the world’s second-largest smart home market, after the United States, with over 78 million households in the country using smart home products. The combination of advanced technology, favorable consumer preferences, and government support has created a conducive environment for the smart home market to thrive. The smart home appliance market in China is a competitive field with global players like Samsung and Apple alongside Chinese stalwarts like Midea, Gree, and Haier, all innovating to gain market share. Amidst this competition, firms are expanding their product offerings and embracing collaboration, contending with rising startups like ORVIBO and Rokid. Viomi stands out among its peers as the only company that has developed a comprehensive whole-house intelligent solution. It boasts the most complete hardware coverage, an evolving software experience, and one-stop services. By leveraging its market expertise, R&D capabilities, and customer-centric approach, Viomi has crafted a robust and extensively integrated ecosystem, establishing a strong position in the dynamic market landscape.
About Viomi Technology Co., Ltd.
Viomi Technology Co., Ltd develops and sells IoT-enabled smart home products in China, including water purifiers, kitchen appliances, and other smart devices. They distribute products via online platforms and offline stores and have a strategic partnership with Xiaomi Corporation. Based in Guangzhou, the company was founded in 2014.
About Diamond Equity Research
Diamond Equity Research is a leading equity research and corporate access firm focused on small capitalization companies. Diamond Equity Research is an approved sell-side provider on major institutional investor platforms.
For more information, visit https://www.diamondequityresearch.com.
Disclosures:
Diamond Equity Research LLC is being compensated by Viomi Technology Co., Ltd (NASDAQ:VIOT) for producing research materials regarding Viomi Technology Co., Ltd and its securities, which is meant to subsidize the high cost of creating the report and monitoring the security, however, the views in the report reflect that of Diamond Equity Research. All payments are received upfront and are billed for an annual or semi-annual research engagement. As of 11/15/23, the issuer had paid us $34,985 ($35,000 contract, fee reflects wire charge) for our research services, which commenced 10/16/23 and is billed annually. Diamond Equity Research LLC may be compensated for non-research related services, including presenting at Diamond Equity Research investment conferences, press releases and other additional services. The non-research related service cost is dependent on the company, but usually do not exceed $5,000. Diamond Equity Research LLC has been paid $2,500 by a third-party affiliate on behalf of Viomi Technologies Inc. to present at our emerging growth conference, with authorization from company. Issuers are not required to engage us for these additional services. Additional fees may have accrued since then. Although Diamond Equity Research company sponsored reports are based on publicly available information and although no investment recommendations are made within our company sponsored research reports, given the small capitalization nature of the companies we cover we have adopted an internal trading procedure around the public companies by whom we are engaged, with investors able to find such policy on our website public disclosures page. This report and press release do not consider individual circumstances and does not take into consideration individual investor preferences. Statements within this report may constitute forward-looking statements, these statements involve many risk factors and general uncertainties around the business, industry, and macroeconomic environment. Investors need to be aware of the high degree of risk in small capitalization equities including the complete loss of their investment. Investors can find various risk factors in the initiation report and in the respective financial filings for Viomi Technology Co., Ltd. and investors should read full disclosures found in the research report.
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