The quality of home appliances is becoming more and more important, or how to support the market capitalization of hundreds of billions of dollars from Covos or "dimension reduction" to the 3% of the revenue of home appliance stocks is only beautiful.

Wearing the halo of "sweeping robot" and "technology", Cowers (603486 SH) has increased its market value 14 times in just 15 months, even though the stock price has fallen from its peak to the present, the market capitalization is still above 100 billion yuan, reaching 109.3 billion yuan. However, at a time when the competition in the field of floor-sweeping robots is in full decline, the company recently spent 1 billion yuan to expand its small home appliance brand "Tenco" production base, with a production capacity of 12 million sets per year.

At present, the sales revenue of the Tim Ke brand has accounted for 38.01% of the company's revenue, and is growing rapidly. This also means that in the future, the revenue of small household appliances in Covos is likely to exceed the income of floor-sweeping robots and become a company dominated by home appliances, and the gold content of the "technology" halo above its head will be greatly reduced. If it is positioned as a home appliance stock, its valuation is bound to be reshaped.

At present, the A-share home appliance industry has an average price-to-earnings ratio of 20.2, while Corworth's price-to-earnings ratio is 54.30. It is worth mentioning that the total market capitalization of Covos is the market capitalization of home appliance leader Midea (000333 menstruum SZ). In the first half of this year, Midea's revenue was 174.8 billion yuan, while Koworth's revenue was less than 5.4 billion yuan, only about 3 percent of Midea's. On such a scale, once Covos reduces its dimension, what will it rely on to prop up the current market capitalization?

Who is Tenco?

In 2018, "the first share of A-share sweeping Robot" was listed on the Shanghai Stock Exchange. It was exactly 20 years after the founder Qian Dongqi founded the Coworth brand. The predecessor of Kovos is Taiyi Kai Electric Appliances, a brand-name vacuum cleaner company founded by Qian Dongqi. In 2009, 10 years after the establishment of the brand, Corworth's first mass production robot, "Dibao", was officially put on the market, which really opened the prelude to the development of Corworth's self-made and self-built brand.

But in the same year that Corworth went public, Qian Dongqi handed over the robot business to his son Qian Cheng, and later founded the home appliance brand Tianke, which has three main products: vacuum cleaners, floor washers and hair dryers.

In March 2019, Tianke household appliances were introduced to the market. The target of Tim Ke is not a robot enterprise, but a foreign fashion household appliance company "Dyson". In terms of external publicity, compared with Dyson's cool techs, Qian Dongqi believes that paying attention to functions can be a "white technology", hiding technology behind functions and paying more attention to the subtle needs and pain points of consumers' lives.

Some people in the industry told the Financial Associated Press that Covos builds the Tim Ke brand, paying more attention to the market vacancy of high-end household appliance brands, and actually has no advantage compared with foreign brands in technology, mainly because of the competition between sales channels and prices. And a reporter from the Financial Associated Press also noted that in this year's Singles Day Taobao sales platform, the highest price for adding ground washers is 4290 yuan per unit, and the lowest price is 1790 yuan per unit, which is 500 to 1000 yuan lower than the same type of Dyson products.

However, the growth of Tim Ke can not be ignored. In 2019, Tenco brand intelligent appliances achieved sales revenue of 273 million yuan, accounting for only 5.1% of Covos's total revenue. But by 2020, Tian can achieve sales revenue of 1.259 billion yuan, an increase of 361.64% over the same period last year, accounting for 17.41% of the company's revenue. In the first half of 2021, Timco has grown into an important part of Corworth's total revenue of 38.01%, which shows how fast it is growing.

According to this trend, after the completion of 12 million manufacturing centers, it is not impossible for Tim to outsell Covos robots in terms of internal sales.

"Science and technology" has no advantage.

In the face of the founder's second venture, does Coworth's "sweeping robot" catch up under pressure at the same time? The following set of data tells the story.

According to the semi-annual report of Kovos 2021, the R & D investment in the first half of this year was 202 million yuan, accounting for 3.76% of the total revenue, just 0.76 percentage points higher than the national high-tech enterprise certification baseline (the baseline is 3%).

In fact, in the three years after listing (2018-2020), Corworth's R & D investment was also low, at 3.60%, 5.22% and 4.67%, respectively. On the other hand, Coworth's international competitors Dyson and iRobot, account for an average of more than 30 per cent and 10 per cent of annual R & D investment, respectively; even in Coworth's domestic competition for 688169.SH, R & D accounted for 8.47 per cent in the first half of this year.

In terms of R & D team building, by the end of 2020, the number of Kovos R & D personnel was 951, accounting for 14.53% of the company's total. As of the first half of this year, stone science and technology research and development personnel had 464 people, nearly 60% of the total number of people in the company.

In this regard, some people in the robot industry told the Financial Associated Press that as a science and technology enterprise, it is far lower than its peers in R & D investment and R & D personnel, so it is very difficult for the enterprise to lead its competitors in technology, and it has been so light in research and development for a long time. Then the so-called science and technology enterprises will no longer have any advantages.

At the same time, it is worth mentioning that Corworth signed a product procurement agreement and a technology licensing agreement with iRobot in May 2020 to purchase competitors' unique Aeroforce technology and related intellectual property rights, as well as the competitors' high level of technology research and development.

The above-mentioned robot industry insiders told the Financial Associated Press that relying on the purchase of technology, or even the technology of competitors, shows that its technology is not excellent, and it is difficult for Kovos to establish technical barriers among similar domestic products, and its products are still a long way from complete automation. At the same time, there is still a lot of room for improvement in the ability of obstacle recognition, path planning, detection and so on.

Competitors are eyeing covetously

Looking around, some domestic competitors have even surpassed Covos in terms of technological content and performance. According to a reporter from the Financial Associated Press, due to the low technical barriers, many people are eyeing the track of sweeping robots covetously. Among the domestic manufacturers, the floor sweeping robot of Xiaomi smart home is one of the main products of Xiaomi. At present, Xiaomi floor sweeping robot ranks second in the domestic market share. On the other hand, traditional home appliance companies Haier, Midea and many start-ups have quickly stepped into the floor-sweeping robot track. Cloud Whale, a new floor-sweeping robot company, won 10.3% of the market share when it first launched in 2020. A number of floor-sweeping robots have received financing so far this year. Among them, the sweeping, dragging and washing robot Wali completed 40 million yuan A round financing in May this year, and Lesheng Intelligence, a floor sweeping robot company established in 2017, also completed tens of millions of yuan A round financing in the first half of the year.

In this regard, a person close to the company told the Financial Associated Press that Coworth is currently a former pacesetter, followed by a pursuer, which is unable to cross, and the pursuer is getting closer and closer. If Kovos does not make a breakthrough in technological research and development, then its space in the floor-sweeping robot market will be further compressed, which will have a great impact on its performance.

The future may be defined as a household appliance enterprise.

According to a reporter from the Financial Associated Press, according to Qian Dongqi's idea, after the establishment of Tim Ke, Kovos is a two-wheel drive enterprise with intelligent robots and smart home appliances, but the capital market does not seem to approve of this layout.

On July 15 this year, Kovos set a record high of 252.71 yuan per share, with a total market capitalization of more than 143.2 billion yuan. Because of the concept of sweeping robots and technology, the share price of Kovos increased 14-fold in just 15 months.

Subsequently, shareholder Tai Yikai decided to "liquidate" 10.2796 million shares on the grounds of "their own capital needs", while the Shanghai Stock Connect also reduced its holdings for five consecutive days. As a result, Corworth shares began to fall endlessly. On Oct. 18, Kovos shares fell as low as 138 yuan, nearly halving from their peak. It was just three months after the stock price peaked.

In this regard, some brokerage analysts told the Financial Associated Press that the current market capitalization of Covos is still up to hundreds of billions, which is the valuation given by "high-tech" companies in the market. In fact, with the company's current technology research and development investment, Kovos will belong to home appliance companies with certain technology content in the future, and there is still a big gap from robot enterprises. If it is valued by a home appliance company, it will have a market capitalization of up to 10 billion yuan according to iRobot, a competitor of Covos. Because Wall Street values iRobot at $2.524 billion, or about 16.334 billion yuan, based on the attributes of its home appliance company.

It is worth noting that in the first half of 2021, Covos spent as much as 694 million yuan on marketing and advertising, up 217 percent from 219 million yuan in the same period last year and much higher than the revenue growth of 123.11 percent in the first half of the year. In the view of industry insiders, this is not in line with the characteristics of a high-tech company, but in line with the characteristics of home appliance enterprises. If Kovos is defined as a home appliance company by the market in the future, then its share price still has a lot of room to fall. A reporter from the Financial Associated Press wanted to interview the company on related issues, but was refused.