The visible expansion of China's homegrown tech giants has led to a notable shift in focus from the A-share Science and Technology Innovation Board to exploring opportunities in the Hong Kong Stock ExchangeRecently, Beijing Jizhijia Technology Co., Ltd., a prominent player in the mobile robotics sector, made headlines by officially lodging its prospectus with the Hong Kong Stock Exchange, seeking a listing on the main board.
This move is particularly interesting considering that Jizhijia had embarked on an initial public offering (IPO) journey earlier, in June 2021. The company was initially advised by China International Capital Corporation (CICC) for its planned debut on the Shanghai Stock Exchange’s Science and Technology Innovation BoardThroughout 2021 and early 2022, Jizhijia provided quarterly updates on its IPO guidance, indicating a strong commitment to enter the SCI
However, following a series of silence in updates since July, speculations arose that the company might have abandoned its plans for the domestically focused board.
Jizhijia has positioned itself as a leading entity in the rapidly evolving sector of Autonomous Mobile Robots (AMR). Its solutions have made a significant impact in the global warehouse and logistics arena, affirming its status as a market leaderNevertheless, despite its strengths, Jizhijia faces an uphill battle, as the AMR segment is still relatively young and highly competitive, leading to mounting financial losses reported in its recent statements.
As competition in the Chinese market intensifies, Jizhijia recognized the need to shift its strategic focus, reallocating its operational and capital resources to international marketsThis pivot indicates a broader trend among native tech firms, showcasing their eagerness to tap into lucrative markets beyond China.
The indispensable role of AGVs (Automated Guided Vehicles) and AMRs, particularly influenced by the surge in e-commerce and retail logistics, made them crucial in regional logistics centers
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Jizhijia's inception and growth can be traced back to this demand surge, positioning the company as a forerunner in the AMR sectorWith an impressive roster of investors, Jizhijia has completed 11 financing rounds, raising approximately RMB 3 billion, and boasts a current valuation of around RMB 15 billion.
The impressive list of backers, ranging from early-stage venture capital firms like Gao Rong Capital to renowned state-owned private equity funds, significantly bolsters Jizhijia's market positionThe company has secured engagements with about 770 end customers, including notable Fortune 500 entities, with its clientele spanning across fast-moving consumer goods (FMCG), e-commerce, and third-party logistics sectors, making it a formidable player within this space.
Throughout its journey, Jizhijia has deployed over 1,400 projects across more than 40 countries and regions, having delivered a total of 46,000 AMRs by mid-2023. Such figures bolster its claim as the largest supplier of warehouse fulfillment AMR solutions globally, highlighting its expansive industry footprint, yet, despite holding a considerable market share, the financial returns have not yielded significant profits.
Analysis of the financial data presented in its prospectus reveals earnings from 2021 to the first half of 2024 totaling RMB 7.9 billion, RMB 14.52 billion, RMB 21.43 billion, and RMB 7.82 billion, respectively
In contrast, during the same periods, Jizhijia reported net losses of RMB 1.05 billion, RMB 1.57 billion, RMB 1.13 billion, and RMB 550 million when adhering to GAAP standardsEven when adjusted to exclude stock-based compensation under non-GAAP standards, losses were still significant—amounting to approximately RMB 1.84 billion over the three-and-a-half years.
The company attributes its losses to the fiercely competitive landscape and its commitment to prioritizing innovation and business expansionWhile it forecasts profitability driven by a growing order book, the reality paints a complex picture where high overheads and competitive pricing pressures hinder its progress.
Notably, Jizhijia's revenue primarily stems from high-price overseas markets, contrasting sharply with its comparatively limited efforts in domestic promotion within ChinaThe company has reported lower gross margins in the Chinese market compared to international operations, reinforcing the theme of its strategic shift
Over the years from 2021 to the first half of 2024, the overall gross margin was just 10.2%, followed by increments to 17.7%, 30.8%, and finally reaching 32.1%. By comparison, margins outside mainland China stood at 38.7%, 42.0%, 46.4%, and 40.8% during the respective periods.
Digging deeper, Jizhijia segments its revenues between AMR solution services and RaaS (Robot as a Service) offeringsA closer look shows that its AMR solution revenue remains higher internationally than domestically, illustrating a correlation between higher overseas business and improved profitability metrics.
Some industry insiders suggest that Jizhijia's conscious decision to downplay domestic pursuits stems from the challenging operating environment, citing difficulties in securing profits in China’s highly competitive marketAlthough Jizhijia continues to maintain an operational base in China, its realigned strategy focuses predominately on targeting international markets where it perceives potential for sustainable profits.
In the international AMR domain, customers exhibit lower price sensitivity, allowing Jizhijia to adopt premium pricing strategies—this juxtaposes with the struggles it faces in the Chinese market where it competes against affordable AGV alternatives widely employed in standardized industrial applications
The emergence of challengers such as Hikvision and compelling adversaries in international arenas, including MiR, indicates a race to the top, each attempting to capture sizeable market shares.
The landscape is further complicated by the influx of legacy robotic companies like KUKA pivoting towards the AMR niche, and heavyweights in the logistics arena, including JD.com, developing their proprietary AMR alternatives, exacerbating market competition.
Despite Jizhijia aiming to leverage economies of scale to bolster its cost-effectiveness and stability, the persistence of competition implies that it may take several years to attain a commanding advantage in this sectorNevertheless, the company remains steadfast in its vision and commitment to delivering innovative solutions, suggesting an evolving narrative within the robotics landscape as Jizhijia navigates its way towards profitability amidst the multitude of challenges at hand.