Recently, a company that claims to be a "global leader in warehousing robots," Beijing Smart Robotics Technology Co., Ltd(referred to as "Smart Robotics"), has announced its intention to go public on the Hong Kong Stock Exchange.

However, can Smart Robotics's claim of being a "global leader" match its actual capabilities?

From a fundamental standpoint, while Smart Robotics is already a top player in the industry, it has yet to achieve profitability, and it faces fierce competition with continuous pricing pressuresAdditionally, major shareholders reduced their stakes at discounted prices prior to the company's IPO, and if the company is not listed within 18 months, buyback provisions will be triggered.

Smart Robotics provides Autonomous Mobile Robot (AMR) solutions.

AMRs utilize advanced sensors and algorithms to navigate autonomously in environments without human intervention, primarily used for logistics and warehousing tasks such as material handling and inventory management.

Compared to Automatic Guided Vehicles (AGVs), which require fixed routes, AMRs are significantly more flexible and capable due to their deep sensory perception and computing capabilities, acting like "driverless cars" within warehouses.

As labor-intensive warehousing faces risks from human errors and rising labor costs increase operational expenses, the increasing consumer demand for personalized products and shorter product lifecycles necessitates real-time inventory management and flexible logistics.

In the trend towards automation in warehousing, AMR solutions are particularly beneficial for e-commerce and industries demanding rapid order fulfillment and high-volume, fast operations.

From 2019 to 2023, the global AMR solutions market expanded from RMB 9.3 billion to RMB 36 billion, achieving a compound annual growth rate (CAGR) of 40.3%.

According to 2023 revenue figures, Smart Robotics ranked first among global AMR solution providers, holding about 6.0% market share.

As of June 30, 2024, Smart Robotics has delivered approximately 46,000 AMRs to around 40 countries and regions worldwide.

From 2021 to 2023, the company achieved operating revenues of RMB 790 million, RMB 1.452 billion, and RMB 2.143 billion respectively, with revenue growth rates of 83.90% and 47.57% in 2022 and 2023.

During the same period, its net profits were -1.05 billion, -1.567 billion, and -1.127 billion; adjusted net profits after excluding stock-based compensation and other impacts were -763 million, -815 million, and -444 million respectively.

However, in the first half of 2024, the growth rate of Smart Robotics’s revenue showed a significant decline; during this period, revenue was RMB 782 million, a year-on-year increase of only 4.63%, while the net profit stood at -550 million, with an adjusted net profit of -194 million, representing a narrowing of losses compared to the same period last year.

Smart Robotics attributed the decrease in revenue growth in the first half of 2024 to a reduction in its Robotics as a Service (RaaS) business line, which has led to a decrease in generated revenue, offsetting part of the income growth during that period.

Previously, Smart Robotics offered RaaS services that provided standardized robot leasing and a complete set of operational support and management services, but this business line has been gradually reduced in recent years.

Additionally, many clients, particularly in e-commerce, retail, and logistics, tend to place orders close to the end of the calendar year

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Such seasonal ordering trends typically lead to an increase in orders during the fourth quarter, with corresponding revenues recognized in the second half of the following year after project completion and client acceptanceMoreover, collaborations with clients often enable timely project completions before year-end, further promoting a seasonal revenue model.

It's important to note that despite ranking first among global AMR solution providers in 2023, Smart Robotics's 6.0% market share only leads the second provider by 0.4 percentage points.

The market is actually quite fragmented, with third and fourth place holding 4.0% and 3.7% market shares, respectively

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Given that leading companies have minimal market shares, this indirectly illustrates that the industry is not characterized by high entry barriers or technical challenges, making Smart Robotics's "first" position somewhat lacking in dominance.

As a result, Smart Robotics has consistently high sales investment over recent years.

In the report period, the company's sales and marketing expenses were RMB 349 million, RMB 456 million, RMB 509 million, and RMB 230 million, accounting for 44.2%, 31.4%, 23.8%, and 29.3% of revenue, respectively.

Salary for employees consistently comprised over 60% of sales expenses during each reporting period, tallying RMB 237 million, RMB 332 million, RMB 353 million, and RMB 165 million.

According to the prospectus, as of June 30, 2024, Smart Robotics had a sales and marketing team of 470 staff.

In rough calculations, each sales employee's average salary in the first half of 2024 was about RMB 351,000, while the average salary for 384 R&D employees was approximately RMB 301,000.

In fact, during the reporting period, the company's R&D spending always remained less than the sales spending and has been accelerating its decline since 2023, recorded at RMB 340 million, RMB 437 million, RMB 380 million, and RMB 133 million in the various periods, with R&D expense ratios of 43.0%, 30.1%, 17.7%, and 17.0%.

The reduction in R&D expenditures has been a significant factor contributing to narrower losses in 2023 and the first half of 2024, while a higher gross margin has also played a role.

As of the end of 2021, 2022, and 2023, as well as for the first half of 2023 and 2024, Smart Robotics's overall gross margins were 10.2%, 17.7%, 30.8%, and 28.5%, 32.1%, respectively; the gross margins for their warehousing fulfillment AMR solutions were 33.6%, 36.6%, 39.0%, and 36.6%, 33.8%.

Despite growth in revenue from warehousing fulfillment AMR solutions contributing to an increase in overall gross margins, the gross margin from this business segment has shown a downward trend in the first half of 2024.

According to data from the China Warehousing and Distribution Association, the average price of AGV/AMR devices fell from RMB 184,900 in 2019 to RMB 95,900 in 2022, and is expected to decline to RMB 56,600 by 2027; average gross margins also decreased from 53.31% to 40.25% during the same period.

According to market research agency Interact Analysis, the average revenue per user (ARPU) of mobile robots globally decreased by 3.1% in 2023, a similar decline to 2022.

As prices continue to drop, the industry faces forward-looking challenges

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In 2024, sluggish downstream market conditions are expected to lead to a slowdown in AMR salesAccording to Gao Gong Robot Industry Research Institute, the estimated AMR sales in China for 2024 will reach 39,500 units, a year-on-year increase of 10.64%, drastically reduced from a previous growth rate of 98.33%.

In January 2025, Interact Analysis released a research report downgrading the forecast for the global mobile robotics market in 2027 by 18% due to a range of macroeconomic factors impacting demandAnalysts noted that the current challenging economic environment has caused both manufacturers and retailers to slow their automated investment plansThus, rapid growth in AMR deployment is no longer expected before 2027.

Labor shortages remain the biggest driver behind the demand for mobile robots; however, high upfront costs, lack of interoperability, competition from fixed automation systems, as well as rising inflation and interest rates, represent significant obstacles to their widespread adoption

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To overcome these barriers, the industry is striving to lower prices and introduce Robotics as a Service (RaaS) and leasing models to minimize the required buy-in for companies considering mobile robots.

In the prospectus, Smart Robotics did not provide direct figures on the gross margin of its RaaS business, but calculations based on sales revenue and cost figures indicated that during the reporting period, this segment's gross margins were considerably low, even reaching -2.78%, -25.87%, -35.29%, and -108.76% in various periods.

Despite gradually reducing its involvement in this area, Smart Robotics is likely to face challenges due to the industry pressure.

Moreover, most of Smart Robotics' revenue comes from regions outside mainland China, with this proportion being 57.3%, 70.3%, 76.8%, and 78.7% during the report periods

As the company mainly produces in China, it may face potential tariff risks from the U.Sand Europe in the future.

Smart Robotics boasts a highly impressive founder.

In July 2004, founder Zheng Yong obtained a Master's degree in Management Science and Engineering from Tsinghua University and subsequently held various operational manager positions at ABB Ltd., a globally renowned electrical automation company, providing solutions in robotics, machinery, and factory automationLater, he managed a factory at a subsidiary of Saint-Gobain, overseeing operations from engineering to quality control and logistics at key production bases in China.

In May 2013, Zheng Yong joined New Horizons Capital as a senior manager, responsible for post-investment management for portfolio companies alongside new investments in TMT and robotics sectors; in February 2015, alongside recognized figures in robotics and automation, he co-founded Smart Robotics.

The convergence of strong founders in a highly imaginative industrial robotics sector allowed Smart Robotics to attract dozens of investment institutions, completing 11 funding rounds that raised approximately RMB 1.635 billion and USD 395 million, totaling about RMB 4.529 billion at the latest exchange rates

By the end of 2022, the post-investment valuation had reached RMB 15 billion.

The shareholder mix is equally impressive, including prominent institutions like Volcano Stone, Gao Rong, Vertex Ventures under Temasek, Genesis Capital, Yunhui Capital, the Greater Bay Area Fund, China Internet Investment Fund, Sailin, Hefei Jian Investment, Ant Group, Agricultural Bank Investment, Intel Asia-Pacific, and CICC Qi Chen, among others.

However, since completing the E1 round of financing in December 2022, the company has not secured further funding.

From December 2023 to April 2024, the shareholder Marcasite, a unit of Warburg Pincus, transferred part of its shares in Smart Robotics, netting approximately RMB 456 million at varying prices per share down to nearly half of the E1 round's price of RMB 13.13 per share.

Marcasite currently remains the largest direct shareholder, holding a 11.86% stake, while the five founders collectively hold 21.70% of the shares with a combined voting power of 55.36%, effectively making them the company's principal control.

Previously, Smart Robotics entered agreements with investors stipulating that redemption rights would restore on either the day of application withdrawal or rejection, or 18 months after the first submission to the Hong Kong Stock Exchange, depending on which occurs first.

This means that if listing is not achieved within 18 months, Smart Robotics will trigger the buyback condition