Key Takeaways:
Zhaowei Machinery's first-quarter revenue and profit both declined, with its profit down more than 25% year-on-year
Buoyed by its recent Hong Kong listing, the company's cash reserves surged to 950 million yuan by the end of March
Making robots walk, run, and fight may be complex, but it's much easier than making them generate profits. In the absence of such profits, makers of robots that serve tea, pour water, dance and do somersaults have instead relied on a steady flow of fresh investor capital to keep their operations running. Meantime, profits for the sector remain elusive, and revenue is unstable, even as valuations for robotic concept plays continue to rise.
A case in point is high-precision component maker Shenzhen Zhaowei Machinery & Electronics Co. Ltd. (2692.HK; 003021.SZ), which many investors are treating as a robot concept play. The company profoundly understands the tenuousness of its position, reporting last week that both its revenue and profit declined in the first quarter. Investors that have flocked to robot stocks have been lukewarm on Zhaowei since its Hong Kong listing two months ago, sending its stock down about 8% from its offering price.
Zhaowei doesn't make finished robots, but rather provides power transmission and drive systems that allow robots to move. Its core products include the gearboxes, micro motors, and integrated drive modules that convert electricity into precise rotational and thrusting movements. Its products have found their way into applications in automotive electronics, consumer devices and industrial automation. The rise of robotics has also extended the use of its products into areas like robotic fingers and micro joints, giving the company a runway into the robot concept arena.
But while the concept may sound good, it has yet to materialize in Zhaowei's financials. The company's latest report shows its revenue slipped 2.7% year-on-year to 357 million yuan ($52.3 million) in the first quarter, while its net profit tumbled 25.2% to ...
