Photo source: Visual China Blue Whale Financial Reporter Zhang Yanti Wang Jianwen
After more than three consecutive years of stock price decline, in 2024, the stock price of Covance realized "bottoming out and rebounding".
In less than a month from April 17 to May 13 this year, the stock price of Coworth nearly doubled. However, behind this wave of stock price rebound, the performance of Coves is not good. For two consecutive years, Coves has been in the vortex of increasing income without increasing profits.
Since May 14, the short-term stock price boom of Coves has come to an end.
The son takes over, and the old man in his sixties starts his own business again. Sweeping grass comes into being
Qian Dongqi, the founder of Kevos, was born in 1958. At the age of 40, he founded the predecessor of Kevos, Taiyikai Electric Appliance, which is mainly engaged in OEM of vacuum products. From the OEM to the realization of branding, the counter attack of Covance is full of surprises. On May 28, 2018, Covance, which has been established for nearly 20 years, was listed on the Shanghai Stock Exchange. Standing at the forefront of a group of executives is not Qian Dongqi, the 60 year old founder of Cowos, but his son Qian Cheng.
After listing, Qian Dongqi chose to gradually delegate power and transfer mature business to Qian Cheng. In October 2018, Qian Cheng began to serve as the general manager of the household robot business department of Kevos. In October 2021, he was transferred to CEO of Covance Service Robot. As for Qian Dongqi, after the handover, he chose to focus on the development of the new brand "Tianke" under Covance. Tianke's main products include intelligent floor washing machines, intelligent cooking cooking machines, intelligent hair combs, intelligent eye beauty devices, intelligent vacuum cleaners, intelligent air purifiers, etc.
In 2021, Tianke will become an important support for explosive growth of performance. The "two wheel" drive strategy of Covos worked, and Covos achieved an operating revenue of 13.086 billion yuan, up 80.90% year on year; The net profit attributable to the parent company was 2.01 billion yuan, up 213.51% year on year. In terms of sub projects, Covance has achieved a revenue of 6.71 billion yuan, accounting for 51.28% of the total revenue; The revenue of Tianke was 5.137 billion yuan, accounting for 39.25% of the total revenue, with a strong growth of 307.97%. At the same time, the gross profit margin increased by 8.55 percentage points to 51.41%.
While the fundamentals are improving, in 2021, the stock price of Coworth reached a historical high. On July 15, 2021, the stock price of Coworth closed at 244.64 yuan/share, and its market value also exceeded 140 billion yuan. The company was once called "Sweeper". In 2021, Kovos also threw out the highest dividend of 631 million yuan.
After the stock price peaked, on December 22, 2021, Qian Cheng announced that he would reduce his holdings of 0.46% of the company's shares. At this time, it was only about 7 months before the ban on its shares was lifted. On December 28, Qian Cheng completed the reduction of his holdings and realized a total of about 359 million yuan. The main body of this reduction is Ever Group under the control of Qian Cheng. After the reduction, Qian Cheng's shares in the company decreased from 14.98% to 14.52%.
However, it is worth noting that there are hidden worries behind the highlight moment. In 2020, the provision for inventory falling price was 92.8744 million yuan, accounting for 7.23% of the inventory in 2020, and in 2019, the provision for inventory falling price was only 31.4221 million yuan, accounting for 3.14% of the inventory in 2019. The increase in the proportion of provision for falling price of inventory goods may also mean that Covance is not optimistic about the sales expectation of the company's sweeping robot products.
Capital operation increased, and 2.2 billion of self owned funds were used to expand production
For Coworth, 2021 is a year of special significance. This year is not only the peak of the company's performance growth and share price, but also the concentration period of the company's capital operation.
In April 2021, Coworth announced that it would issue 1.04 billion yuan of convertible bonds. The duration of this bond is 6 years, that is, from November 2021 to November 2027. The initial conversion price of convertible bonds is 178.44 yuan/share.
According to the announcement, the purpose of this issuance of convertible bonds is to increase technology research and development on the one hand, and to speed up the progress of going to sea on the other hand. Specifically, of the 1.04 billion yuan raised by this bond, 655 million yuan will be used for multi intelligent scene robot technology innovation projects, including the establishment of home service robot iteration and new category innovation laboratories, the establishment of outdoor robots and indoor large scene robot multi technology platforms, and the establishment of voice and visual AI training laboratories. Through the above projects, Covance wants to improve the intelligence and use experience of products such as sweeping robots, and explore more use scenarios of service robots.
In addition, 305 million yuan will be used for the international operation project of Tianke intelligent living appliances, and 80 million yuan will be used for the global digital platform project of Kevos brand service robot. These two projects are designed to promote the sailing process of the products of Covance.
In addition to issuing convertible bonds to ask for money from the market, in 2021, Covance will spend 2.2 billion yuan to expand its production capacity, and the sources of funds are self owned or self raised.
In October 2021, Covance announced that it will build a high-end intelligent living appliance manufacturing center project with a total investment of about 1 billion yuan. After completion, it will provide 12 million sets of capacity per year for Tianke intelligent floor washer, intelligent cooking machine, intelligent vacuum cleaner, intelligent hair dryer, intelligent beauty instrument and other products.
In December 2021, Coworth announced again that its subsidiary Taiding New Energy would build a 2GWH polymer lithium-ion battery project with a total investment of about 1.2 billion yuan. This project can provide battery products for the company's sweeping robots, floor washers, etc.
Coworth also attaches great importance to this lithium battery project. In December 2023, Li Qianhuan, General Manager of Tiding New Energy, was elected as a non independent director of Covos. He is also the only one of the six non independent directors of Covos who is a director of the company's supply chain subsidiary.
Price reduction promotion, still trapped in the vortex of income increase without profit increase
Since taking over the floor sweeping robot business of Covance, Qian Cheng has put forward a nine word strategy of "globalization, multi category, high-tech", and in 2019, promoted Covance to withdraw from the service robot OEM business and low-end floor sweeping robot market on which it started. Since then, Coves sweeping robot has focused on high-end products.
Behind the highlight in 2021, the inventory of Coworth has soared from 1.285 billion yuan in 2020 to 2.417 billion yuan. Coworth had to put "price reduction promotion" on the agenda. The company lowered the price of the high experience explosive Fuwan series, and adjusted the price of Fuwan 2.0 products from 3000+to 2000+. At the same time, the company's efforts on the sales side have led to a sharp increase in sales expenses. In 2022, the sales expenses of Covance will be 4.623 billion yuan, an increase of 1.386 billion yuan over the previous year.
The sharp increase in sales expenses has swallowed up part of the profits to some extent. Since 2022, Coworth has fallen into the vortex of increasing revenue without increasing profits.
In 2022 and 2023, the operating revenue of Covance will be 15.325 billion yuan and 15.502 billion yuan respectively; Net profit attributable to the parent company was 1.698 billion yuan and 612 million yuan respectively. In the first quarter of 2024, the company's operating revenue will be 3.474 billion yuan, up 7.35% year on year; The net profit attributable to the parent company was 2.98%, down 8.71% year on year, and the trend of net profit decline has not stopped. The Company's comprehensive gross profit margin also decreased from 51.61% in 2022 to 47.50% in 2023.
In 2023, the sales expenses of Covance will continue to grow to 5.297 billion yuan, up 14.60% year on year, accounting for 34.17% of the total revenue. Among them, advertising marketing and platform service fees account for the largest proportion, totaling 3.80 billion yuan. Compared with competing with Stone Technology, the sales expenses of Coves are relatively high. In 2023, the sales expense of Stone Technology will be 1.817 billion yuan, accounting for only 21.00% of the revenue.
Compared with Stone Technology, in addition to spending more on advertising and marketing, Coworth also needs to spend a large amount of additional offline business expenses. Since its inception in the traditional manufacturing industry, Covance has always attached importance to offline business. The annual report shows that in 2023, the offline sales outlets of the company have exceeded 2500, mainly direct sales. Stone Technology has only opened offline experience stores in some core city business districts. As a result, in 2023, the rental and storage expenses in the sales expenses of Covance will reach 206 million yuan, while the rental and storage expenses of Stone Technology in the same period will total only 21 million yuan.
Make efforts overseas to break the situation
In order to change the situation of increasing income without increasing profits, Covos is also seeking to break the situation. Going to sea is an important path for the development of Covos.
Compared with the domestic market, there is also a large demand for clean appliances in the international market. As a veteran player in the industry, the globalization of Covance started very early. As early as 2012, Covance has established branches in the United States, Germany and other places. From 2015 to 2018, Qian Cheng was also specially responsible for the international business of the company.
On the whole, however, the overseas business of early Coworth did not grow fast. From 2019 to 2022, the company's overseas revenue growth rates were respectively -13.52%, 34.95%, 39.63% and 9.92%, which were lower than the growth rate of the company's domestic business in the same period, and also lower than the growth rate of Stone Technology's overseas business revenue in the same period. According to China Merchants Securities Research, Coworth mainly expands its overseas market through B2C e-commerce such as Amazon, as well as self built offline direct channels. Although the self built channels are stable, the progress is relatively slow.
In order to accelerate the layout of overseas business, some of the 1.04 billion yuan of convertible bonds issued by Covance in 2021 will be used for the international operation project of Tianke intelligent living appliances and the global digital platform project of Covance brand service robots.
Among them, the international operation project of Tianke Intelligent Living Appliances is mainly for the construction of overseas storage, overseas market promotion and marketing, overseas information system, expansion of overseas teams, overseas after-sales maintenance center and other projects. The global digital platform project of the Covance brand service robot mainly includes two projects: the global official website direct marketing platform and the digital operation platform.
In 2023, the growth rate of overseas business of Covance will start to surpass that of domestic business. The annual report shows that in 2023, the company's overseas business income will be 6.522 billion yuan, with a growth rate of 25.76%. Overseas business also accounted for 42.07% of the total business.
In November 2023, Coworth opened an overseas business headquarters office in Singapore to further accelerate the process of going to sea. Qian Cheng believes that "the Singapore Office will provide strong support for Covance to further expand its market in Southeast Asia and even the global market and enhance its competitiveness."
