2498.HK
When will profits come for RoboSense Technology? Three or Ten years?

The maker of autonomous driving LiDAR technology reported sequentially improving sales in its operating data for the first nine months of this year

Key Takeaways:

  • RoboSense’s unit sales for its LiDAR products have grown sequentially for three consecutive quarters
  • Investors may worry about the stock’s volatility since its trading debut in January

  

By Lau Chi Hang

Despite its slogan of “making the world safer,” RoboSense Technology Co. Ltd. (2498.HK) has not only failed to deliver such security to its own investors but has caused them a bit of pain and misery instead. The maker of light detection and ranging (LiDAR) technology’s shares have tumbled nearly 80% from their highest close since the company’s listing in January, as investors have quickly grown impatient on its road to profitability.

The company’s core LiDAR systems use light to measure the distance or range of objects, and are deployed mostly in autonomous driving and robotics.

Sales for those LiDAR products continued to increase on a quarter-to-quarter basis in the third quarter, according to the company’s latest quarterly update released this month. During the three months through September, the company sold 138,600 LiDAR units for advanced driving assistance system (ADAS) applications; 131,400 for robotics; and 7,200 units for other applications. The total sales volume of 277,200 units represented the latest steady increase from 246,000 units sold in the second quarter and 240,800 in the first.

Those three quarters look even more impressive when compared with 2023, when the company sold just 259,600 units the entire year – roughly the same as sales in each of this year’s quarters.

Stock roller-coaster

The company sold shares for HK$43 in its IPO in January, and the price hovered around that level initially before starting to surge in mid-May to a closing high of HK$90.80 in June. But then the air ran out of its tires, and the stock nosedived to a low of HK$10.82 at one point before rebounding to its latest close of $17.42 last Friday. The wild gyrations have left investors scratching their heads, trying to figure out where the shares are headed next.

Some suspect the sudden crash was caused by early investors selling off shares after the end of their lockup periods. Indeed, Hong Kong Stock Exchange data shows that Cainiao Smart Logistics Network, a unit of e-commerce giant Alibaba, reduced its holdings in the company from 10.25% to 8.21% by selling shares at an average price of HK$15.33 in August.

Concerned about its collapsing share price, the company turned to share buybacks as a show of confidence in its prospects. Since announcing its interim results for the first half of the year in mid-August, it has bought back its stock over 20 times at prices ranging between HK$11 and HK$17.

That still wasn’t enough to lift market confidence. It wasn’t until the end of September, after the Fed cut interest rates and China began announcing major new economic stimulus measures, that Hong Kong’s stock market came back to life. That rising tide carried RoboSense’s ship as well, sending its stock as high as HK$25, before it began flagging again to its latest levels.

Elusive profits

Stock volatility aside, investors are also concerned about when RoboSense might become profitable. The company is hardly alone in its money-losing ways, as most of its autonomous driving technology peers are also losing money. But RoboSense looks slightly worrisome for its losses that are rapidly ballooning.  

The company’s 220 million yuan loss in 2020 jumped to 1.66 billion yuan in 2021, and grew further still to 2.09 billion in 2022. The figure then more than doubled to a 4.33 billion yuan loss last year. In all fairness, a big part of the losses come from non-cash items related to changes in the fair value of the company’s financial instruments. But its operating loss, which excludes such factors, also widened from 616 million yuan in 2022 to 940 million yuan last year.

Its revenue in the first six months of this year more than doubled year-on-year to 727 million yuan, as it lost 269 million yuan for the period. In an encouraging sign, the company’s operating loss narrowed by 30% to 322 million yuan in the first half of this year from a 461 million yuan loss a year earlier. But investors may be getting impatient for actual profits rather than just narrowing losses.

Its difficulty crossing the breakeven line could owe partly to tumbling prices as LiDAR technology matures and competition heats up. A single LiDAR unit sold for around 10,000 yuan in 2021, but by last year had fallen to 3,200 yuan. The declines continued this year as prices fell to around 2,600 yuan – or a quarter of the price from just three years earlier.

The biggest pressure is coming from Chinese new energy vehicle (NEV) makers, who are one of the biggest buyers of LiDAR systems but are also caught in their own bloody battle for market share. As those manufacturers cut prices, they are trying to partly compensate by seeking lower prices from suppliers of everything from raw materials to microchips and LiDAR systems.

Simply surviving

LiDAR isn’t exactly the most desirable segment right now due to its rapid development that brings heavy R&D costs with limited sales potential. The Chinese market is especially harsh, with cutthroat competition forcing producers to lower prices simply to maintain market share.

That explains why multinationals are moving out of China’s LiDAR sector. Bosch and ZF, both of Germany, have ended their joint venture making LiDAR technology for autonomous driving, while Japan’s Pioneer Electronics has also left the space. That’s left Hesai (HSAI.US), RoboSense and Seyond as the only big Chinese companies still hanging on, while France’s Valeo remains floundering in the sector as well.

Hesai’s shares have lost more than 80% of their value from a high of $30.36 last year. Like RoboSense, the company is still losing money and commands a relatively low price-to-sales (P/S) ratio of just 2.4 times. RoboSense’s ratio is quite a bit higher at 6.8 times, which seems counterintuitive given Heisai’s more advanced status.

Hesai co-founder Li Yifan once commented that LiDAR has promising long-term potential, but may experience a bumpy road before reaching the promised land of profits. “In the long run, China’s LiDAR sector can turn a profit, but no one knows how long it will take,” he said. “Will it be just three years, or will it take 10? No one knows.”

That means for companies still standing like RoboSense, the top priority may be simply surviving over the next few years.

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