China's Robotics Industry Beset by Financing Difficulties and 'Irrationally High Valuation'
Yicai Global
/SOURCE : Yicai
China's Robotics Industry Beset by Financing Difficulties and 'Irrationally High Valuation'

(Yicai Global) Feb. 10 -- Companies in China's once booming robotics market are overvalued and struggling to obtain financing, industry insiders told Yicai Global.

"Turning a profit short-term is difficult for such companies", said Tu Wei, former senior manager at German firm Reis Robotics Inc, a leading German firm engaged in automation solutions for solar energy, foundry and welding applications. "This is the root cause of their challenge to source funds", he added.

"Contrary to popular belief, many high-tech companies are actually asset-heavy, as they need adequate fund guarantees for their massive devices," said Li Yifan, chief executive at Hesai Photonics Technologies Co., who provide solutions for autonomous driving, remote sensing systems using drones and air quality monitoring Internet of Things networks.

The robotics industry requires significant investments early on, so many small- to medium-size companies without solid financials will be declined by banks due to 'their unqualified securing and mortgage terms', staff at several lenders told Yicai Global.

"Though the industry has a promising market, its technologies are less mature and companies have incomplete business models," said Wu Qi, principal of the commercial bank research center at Evergrowing Bank Co. "As many banks' risk control methods are not perfected in the sector, they won't offer significant financing."

"Non-banking financial institutions, especially funds and securities traders have an irrationally high valuation for China's robotics industry, and this caused both the difficulties in financing and the excessively high valuation for the industry." Wu added.

"With the backdrop of a high valuation, many robotics enterprises may give up perfecting their technologies and business models, and then resort to speculating in the capital market. Consequently, the industry may be trapped in the dilemma of having inadequate high-end capacity and overcapacity in low-end sectors." he said.

There are at least 4,000 companies in China that refer to themselves as robotics enterprises, with strong growth expected amid favorable industry policies.

Since January this year, over-valuations of the industry have been reflected in such companies' price-to-earnings ratios, which have hovered around 100. At Estun Automation Technology Co., which provide servo drives and motors for industry, the ratio is close to 166 and at Siasun Robot & Automation Co., a welding and assembly industrial robot-maker, [SHE:300024] it is near 98.

Follow Yicai Global on Facebook @yicaiglobal and Twitter @yicaichina.

Follow Yicai Global on