Stock market: Is industrial robotics undervalued?
No, we are still not recommending any shares here. But at the same time something remarkable is questioned. Our robotics stands for the automation of manufacturing and more (optionally handicraft, household, medicine etc.). Process automation of (enterprise) administrations is called Robotic Process Automation (RPA). A prime of the industry, Uipath, now went public.
Gigantic valuation for robotics software process automation
Uipath is currently valued at around $35 billion. The Romanian company has been in existence since 2005 and, according to the investor presentation, generated revenues of $336 million in 2020; this year, the figure is expected to reach $600 million. Like RPA, the company has a promising development ahead of it, but the valuation is still surprising.
Industrial robotics at a lower price
Kuka was bought by Midea in 2017 for €4.5 billion. The price appeared too high for the German industry, which was asked by the government to make its own purchase offer. Fanuc currently has a market capitalization of US$40 billion, Omron of US$15 billion, and Yaskawa of about US$12 billion (values heavily rounded because converted from YEN to dollars.) That means Uipath has already reached the value of Fanuc, or else that of Omron, Yaskawa, and Kuka combined.
Robotics startups sometimes reach triple-digit valuations (Wandelbots or Franka Emika in our country, for example), but startups in other sectors are often valued much higher. There are probably 10 air cab manufacturers in the world with good opportunities and yet Lilium alone is valued at US$3.3 billion.
The only outlier in industrial robotics seems to be ABB with a valuation of $64 billion. The market volume of industrial robotics (about $130 billion) is expected to exceed that of RPA ($30? billion in 2024) for years to come.
Why is RPA rated higher than industrial robotics?
The reason for the different valuations can only be speculated here. In addition to psychological factors ("hype" about a new business and possible lack of disappointment), industrial robotics is likely to have a disadvantage in the obvious fragmentation of the market and the associated price competition. It is significant that cobots often have a payback period of less than 1 year. If there were only one supplier, he could certainly increase the price of his cobots by 50% and they would still be bought. Maybe a few pieces less, but no matter, in total it would be true. Moreover, as the numerous robotics startups show, entering the industry is relatively easy. With a maximum of 50 skilled employees, two or three years of time and a budget of around €15 million, a good product can already be developed. This has already been shown here(link).
Another reason is that because industrial robots have a significant material content, the scaling effects for large quantities are significantly lower than for RPA.
The crucial difference, however, is probably that robotics manufacturers are still primarily selling mechanics and not AI. The latter is increasingly emerging and in turn fires the imagination of investors and allows higher prices. The expense for this is primarily software, so scaling effects should then also be possible. Another approach to increasing value is likely to be uniform and simple user interfaces, such as those presented by Kuka.
Conclusion: Really high company values seem to be realizable only with more software, which consequently must be rewarded by the market with corresponding market shares at good returns.
Are we networking? LinkedIn
-> To the Cobot group on LinkedIn(Link)
On my own account/ Advertising
The author of this blog is significantly involved in the AI/ robotics project Boost-Bot. He advises robotics companies and investors on market (entry)/business development and funding/subsidies. The standard book on cobots is also written by Guido Bruch.
Source contribution photo: Deutsche Börse AG