3Q19 results in line with our forecastViomi’s 3Q19 revenue rose 89.2% YoY to Rmb1.07bn; non-GAAP net income rose 116.8% YoY to Rmb83.9mn. The results are in line with our forecast and the revenue growth exceeds 3Q19 official guidance, despite the challenging home appliances market. As we remain cautious about a recovery in China’s home appliances shipment in 4Q19 and 2020, we cut our 2019 and 2020 earnings estimates by 7% and 11%.
We maintain OUTPERFORM rating and our US$12.5 TP (11.3x 2020e non-GAAP P/E), implying 23.8% upside.
Volume growth in water purifiers offset by ASP decline.Water purifier revenue increased 1% YoY in 3Q19. For Viomi’s water purifier revenue, we estimated roughly 20%YoY growth in sales volume which was offset by a 20% YoY decline in ASP on intense competition in 3Q19.For 4Q19, we expect a more healthy revenue performance with YoY growth back to double digits thanks to contribution from the 11/11 sales event in China.
Other IoT home appliances maintain robust growth, despite market headwinds. Revenue from Viomi’s other products (excluding water purifier systems) increased 142% YoY in 3Q19, thanks to continued uplift of Viomi’s brand power, as well as the successful launches of new Xiaomi-branded products,such as sweeping robots, range hoods, and gas stoves. With challenging macro conditions ahead, we stay cautious on Viomi’s revenue growth prospects in 4Q19 and 2020.
Continues to cooperate with Xiaomi in AIoT. The company reiterated it has a good relationship with Xiaomi, and will continue to cooperate with Xiaomi in AIoT product categories. We believe 5G will boost the AIoT industry,which we expect to become a long-term growth driver for Viomi.We lower our 2019 and 2020 earnings forecasts by 7% and 11%, as we remain cautious about a recovery in China’s home appliances market in 4Q19 and 2020. The stock is now trading at 14.2x and 9.1x non-GAAP 2019/2020 P/E.
We maintain OUTPERFORM and our TP of US$12.50 (17.5/11.3x 2019/2020 P/E, 23.8% upside).Demand fluctuations; tough competition in products.Figure 1: Results review and earnings forecast revisions
Source: Corporate filings, Wind Info, CICC Research
Figure 2: Earnings forecast breakdown, by business segment
Source: Corporate filings, Wind Info, CICC Research
Figure 3: CICC estimates vs. market consensus
Source: Corporate filings, Wind Info, CICC Research
Source: Wind Info, Bloomberg, CICC Research
Source: Wind Info, Bloomberg, CICC Research
黃樂平 leping.huang@cicc.com.cn胡譽鏡 yujing.hu@cicc.com.cn 閆慧辰 huichen.yan@cicc.com.cn丁寧 ning.ding@cicc.com.cn 楊俊傑 junjie.yang@cicc.com.cn 陳旭東 xudong.chen@cicc.com.cn成喬升 qiaosheng.cheng@cicc.com.cn劉瑩瑩 yingying.liu@cicc.com.cn李詩雯 shiwen.li@cicc.com.cn姚遜宇 xunyu.yao@cicc.com.cn韋昕 xin.wei@cicc.com.cn
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