NEW YORK, July 31, 2024 (GLOBE NEWSWIRE) -- Diamond Equity Research, an equity research firm with a focus on small capitalization public companies released an Update Note on Viomi Technology Co., Ltd. (NASDAQ: VIOT). The update note includes detailed information on the Viomi Technology’s business model, services, industry, financial results, valuation, and risks.
The update note is available here. Highlights from the note include:
- Strategic Divestiture of IoT@Home Portfolio: Viomi Technology Co., Ltd has announced a strategic move to sharpen its focus on the home water solutions market. The company has entered into definitive agreements with its founder, Chairman of the Board, and CEO, Mr. Xiaoping Chen, along with an entity controlled by Mr. Chen, to divest its IoT@Home portfolio products (excluding range hoods, gas stoves, and water heaters) for RMB65 million in cash. This transaction involves the termination of existing variable interest entity (VIE) contractual arrangements between Yunmi Hulian Technology (Guangdong) Co., Ltd. and Foshan Yunmi Electric Appliances Technology Co., Ltd. ("Foshan Viomi"). Consequently, Mr. Chen will gain full control over Foshan Viomi and its subsidiaries, including Foshan Xiaoxian Hulian Electric Appliances Technology Co. Ltd., Foshan Qutansuo Electric Technology Co., Ltd., Guangdong AI Touch Technology Co., Ltd., and Zhuawa Technology (Guangdong) Co., Ltd. Additionally, as part of a pre-closing reorganization, Zhumeng Hulian Technology (Guangdong) Co., Ltd. and Guangzhou Interconnect Technology Co., Ltd. ("Guangzhou Interconnect") will enter into a new set of VIE contractual arrangements, consolidating Guangzhou Interconnect under Viomi.
- Board Approval and Financial Fairness: The special committee of the Board, comprising independent and disinterested directors Ms. Jinling Zhang, Mr. Weijiang Wu, and Mr. Jun Li, led the evaluation and negotiation of the transaction. Kroll LLC served as the independent financial advisor, issuing a fairness opinion on the deal. The Board, acting upon the unanimous recommendation of the special committee, resolved that the proposed transaction is in the company's best interest and is financially fair. The transaction, subject to certain closing conditions, is expected to close by the end of August 2024. Upon completion, Mr. Chen will pay the RMB65 million purchase price through Foshan Viomi via a registered capital increase to Guangzhou Interconnect. Post-transaction, Viomi will strategically focus on enhancing its home water solution business and related products, leveraging AI technology to deliver superior drinking water solutions for household users.
- We believe that, in the face of increasing competition within the IoT and smart home market, Viomi’s decision to divest its IoT@Home portfolio and concentrate on the home water solutions sector is a prudent move. The global demand for advanced water purification and management systems remains high and still largely unmet. By reallocating resources and attention toward this niche, Viomi positions itself to address a critical need, potentially capturing significant market share in a huge and growing industry. This strategic refocus could lead to enhanced innovation, improved product offerings, and a stronger market presence in the water technology space.
- Board Approval and Financial Fairness: The special committee of the Board, comprising independent and disinterested directors Ms. Jinling Zhang, Mr. Weijiang Wu, and Mr. Jun Li, led the evaluation and negotiation of the transaction. Kroll LLC served as the independent financial advisor, issuing a fairness opinion on the deal. The Board, acting upon the unanimous recommendation of the special committee, resolved that the proposed transaction is in the company's best interest and is financially fair. The transaction, subject to certain closing conditions, is expected to close by the end of August 2024. Upon completion, Mr. Chen will pay the RMB65 million purchase price through Foshan Viomi via a registered capital increase to Guangzhou Interconnect. Post-transaction, Viomi will strategically focus on enhancing its home water solution business and related products, leveraging AI technology to deliver superior drinking water solutions for household users.
- Opportunities in the Global Home Water Purification Market: The global home water solutions market was valued at USD 12.12 billion in 2022 and is projected to grow to USD 26.73 billion by 2030, exhibiting a CAGR of 10.5%. This growth is driven by increasing consumer awareness of water quality issues, rising urbanization, and the adoption of smart home technologies. Companies like LG, Panasonic, A.O Smith, Eureka Forbes, and Brita are popular among consumers but lack new-age IoT-enabled smart water purifier options. Viomi, as one of the few pure-play Chinese water purification companies, is potentially well-positioned to capitalize on this substantial market opportunity. The company's strategic shift towards focusing solely on water solutions could facilitate international expansion and enable it to capture a significant portion of this fast-growing global market.
- Impact of Viomi's Strategic Restructuring on Core Business and Efficiency: Viomi's divestment of loss-making businesses is expected to streamline operations, improve financial health, and enhance its focus on core home water solutions. This restructuring is a crucial part of Viomi's strategy to optimize its operational framework and drive greater efficiency:
- Strategic Initiative to Optimize Operating Structure: Viomi's major restructuring is a strategic initiative designed to optimize its operating structure, improve overall efficiency, and focus on its core business of home water solutions. By divesting loss-making businesses, Viomi aims to enter a more favorable operational status and maximize its major advantages. The company will strategically concentrate on household water solutions and related products, utilizing AI technology to provide superior drinking water solutions for household users.
- Focus on Core Business: This reorganization is part of Viomi's "Focus" strategy, which involves reallocating resources to the core business, enhancing operational efficiency, and improving profitability. With a decade of experience in the water purification industry, Viomi aims to leverage its expertise and innovations to maintain its competitive edge.
- Technological Advancements with AI integration: Viomi's commitment to continuous research and development is evident in its technological innovations, such as fresh large flux direct drinking water technology, three-dimensional integrated water circuits, ERO electrodialysis water quality adjustment technology, and 10-year long-lasting filter cartridges. These advancements have consistently improved the quality of life for consumers. Furthermore, Viomi's integration of AI technology in its water purifiers offers real-time water quality display, remote monitoring, proactive reminders, and intelligent waterway self-cleaning technology, enhancing user experience.
- Increased Production Capabilities and International Expansion: The consolidation of Viomi's Water Purifier Gigafactory, with an annual production capacity of 5 million units and 30 million filter cartridges, exemplifies its integrated and automated production capabilities. The gigafactory's comprehensive industrial chain and high-standard hygienic production processes ensure end-to-end traceable quality control. Additionally, Viomi has recruited top industry talents and developed omni-channel marketing and service capabilities in China, while actively expanding into the U.S. and other international markets.
- Future Prospects: Looking ahead, Viomi will focus on maximizing the strengths of its water purifier gigafactory, building a robust industrial chain system, achieving scale efficiency, and enhancing its brand impact. We believe that Viomi's reorganization is significant, as it not only improves the company's financial health by divesting loss-making businesses but also enhances its competitiveness in the home water solution market. This strategic focus is expected to help Viomi provide better drinking water solutions for global home users. The restructuring is anticipated to be completed by the end of August 2024.
- Strategic Initiative to Optimize Operating Structure: Viomi's major restructuring is a strategic initiative designed to optimize its operating structure, improve overall efficiency, and focus on its core business of home water solutions. By divesting loss-making businesses, Viomi aims to enter a more favorable operational status and maximize its major advantages. The company will strategically concentrate on household water solutions and related products, utilizing AI technology to provide superior drinking water solutions for household users.
About Viomi Technology Co., Ltd.
Viomi Technology Co., Ltd develops and sells IoT-enabled smart home products in China, including water purifiers, kitchen appliances, and other smart devices. They distribute products via online platforms and offline stores and have a strategic partnership with Xiaomi Corporation. Based in Guangzhou, the company was founded in 2014.
About Diamond Equity Research
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Disclosures:
Diamond Equity Research LLC is being compensated by Viomi Technology Co., Ltd (NASDAQ:VIOT) for producing research materials regarding Viomi Technology Co., Ltd and its securities, which is meant to subsidize the high cost of creating the report and monitoring the security, however, the views in the report reflect that of Diamond Equity Research. All payments are received upfront and are billed for an annual or semi-annual research engagement. As of 07/31/24, the issuer had paid us $34,985 ($35,000 contract, fee reflects wire charge) for our research services, which commenced 10/16/23 and is billed annually. Diamond Equity Research LLC may be compensated for non-research related services, including presenting at Diamond Equity Research investment conferences, press releases and other additional services. The non-research related service cost is dependent on the company, but usually do not exceed $5,000. Diamond Equity Research LLC has been paid $2,500 by a third-party affiliate on behalf of Viomi Technologies Inc. to present at our emerging growth conference, with authorization from company. Issuers are not required to engage us for these additional services. Additional fees may have accrued since then. Although Diamond Equity Research company sponsored reports are based on publicly available information and although no investment recommendations are made within our company sponsored research reports, given the small capitalization nature of the companies we cover we have adopted an internal trading procedure around the public companies by whom we are engaged, with investors able to find such policy on our website public disclosures page. This report and press release do not consider individual circumstances and does not take into consideration individual investor preferences. Statements within this report may constitute forward-looking statements, these statements involve many risk factors and general uncertainties around the business, industry, and macroeconomic environment. Investors need to be aware of the high degree of risk in small capitalization equities including the complete potential loss of their investment. Investors can find various risk factors in the initiation report and in the respective financial filings for Viomi Technology Co., Ltd.
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