Why Hello Tech can go on the market with portable power station products
Hello Tech is listed at a high price
Hello Tech was officially listed in Shenzhen Stock Exchange in China, with a price of 237.5 RMB per share. On the first day of listing, Hello Tech closed at 210.50 RMB/share, down 11.37%. Even if it rose by 10% the next day, the share price still failed to return to the issuing price.
Among the total repurchases, Hello Tech’s repurchases amounted to 525 million RMB, accounting for 9.01% of the issuance. It has to be admitted that the hot new energy sector this year has given Hello Tech high pricing confidence. However, from the perspective of revenue composition, Hello Tech is still a cross-border trading company.
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Similar to the early cross-border e-commerce companies, Hello Tech focused on the ODM business of external battery at the beginning, and then launched its own brand “Jackery”, which paralleled OEM with its own brand business.
Later, Hello Tech turned to the small field of portable power station at that time. In November 2016, Hello Tech launched its first lithium battery portable power station product, officially entering the portable power station industry. At present, portable power station products account for 78.83%, 83.52% and 79.82% of its revenue from 2019 to 2021.
Hello Tech vs Pylon Tech
In the prospectus of Hello Tech, two comparable companies are given: Anker and Pylon Tech. However, the P/E ratios of the two companies with the same caliber are quite different, 35.30 times and 220.96 times respectively.
The pricing of Hello Tech mainly refers to the global household energy storage leader Pylon Tech. According to the current issue price, the market value of Hello Tech after the issue is 22.8 billion. Based on the non net profit deduction in 2021, the price earnings ratio (PE) is 84.6 times.
However, the business of Pylon Tech is different from that of Hello Tech. The main business of Pylon Tech includes energy storage system and energy storage cell. If we divide it by industrial chain, Pylon Tech is at the top of the industrial chain.
The energy storage industry chain or the electrochemical energy storage includes upstream cells, battery packs, battery management systems, converters and other equipment, while the midstream includes energy storage system integrators. Among them, Pylon Tech covers all links except PCS of energy storage converter.
According to the data, the upstream accounts for 88% of the energy storage cost, while the midstream only accounts for 12% of the cost. Therefore, it is not surprising that Pylon Tech, located in the upstream, has more bargaining power and more than 200 times of PE.
In 2021, Pylon Tech experienced a significant slowdown in growth after deducting non net profits. It was not until this year’s Russian Ukrainian war that it rose again. In the first half of this year, its net profit after deducting non profits increased by 79.01% year on year, 67 percentage points more than last year.
If the stock price remains unchanged, the P/E ratio of Pylon Tech will drop to 75 times, which is similar to the current issuance level of Hello Tech. But Hello Tech is only in the middle of the industrial chain.
Its main business is portable power station products and solar panels supporting energy storage products, which still need to be assembled by purchasing raw materials such as power cells, inverters and solar panels from upstream. Therefore, compared with Pylon Tech, Hello Tech’s bargaining power in the industrial chain is not high.
Hello Tech vs Anker
Compared with Anker, the two companies are actually more similar. Both Anker and Hello Tech sold their products to the world through online means, and in the early days, they mainly engaged in the business of external battery. It is worth mentioning that Anker has also launched its own portable power station products. Data shows that Anker ranks fifth with a market share of 2.2%.
Although portable power station products have brought new growth points to Anker, the performance of its secondary market this year is not satisfactory. In 2021, the non net profit deduction of Anker decreased by 2.69% year on year, which is the first decline since 2014.
The stock price also fell from the highest point of 201.36 in 2021 to the lowest point of 87.22, dropping by more than 55%. Calculated by deducting non net profits in 2021, the price earnings ratio of Anker is only 30 times. But if we look at the current stock price and net profit level, its P/E ratio is lower, only close to 20 times.
The decline of Anker’s market value is inseparable from the cold of the whole cross-border industry. 2021 is a year of frustration for cross-border e-commerce. On the one hand, it is affected by the devaluation of the RMB exchange rate; On the other hand, it is affected by the rising cost of shipping and raw materials.
Even under the catalysis of the epidemic, the operating income of Anker in 2021 increased by 34.45%, which is also slower than that in 2020; But more importantly, its cost increased by 39.25% year on year, even exceeding the growth of revenue.
This is also reflected in Hello Tech. In addition to the cost of shipping, the traffic competition increased significantly last year. From 2019 to 2021, the sales expense of Hello Tech increased from 84 million RMB to 227 million RMB and double to 565 million RMB.
The sharp increase in sales expenses has caused Hello Tech to increase its income without increasing its profits. From 2019 to 2020, Hello Tech’s revenue soared, and its net profit increased by 200 million; However, by 2021, the revenue was double, while the net profit was only increase by 45 million RMB. In H1 of 2022, the growth rate excluding non net profits has declined, which is -2.57% year on year.
According to the performance forecast, Hello Tech’s non net profit deduction is expected to be between 198 million RMB and 277 million RMB, with a year-on-year growth of 0.11% to 36.94%. Assuming that the non net profit of Hello Tech will increase by 36% in 2022 and the stock price remains unchanged, the P/E ratio of Hello Tech will be close to 62 times.
If we estimate by 20 times of Anker, the net profit of Hello Tech still needs to increase by 300% when the stock price remains unchanged. At present, the P/E ratio of Hello Tech is undoubtedly a very high multiple among a large number of cross-border e-commerce businesses.
Analysis of Hello Tech’s product strength
Data shows that the market size of the global portable power station industry was only 60 million RMB in 2016, and it has reached 4.26 billion RMB in 2020 after the epidemic, with an average annual compound growth rate of 190.28%. It is estimated that the market size will reach 88.23 billion RMB by 2026. In addition, more than 90% of the world’s portable power station comes from China.
Not only did the investment in portable energy storage in the primary market continue unabated, but companies such as EcoFlow and Poweroak have received large investments from organizations such as SEQUOIA CHINA, with a valuation of more than $1 billion.
Old brand consumer electronics brands such as Anker and Baseus have also launched their own portable power station. Even Huawei, Millet and other companies have announced that they will invest in portable power station products.
Compared with enterprises in the primary market, Hello Tech raised 5.8 billion RMB this time, which is undoubtedly a large sum of money. In addition, brand influence is another competitive advantage of portable power station. Hello Tech has worked hard in this field for 6 years, and has more advantages in brand.
With the expansion of outdoor scenes, different brands have given portable power station more product definitions, such as more complex power management systems, software system development and other functions. Today, the main competitive points are still concentrated on the basic functions such as high power and long charging time, as well as the product itself.
Take EcoFlow and Poweroak for example, most of their products are high-power power supplies. For example, the DEDELTA series launched by EcoFlow has a rated power of more than 1000wh, and the DEDELTA Pro has reached 3600wh; The latest 757 portable power station product launched by Anker also has a charging capacity of 1229wh.
Relatively speaking, Hello Tech mainly uses low-power power supply, but it is moving towards high-power. The newly launched 2000 Pro can reach 2160Wh capacity. In addition to the basic functions, the embodiment of product strength, including appearance design and interface quantity, is the competition point among companies.
For example, the DELTA Max launched by EcoFlow is equipped with USB slow charging/fast charging, and can power up to 13 devices at the same time, with its own smart APP. The latest 600W parallel digital outdoor power supply introduced by Baseus innovatively adopts lithium iron phosphate battery cell and modular design, and can realize the functions of AC line parallel use. In contrast, the innovation of Hello Tech still needs to be improved.
Behind the difference in product strength, it reflects the capabilities of PCS and BMS and the industrial design of products, which is also directly related to the R&D investment of each company. In this regard, Hello Tech is obviously inferior. From 2019 to 2021, the R&D of Hello Tech was only account for about 2%. However, Anker has 6%, and Pylon Tech has 7%.
The market development trend of portable power station
In addition to the product power, the market space for portable energy storage has also prompted various enterprises to start looking for new growth points. There are mainly the following trends
● Return the promotion of portable power station products to China
Although the proportion of people participating in outdoor activities in China is only 9.5%, far less than 50% in the United States. However, whether it can open the Chinese market is an open question.
● Continuously renovate the product definition
For example, in software systems, more possibilities such as self diagnosis and detection are given. However, this kind of product innovation faces not only the problem of whether the market demand really exists, but also the problem of sales model competition.
● Focus on household and small commercial energy storage products
This is also the second most mainstream growth curve at present, and Hello Tech is making efforts in this direction.
In fact, household energy storage needs to support the use of a variety of different power appliances, which requires a higher power management system. In addition, due to the higher power consumption and energy storage involved, there are also high technical problems in the components such as power cells and power modules.
Household energy storage also involves scenarios such as household electricity spontaneous self use and electricity price difference, so it is also difficult for energy management. In addition to products, there are also great differences between the sales models. As portable power station is more consumer electronic, it can be directly sold online through third-party platforms.
However, due to the problems of installation and security of household energy storage, enterprises need to lay a large number of offline channels, including maintenance stores. The data shows that 70% of Hello Tech’s income depends on online channels. To be sure, if wanting to develop household energy storage in the future, Hello Tech still needs to fill the vacancy of its offline channels.