Roborock is gearing up for its Hong Kong IPO, destined to battle with its rival iRobot?

The leading companies in the A-share market are initiating a wave of listings in the Hong Kong stock market.

Recently, Roborock (688169.SH) announced its plan to list in Hong Kong, aiming to further develop international business and optimize its shareholder composition.

In 2024, the overseas business revenue of Roborock has exceeded 50%.

Although the overseas business is facing tariff-related risks, Roborock has gradually shifted its production capacity for the North American market to Vietnam since last year. Whether this IPO will further expand production capacity in Vietnam is under scrutiny.

However, the overseas market is also highly competitive.

As a leading global smart vacuum cleaner company, iRobot (IRBT.O) has undergone the largest product update iteration in its history this year.

This may be putting more pressure on Roborock's overseas expansion.

Fundraising for Factory Construction?

The "A+H" model is popular, partly because regulators have a positive attitude towards A-share companies listing in Hong Kong.

In April last year, the China Securities Regulatory Commission clearly stated that it would further enhance communication and coordination with relevant departments to support qualified mainland industry leaders in listing in Hong Kong for financing;

On the other hand, several A-share companies, such as Contemporary Amperex Technology Co., Limited (300750.SZ), have successively entered the Hong Kong stock market and received positive market feedback.

This has increased the enthusiasm for A-share companies to list in Hong Kong.

The important purpose of Roborock's listing in Hong Kong is to develop international business.

"To further enhance the company's global brand awareness and competitiveness, consolidate its industry position, and better utilize the advantages of international capital markets to optimize capital structure and shareholder composition," Roborock stated.

Roborock's overseas business has indeed performed outstandingly, surpassing its domestic business.

In 2024, revenue from overseas regions reached 6.388 billion yuan, a year-on-year increase of over 50%, accounting for more than 50%.

However, Roborock still mainly supplies overseas markets in the form of domestic exports, with limited overseas supply chain layout, currently only having a factory in Vietnam, which will start shipping in the fourth quarter of 2024.

Under tariff risks, the urgency of building factories overseas is increasing.

In terms of capital reserves, Roborock is "not short of money." As of the end of the first quarter of 2025, cash and cash equivalents reached 1.635 billion yuan.

However, foreign currency reserves are relatively limited, with the dollar equivalent in the monetary funds project amounting to 852 million yuan by the end of 2024, which may put pressure on Roborock's subsequent capacity expansion for overseas factories.

Many A-share companies also aim to raise funds in Hong Kong for overseas factory construction.

For example, one of the purposes of Contemporary Amperex Technology Co., Limited's fundraising in Hong Kong is to promote the construction of phases one and two of its Hungary project to establish localized production capacity in Europe Analysts in the home appliance industry at Galaxy Securities, including He Wei, pointed out that under the high tariff policy in the United States, the internationalization process of Roborock's supply chain is accelerating. Currently, an increasing number of models sold in the United States have shifted their supply chains to Southeast Asia.

This may raise higher demands for the capacity levels of Roborock's overseas factories.

Sacrificing Profits to Capture Market?

As the proportion of revenue from overseas markets increases, Roborock is undergoing significant channel reforms—intensifying online direct sales.

In the European market, Roborock has opened brand specialty stores on online platforms such as Amazon, Home Depot, and Target.

However, to stabilize distribution, Roborock plans to share more profits with distributors to achieve a smooth transition of sales channels.

This series of reforms has led to Roborock experiencing a situation of "increased revenue without increased profits."

Although revenue in 2024 is expected to grow nearly 40% year-on-year, net profit attributable to the parent company has declined by 3.64%, with a gross profit margin of 50.14% dropping nearly 5 percentage points.

Goldman Sachs believes that while this strategy will be effective in the medium to long term, there are still risks in the short term.

The accelerated growth of low-margin direct sales may be offset by a decline in high-margin sales revenue aimed at distributors.

From the first quarter, it can be seen that Roborock sacrificed more profits for channel reform. In the first quarter of 2025, revenue increased by over 80% year-on-year, but net profit attributable to the parent company fell by nearly 30%.

With only a 7.8% net profit margin, it has dropped by more than 13 percentage points, setting a new low for the first quarter since its listing.

Overseas competition is becoming more intense.

Roborock's primary competitor is iRobot, whose declining competitiveness may present overseas opportunities.

iRobot is known for its Roomba home vacuum cleaning robot and has consistently topped sales charts in Canada, Japan, and the United States.

However, its shipment volume has been surpassed by Roborock.

According to IDC monitoring data, Roborock holds the global number one position with a 16% market share, leading iRobot by 2.3 percentage points.

iRobot has been affected by slow product updates and a limited product range, with revenue in 2024 declining nearly a quarter to 4.9 billion yuan, and a net loss reaching 1.046 billion yuan.

In response, iRobot has initiated large-scale layoffs and launched the largest product release in its history.

For example, it has continuously introduced several products, including the Roomba 105 Vac robot series with 70 times the suction power and the Roomba Plus 505 combination robot series with self-cleaning capabilities.

"These powerful breakthrough new products are expected to bring profit growth compared to our traditional product lines and will support year-on-year revenue growth starting in 2025," said iRobot CEO Gary Cohen.

As iRobot reorganizes, it remains an important competitor to Roborock.

With this listing in Hong Kong, whether Roborock can further solidify its position as a leading player in the vacuum cleaning robot market by accessing overseas capital is something the market is eagerly watching