In recent years, the collaborative robot industry has seen remarkable growth, witnessing an expansion in market size and application areasCompanies in this sector are seizing the opportunity to pursue public listings to facilitate further development.

On December 31, 2024, one of China's leading collaborative robot manufacturers, JAKA Robotics Co., Ltd. (hereinafter referred to as "JAKA" or "the Company"), updated its prospectus in preparation for an initial public offering (IPO) on the Shanghai Stock Exchange's Science and Technology Innovation Board.

Currently, JAKA struggles to maintain profitability, raising significant concern regarding when the company will achieve sustainable profit.

Facilitating upgrades in industrial intelligence

Collaborative robots, or cobots, are designed to work alongside humans in shared spaces, representing a subcategory of industrial robots tailored for specific applications.

Following trends towards future intelligent factories, these robots are envisioned to coexist harmoniously with humans, taking on various tasks, including those deemed too complex, undesirable, or unsafe for humans.

In contrast to traditional industrial robots, collaborative robots are characterized by their ability to interact closely with human workers, along with features such as high safety standards, a low weight-to-load ratio, ease of programming, and rapid deployment capabilities.

JAKA stands out as one of the leading players in the collaborative robot sector.

The company's history dates back to July 2014, when Li Mingyang co-founded JAKA with Professor Sheng Xinjun from Shanghai Jiao Tong University

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Li had over a decade of experience in the beverage packaging industry, where he noted significant automation in beverage processing, yet the packaging stage still relied heavily on manual labor, thereby escalating costs annually.

Li believed that leveraging technology could help mitigate these packaging costsConsequently, he collaborated with Sheng and others to establish JAKA.

In 2015, JAKA launched the first intelligent packaging production line for the domestic dairy industry and subsequently developed automated sorting and grading robot packaging systems for the chemical fiber industry, significantly reducing labor costs for enterprisesThese early successes allowed JAKA to solidify its position within the industry.

To date, JAKA's technologies have been deployed in services such as hospitality, retail, and education, while also attracting clients in the automotive, electronics, semiconductor, and new energy sectorsThe company has installed thousands of collaborative robots across China, Japan, South Korea, Southeast Asia, Europe, and North America, significantly promoting the global upgrade of industrial intelligence.

Challenges in sustaining profitability

In the prospectus, JAKA states that it is among the top-tier enterprises in China's collaborative robot sector.

Financial reports indicate that JAKA's revenue skyrocketed from 48.28 million yuan in 2020 to 350 million yuan by 2023. Despite the revenue surge, the company struggled to achieve stable profitability

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From 2021 to 2023, JAKA's net profit was reported as -7.23 million yuan, 5.73 million yuan, and -28.55 million yuan, with a loss of 3.25 million yuan in the first half of 2024.

Consequently, the Science and Technology Innovation Board's review committee has requested JAKA to “carefully estimate and objectively disclose forward-looking information, including the levels and underlying assumptions necessary to reach breakeven.” They also sought an analysis of the company's capacity for sustainable operations.

The prospectus further notes that JAKA implemented an equity incentive plan in November 2022, which incurred share-based payment expenses of 177 million yuanThe amortization of these costs adversely affected net profit.

Moreover, JAKA indicated that the collaborative robot industry is technology-intensive, requiring substantial investments in R&D and promotion, which has dampened overall profitabilityBetween 2021 and 2023, JAKA's R&D expense rate was recorded at 15%, 17%, and 21%, while its sales expenses were 28%, 31%, and 31%, all surpassing the industry average.

Nonetheless, the challenges of profitability may not be unique to JAKA but reflect a broader issue within the domestic collaborative robot sector.

At the end of 2024, another domestic leader in collaborative robots, Yuetong (02432.HK), is expected to be listed on the Hong Kong Stock Exchange, marking it as the "first stock" in this industry.

The prospectus shows that between 2021 and 2023, Yuetong incurred net losses of 41.76 million yuan, 52.48 million yuan, and 103 million yuan, with losses of 59.88 million yuan in the first half of 2024. Over this period, Yuetong recorded aggregate losses exceeding 250 million yuan, attributing sales expense increases as one of the main causes of this financial strain.

In response to inquiries from the Science and Technology Innovation Board, JAKA stated that it anticipates transitioning from a loss to profitability by 2025. To achieve breakeven, they forecast an R&D expense rate of 16% and a sales expense rate of 19% for that year.

What does the market hold for the future?

As a new direction in industrial robots, the prevalence of collaborative robots is rising steadily

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According to data from the High-Tech Industry Research Institute (GGII), the proportion of collaborative robots in the industrial robot market has increased from 2.7% in 2017 to 10.5% in 2023.

In 2023, global sales of collaborative robots reached 57,000 units, primarily utilized in sectors such as automotive and components (39%), 3C electronics (13%), and machine processing (12%).

Data from the International Federation of Robotics (IFR) indicates that, similar to industrial robots, China is the largest market for collaborative robots globally, with approximately 41% of global sales originating from the Chinese market in 2023.

In terms of industry competition, domestic collaborative robots are now up against foreign businessesMajor international brands include Switzerland's ABB, Germany's KUKA, Japan's FANUC, and America's Rethink Robotics.

Guotai Junan Securities believes that as domestic substitutes gain traction, Chinese manufacturers like JAKA, Yuetong, Dazhu, and Aobo Intelligent continue to enhance technological innovation and product development, gradually dismantling foreign monopolies.

Furthermore, within the sphere of domestic collaborative robots, firms such as JAKA, Aobo Intelligent, and Yuetong, aiming for or recently completed IPOs, face substantial competition from established industrial robotics companies like Estun (002747.SZ), Tuosida (300607.SH), and Efort (688165.SH).

Despite the intense competition, collaborative robot manufacturers are strategizing to expand their manufacturing capabilities

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