How do you turn a boring machinery play into a hot-selling stock of the future?
For Yawei (002559.CN), the answer is robotics.
It’s not clear when Yawei’s first robot will roll off its production line, but since the company announced a tie-up with Reis under leading German robotics maker Kuka about a week ago, the stock has shot up 30 percent.
Yawei will pay about 6 million euros (US$8.2 million) for some of Kuka’s robotics technology. A joint venture will be formed to design automation equipment for making Yawei machine tools including cutting and bending machinery.
In the longer term, the pair will pursue market opportunities in Asia.
Investors don’t mind paying a premium for Yawei’s exciting prospects, even though that means a market value in excess of 40 times its earnings.
Like many new industries in their initial stages, fantasy trumps fact.
Such fantasy is best exemplified by forecasts of China’s robotics market growing 30 percent annually for the next 30 years.
Affordability is also seen rapidly improving as the cost of automation is estimated to come down at least 4 percent a year, while good old fresh and bone is set to become more expensive.
Many promising stars of tomorrow, such as solar energy and wind power, have failed to deliver consistent profit after years of rapid market expansion.
Wind power bulls overlooked a drop in income from selling carbon credits, warranty disputes, grid connection bottleneck and an influx of turbine makers.
The solar sector is struggling to recover from Europe’s subsidy policy change and excess capacity.
With little doubt, the robotics industry will have its fair share of challenges. But these problems belong to the future. In the meantime, speculators are having a ball.
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