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First Half Results
Total revenue for the first half of 2025 for Viomi (NASDAQ:VIOT) was RMB 1.48 billion ($206 million), exceeding our revised estimate of approximately $190 million. Revenues were up 76.6% versus the same period of 2024 as a result of the company’s renewed focus as a water purification company in 2025 (the company divested a large consumer products division in 2024). It is worth noting that, on a sequential basis, revenues increased by 15% ($206 million versus $179 million). There is a fair amount of seasonality in the business, given the significant Chinese shopping holidays that occur in the second half of the year. However, we believe this 15% sequential growth is a more accurate representation of the company’s performance in the first half of the year.
Home Water Systems (up roughly 85% year over year) and Kitchen Appliances/Other (up more than 140% year over year) were the primary drivers of the outperformance in the first half of 2025. In January 2025, the Chinese government expanded the number of home appliances eligible for government subsidies from 8 to 12 product lines, which included water purifiers for the first time. The subsidy, capped at up to 20% of the sales price of an appliance, was introduced to spur consumer demand and encourage consumers to upgrade many home appliances that were not as energy efficient as current models. Based on other financial results from home appliance manufacturers in China, we believe that this boosted overall sales probably 10-15% above what would have been expected, and that would be in line with Viomi’s reported 15% increase in sequential revenues from the second half of 2024 to the first half of 2025.
The company’s relationship with Xiaomi remains vital to its continued success with 92% of total revenues derived from Xiaomi, up from 80% in the first half of 2024. As we’ve noted before, the company’s reliance on Xiaomi poses a significant risk for investors. However, given the deep financial ties between the two companies, we do not foresee this relationship changing in the near future.
The balance of the income statement was roughly in line with our forecast, and the company reported net income of $16.6 million or $0.24 per ADS, which was double our forecast of $0.12 per ADS.
VALUATION
As one of the smaller public players in the market and given the company’s substantial dependence on Xiaomi, we believe Viomi will trade at a discount to its comps. Based on our new EPS forecast of $0.45/ADS for 2026 and a current ADS count of around 69 million, we are increasing our 12-month target for Viomi’s shares to $5.00/ADS, or approximately 11 times our 2026 estimate (peers trade at PE multiples in the mid-teens). We would note that if the company is aggressive with its share buyback program or if the appliance subsidy program is extended in 2026, we could revisit this target.
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