While the market believes that one of the main weaknesses of UBTech Robotics Corp Ltd. (the "Company") is in its cash burn rate, we believe that the Company has taken steps to maintain solvency. We will maintain the investment rating at "Buy" and adjust the target price to reflect changes in market conditions in our next Company Report. As defined by their latest interim report, the Company’s cash burn rate per month is roughly RMB83.8 mn per month, with total cash on hand of RMB755.0 mn. As of the date of the interim report, the Company had 9.01 months before they would become insolvent, which is a concern among investors. However, the Company has increased their allowance for bank credit to RMB1,950 mn from RMB1,100 mn, and raised a combined RMB1,081 mn from stock placements. At the current cash burn rate, the Company will have an additional 23.04 months of time after June 2024 to become profitable.
　　Based on current performance at exhibitions, and the announcements at 1H2024 earnings call, we believe that the Walker S will be able to bring the Company into profitable territory in 2026. Elon Musk mentioned that the Tesla Optimus would cost roughly US$20,000 to US$30,000 when mass produced at the "We, Robot" event in October 2024. If we assume that the learning curve for both electric vehicles and humanoid robots is the same, the price difference (in percentage terms) between the first released product and the mass-produced products should be roughly similar. The first Tesla EV, the Roadster 1.5, released in 2007 had a sales price of US$98,950, while the current mass-produced Model 3 sells for US$29,990, at roughly 30.3% of the original price. Extrapolating to the Tesla Optimus, we can estimate the range for the first Optimus model to be between US$66k and US$100k. If we apply a conservative estimate that the price point of the first Walker S is to be 75% of that of the Optimus, and assume a gross profit of 35%, then Walker S would have an initial price point between RMB361.4k and RMB542.1k. If we assume all of the Company’s future revenue comes from the Walker S, the breakeven point for the Company would be between 8,159-5,439 units per year.
　　Catalyst: Mass shipment of the Walker S to downstream industries.
　　Risk factor: Limited development of industrial use cases.