By Brian Lantier, CFA
NASDAQ:VIOT
READ THE FULL VIOT RESEARCH REPORT
Viomi's (NASDAQ:VIOT) preannounced first-half 2025 revenues of more than RMB1.4 billion (approximately $193 million), which significantly exceeded our forecast of $131 million by nearly 50%. According to the company, these revenues were up "more than 70% versus the first half of 2024 results."
The company indicated in a press release announcing its first-half revenue that "supportive government policies" helped drive the outperformance. In January 2025, China's National Development and Reform Commission and Ministry of Finance announced a new program to encourage consumers to upgrade several home appliance categories, including refrigerators, televisions, air conditioners, water heaters, and water purifiers. The trade-in program enables consumers to receive up to 20% of the sale price of an item as a subsidy. The 2025 amendments to the program added microwaves, water purifiers, dishwashers, and rice cookers to the list of eligible appliances, which seems to have benefited Viomi as consumers used the subsidy to lower the cost of owning an advanced water purification system.
Historically, the second half of the year is the strongest for the company as several key shopping holidays in China fall in this period (11/11 and 12/12, in particular). At this point, it is unclear whether the government subsidies have pulled forward demand that would have typically fallen in the second half of the year. However, it is likely that if the company's installed base of water purification units has increased, then the subsequent sales of replacement filters in 2026 and beyond will offset any changes in overall revenue projections.
In July, Viomi announced that it had approved a special dividend of 8.8 cents per ADR, estimated to be a total distribution of approximately $6 million to shareholders. Given that the stock was trading at roughly $3 per share as of the date of this announcement, this equates to a roughly 3% yield for ADS holders, which was paid to ADS holders of record on August 21st. At the time of the special dividend announcement, the company cited operating efficiency as a factor in the decision to issue the special dividend. We also believe that the company's strong first-half performance was a contributing factor in the decision to issue the special dividend.
We are not yet adjusting our price target, as we would like to see the full-year audited financial statements and the half-year income statement before making any changes. We have updated our model to reflect the revenue number previously released for the first half of 2025, and we have adjusted our model to account for what we assume will be higher selling costs.
Our 12-month target valuation remains $4.00 per ADS for the time being; however, we will reevaluate this target once the full financial results are released.
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