The Robots Are Coming—to Collaborate With You

Our future looks increasingly robotic—whether we like it or not. But the investment craze in robotics stocks may already be getting ahead of itself.

The latest example: South Korea’s Doosan Robotics, whose shares nearly doubled in value on their first day of trading Thursday. The company, which is part of the conglomerate Doosan Group, raised around $300 million from an initial public offering, making it Korea’s biggest IPO this year so far.

Doosan makes collaborative robots, or cobots, designed to work together with humans on factory floors. Such robotic helpers are most suitable for smaller companies that may not be ready to automate their whole production line but use cobots to automate processes better done by machines. Apart from its heavy-duty industrial robots, Doosan also makes variants that can serve coffee—and beer.

Doosan isn’t the only robotics company looking frothy of late. Shares of its smaller peer Rainbow Robotics, which is backed by Samsung Electronics, have more than quadrupled this year. Samsung raised its stake in Rainbow to 15% in March.

To be fair, there are plenty of good reasons to be optimistic about industrial robots. Poor demographics and poisonous immigration politics in most advanced economies will mean weak labor-force growth in the future. Robots rarely go on strike. And in the U.S., the enormous surge in manufacturing investment—courtesy of the Inflation Reduction Act and other industrial policy bills—means demand for manufacturing workers could remain strong for quite a while. Reshoring to advanced economies is another tailwind for robotics.

In 2022, almost 60% of Doosan’s sales came from North America and Europe. Though cobots are still a small part of the overall robot market—accounting for 7.5% of industrial robots installed in 2021, according to the International Federation of Robotics—shipments have been growing faster than the market as a whole. Installations for all industrial robots grew 5% year on year to a record high in 2022.

The company is the seventh-largest maker of cobots globally, according to its prospectus. But since the top two companies, Denmark’s Universal Robots and Japan’s Fanuc, dominate the sector with nearly half of the market, Doosan’s market share amounted to only 3.6%.

Doosan has been growing fast: Its sales more than doubled to around 45 billion won, the equivalent of $33 million, in 2022 from 2020. But it isn’t cheap. With a market capitalisation of around $2.5 billion, Doosan now trades at 74 times last year’s revenue. Fanuc trades at just 4.7 times revenue. Doosan is also unprofitable, though its chief executive expects it to move into the black next year.

The robot craze, like the artificial-intelligence craze, is grounded in real technological trends—and demographic ones too. But like human workers, not all robot firms are created equal. Jumping aboard the robot stock bandwagon at any price might not serve investors over the long run.