Viomi Technology's Watershed Moment: How Focused Strategy Drives Profitability and Growth

Viomi Technology Co., Ltd. (NASDAQ: VMI) has undergone a remarkable transformation in 2024, pivoting from a sprawling IoT conglomerate to a lean, high-margin specialist in home water solutions. By divesting its non-core IoT@Home businesses—excluding water-related products—and sharpening its focus on its crown jewel, the home water systems segment, Viomi has achieved a financial turnaround that positions it as a compelling investment opportunity. Let's dissect how operational efficiency, regulatory tailwinds, and strategic market expansion are driving this resurgence.

Operational Efficiency: Cutting Fat to Fuel Profitability

Viomi's 2024 strategic reorganization was a masterclass in prioritization. By shedding loss-making IoT@Home businesses (e.g., smart kitchen appliances), the company eliminated drag on its bottom line. The results speak for themselves:

• Net Income Turnaround: A loss of RMB89.3 million in 2023 flipped to a profit of RMB62.3 million in 2024, with the second half alone delivering RMB56.8 million in net income.
• Cost Discipline: R&D expenses fell 4% year-over-year, while operating expenses grew just 1% despite heightened marketing efforts. This reflects a streamlined organization focused on high-margin products.

The "Water Purifier Gigafactory" further amplifies efficiency. With 100% in-house manufacturing and automation, Viomi reduces reliance on third-party suppliers, lowering costs and ensuring quality control. Meanwhile, its robust IP portfolio (1,800+ patents) shields it from competition and supports ongoing innovation.

Market Expansion: From Domestic Leader to Global Player

Viomi's core home water systems segment delivered 39% YoY revenue growth in 2024, reaching RMB1.5 billion. This growth is fueled by two strategic pillars:

1. Domestic Dominance via Innovation

Products like the Viomi Kunlun Mineral AI Water Purifier—which uses AI to monitor and mineralize water in real time—have captured consumer attention. During China's 2024 Double 11 shopping festival, these purifiers ranked in the top 5 on Douyin and Tmall, underscoring brand strength.

2. International Breakout with the Vortex Series

Viomi's foray into North America with the Vortex series—a compact, tankless RO purifier—has been a home run. Its Kickstarter campaign blew past its goal by 1,200%, and Amazon sales have been strong. This success isn't just about sales volume; it's about brand credibility. Participation at CES 2025 further burnished Viomi's global reputation, signaling intent to expand into Southeast Asia next.

Why Now? Regulatory Tailwinds and Undervalued Valuation

• Environmental Regulations: Governments worldwide are tightening water quality standards, boosting demand for advanced purification systems. Viomi's AI-driven, mineral-infused technology aligns perfectly with these trends.
• Valuation: Despite its turnaround, Viomi's stock trades at just 4.5x forward EV/EBITDA, far below peers like Xylem Inc. (XYL) (8.2x) or Ecopure Water Solutions (6.7x). This undervaluation reflects lingering skepticism about its post-divestiture model, but the data shows a company executing flawlessly.

Risks to Consider

• Gross Margin Pressure: A product mix shift toward lower-margin items (e.g., Vortex in North America) dragged H2 2024 gross margins to 22.6%, down from 32.8% in 2023. Management must balance volume growth with margin preservation.
• Dependency on Xiaomi: While sales to Xiaomi dipped in consumables, they still account for 52% of revenue. Diversifying partnerships is critical.

Investment Thesis: Buy the Turnaround

Viomi's strategic shift has created a lean, high-growth company with a cash fortress (RMB1.026 billion) and a clear path to scaling. The combination of domestic leadership, international expansion, and regulatory tailwinds suggests 20–30% upside potential over the next 12 months.

Recommendation: Accumulate shares on dips below US$1.50. Watch for catalysts like Q1 2025 earnings (expected to show sustained margin recovery) and new product launches at CES 2025. Viomi isn't just surviving—it's thriving in a $200 billion global water purification market. This is a stock to own for the next decade.

In a world where clean water is becoming a premium commodity, Viomi is the engineer of its own destiny.