Chinese drone giant DJI charts a risky flight path
22/03/2018 03:23
(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.)
By Robyn Mak
HONG KONG, March 22 (Reuters Breakingviews) - Hitching a
ride with DJI could be risky for investors. The world's top
maker of unmanned aircraft for hobbyists is raising up to $800
million at a $15 billion valuation ahead of a flotation, Reuters
reported on Thursday, citing people familiar with the matter.
Sales are soaring and DJI has a commanding market lead. But DJI
could easily hit turbulence abroad.
DJI quickly rose to dominate drone sales, building on its
proximity to suppliers, factories and engineers in the Southern
Chinese technology hub of Shenzhen. That gives it an edge over
foreign rivals like Paris-based Parrot PARRO.PA when it comes
to developing camera-equipped aerial vehicles. The company
boasts more than 70 percent of the world market, according to
Skylogic data.
The privately held startup, founded by Hong Kong-educated
entrepreneur Frank Wang, doesn't disclose financials. But
prospective investors are being offered the chance to invest at
a so-called pre-money valuation of roughly 20 times last year's
earnings, according to one presentation seen by Breakingviews.
That looks cheap. Shenzhen-listed Hikvision 002415.SZ , a $64
billion camera and video-surveillance specialist, trades at more
than 40 times expected 2017 earnings, Eikon shows.
Yet a shadow looms over DJI. Of its $1.2 billion in sales
last year, about 85 percent were abroad, the presentation shows.
The United States probably accounts for a huge proportion.
But U.S. President Donald Trump’s administration is jumpy
about Chinese threats to America’s economy, technology
leadership and national security – as Ant Financial, Broadcom
AVGO.O , and Huawei have all recently discovered. Drones are
particularly touchy, since they can easily capture sensitive
data, like images of restricted areas. And the technology
clearly has both civilian and military applications – making
China’s supremacy unsettling, even if DJI focuses on consumer
tech for now.
Last year, the U.S. army banned all DJI kit. DJI also had to
deny separate claims from a U.S. customs office that it might be
sending back sensitive data to China.
Perhaps DJI can reassure Western authorities of its
intentions and data-handling processes. Given Huawei has
effectively been blocked from selling smartphones to U.S.
consumers, that might be harder than it sounds. The risk for
backers is that DJI might be barred from selling drones for
sensitive uses, such as in energy and infrastructure. Worse, it
could even face restrictions in selling to individuals.
On Twitter https://twitter.com/mak_robyn
CONTEXT NEWS
- China's DJI, the world's largest consumer drone-maker, is
raising at least $500 million in new equity and debt ahead of a
possible stock-market listing next year, Reuters reported on
March 22, citing people familiar with the matter. This would
value the company at $15 billion.
- A DJI spokeswoman told Reuters it had no announcement to
make on fundraising and was not currently planning an initial
public offering.
- Sales at the privately held company totalled roughly $2.7
billion in 2017, according to an investor presentation seen by
Breakingviews. Shenzhen-based DJI raised $75 million in 2015, at
a valuation of $10 billion.
- IDC, a market researcher, expects worldwide drone sales to
top $9 billion in 2018.
- For previous columns by the author, Reuters customers can
click on MAK/
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Chinese drone maker DJI seeking at least $500 mln in pre-IPO
funding –sources urn:newsml:reuters.com:*:nL3N1R41K2
Chinese drone maker DJI says it is hunting security flaws in
apps urn:newsml:reuters.com:*:nL2N1LN21B
BREAKINGVIEWS- New U.S. approach can better rein in drone
dangers urn:newsml:reuters.com:*:nL2N1MU16D
BREAKINGVIEWS - China’s biggest unicorns are a different breed
urn:newsml:reuters.com:*:nL4N1L11SC
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Editing by Quentin Webb and Sharon Lam)
((robyn.mak@thomsonreuters.com;)(Reuters Messaging:
robyn.mak.thomsonreuters.com@reuters.net))