Whether we like it or not, our future is expected to increasingly use robots. But the investment frenzy around robot stocks may have gotten ahead of itself.
The latest example is South Korea's Doosan Robotics (454910.SE), whose shares nearly doubled on their first day of trading on Thursday. Doosan Robots, part of South Korean conglomerate Doosan Group, raised about $300m in the country's biggest IPO so far this year.
Doosan Robotics makes collaborative robots that work with humans on the factory floor. This kind of robot assistant is best suited for smaller companies that may not be ready to automate an entire production line, but can use cobots to automate some of the processes that are best done by machines. In addition to heavy-duty industrial robots, Doosan Robotics also produces robots that can serve coffee and beer to customers.
Doosan Robotics is not the only robotics company that has been doing well recently. Shares of smaller peer Rainbow Robotics (277810.SE), which is backed by Samsung Electronics (005930.SE), have more than quadrupled this year. In March, Samsung raised its stake in Rainbow Robotics to 15 percent.
To be sure, there are good reasons to be optimistic about industrial robots. In most advanced economies, poor demographics and toxic immigration politics mean weak future labor force growth. Robots hardly ever go on strike. In the United States, a surge in manufacturing investment as a result of the Inflation Reduction Act and other industrial policy bills means that demand for manufacturing workers is likely to remain strong for quite some time. The return of manufacturing to developed economies is another positive factor for the robotics industry.



In 2022, nearly 60 percent of Doosan's sales will come from North America and Europe. Cobots are still a small part of the overall Robotics market, accounting for 7.5 percent of industrial robot installations in 2021, according to the International Federation of Robotics. Still, shipments of such robots are growing faster than the overall market. In 2022, the total installation of all types of industrial robots increased by 5% year-on-year, hitting a record high.
Doosan is the world's seventh-largest maker of collaborative robots, according to its prospectus. However, two companies - Denmark's Universal Robots and Japan's Fanuc (6954.TO) - account for nearly half of the industry, with Doosan's market share at just 3.6 percent.
Doosan is already growing fast: in 2022, its sales more than doubled from 2020 to about 45 billion won ($33 million). But the stock's valuation is not cheap. Doosan, which has a market capitalisation of about $2.5bn, trades at 74 times last year's revenues. Fanuk's sales ratio is only 4.7 times. Doosan is also unprofitable, though its chief executive expects it to return to profitability next year.
Like the current AI craze, this robotics craze is based on real technological trends, as well as demographic trends. But all humans are not created equal, and neither are robotics companies. Getting on board at any cost in terms of investing in robot stocks may not be good for investors in the long run.