7 Highlights from Xiaomi Corporation’s Latest Earnings

Xiaomi Corporation (HKG: 1810) started the year 2021 on a strong note. 

The Chinese smartphone maker reported first-quarter revenue growth of 54.7% year-over-year (YoY) to RMB76.9 billion as it nabbed market share from one-time sector leader Huawei Technologies Co. Ltd. Meanwhile, adjusted net profit for the period surged 163.8% YoY to RMB6.1 billion. 

Notably, both quarterly total revenue and the adjusted net profit achieved record highs, demonstrating the robustness of the company’s business model and the strong execution of its strategies. 

In this article, we explore the performance of its respective business segments and share its latest corporate developments. Here are 7 highlights from its latest set of earnings.

1. Smartphones remain the backbone of the company  

In the first quarter of 2021, the company’s smartphone business continued to grow significantly. Smartphone revenue amounted to RMB51.5 billion in the quarter, representing an increase of 69.8% YoY. The gross profit margin of the smartphone business was 12.9% in this quarter, and global smartphone shipments reached 49.4 million units. According to Canalys, Xiaomi maintained its 3rd position globally in terms of smartphone shipments in the quarter, with a market share of 14.1%. 

(Source:1Q2021 earnings presentation)

2. Improved smartphone market position in Mainland China 

Xiaomi also maintained rapid growth in the smartphone business in Mainland China. According to Canalys, Xiaomi rose to 4th position in the local smartphone market with a market share of 14.6%, in the first quarter of 2021. 

(Source:1Q2021 earnings presentation)

Additionally, according to third-party data, its online smartphone market share in Mainland China jumped to 38.0% in the first quarter of 2021 from 18.5% in the first quarter of 2020. Meanwhile, the company also expanded its offline retail presence in Mainland China. As of April 30, 2021, its number of retail stores surpassed 5,500, an increase of over 2,300 stores from December 31, 2020.

3. Building a global leading consumer AIoT platform 

In the first quarter of 2021, IoT and lifestyle products segment witnessed the strong performance, with revenue increasing 40.5% YoY to RMB18.2 billion. The gross profit margin of its IoT and lifestyle products segment reached 14.5% in the quarter.  

In Mainland China, Xiaomi maintained its top 3 positions in market share across a wide array of smart home product categories. According to “IDC RPC Quarterly Smart Home Device Tracker, 2020Q4”, the company ranked No. 1 in air purifiers and smart door locks, and No. 2 in robot vacuum cleaners. 

 “Smartphone x AIoT” remains the company’s core strategy as it continues to enhance its smart ecosystem. As of March 31, 2021, the number of connected IoT devices (excluding smartphones and laptops) on its AIoT platform reached 351.1 million units. The number of users with five or more devices connected to its AIoT platform (excluding smartphones and laptops) reached 6.8 million, representing a YoY increase of 48.9%. In March 2021, its AI Assistant (“小爱同学”) had 93.0 million monthly active users (MAU), and the MAU of its Mi Home App reached 49.2 million, representing a YoY increase of 22.8%.

(Source:1Q2021 earnings presentation)

4. Opportunities in internet services

Xiaomi’s internet services segment mainly encompasses advertising, gaming and other value-added services. As a whole, revenue for the internet services segment grew 11.4% YoY to RMB6.6 billion in the first quarter of 2021. The gross profit margin of its internet services segment reached 72.4% in the quarter.  

Xiaomi’s global internet user base continued to expand rapidly. In March 2021, the MAU of MIUI increased by 28.6% YoY to 425.3 million, while the MAU of MIUI in Mainland China rose to 118.6 million, representing a YoY increase of 6.4% and a net gain of 7.7 million users from December 2020. 

5. Commencement of Smart EV Business

On March 30, 2021, Xiaomi announced its plan to establish a wholly-owned subsidiary to manage its smart electric vehicle (“Smart EV”) business. The initial phase of investment will be RMB10 billion, with the total investment amount over the next 10 years estimated to be USD10 billion. Mr. Lei Jun, the Chief Executive Officer of the group, will concurrently serve as the Chief Executive Officer of the smart EV business.  

The company believes its broad user base, extensive experience in integrating software and hardware, and substantial investment in key technologies and resources across the value chain will position it well to become a successful player in the smart EV space.

(Source:1Q2021 earnings presentation)

6. Investments

As of March 31, 2021, Xiaomi has invested in more than 320 companies with an aggregate book value of RMB51.9 billion, an increase of 60.8% YoY. As of March 31, 2021, the total amount of its investments (including (i) fair value of its stakes in listed investee companies accounted for using the equity method based on the stock price on March 31, 2021 (ii) book value of its stakes in unlisted investee companies accounted for using the equity method and (iii) book value of long-term investments measured at fair value through profit or loss) reached RMB69.7 billion. In the first quarter of 2021, the company generated net gains (after tax) of RMB0.4 billion on the disposal of investments.  

(Source:1Q2021 earnings presentation)

7. Updates on U.S. Department of Defense litigation

Xiaomi and the U.S. government have in May 2021 reached an agreement to set aside a Trump administration blacklisting that could have restricted American investment in the Chinese smartphone maker. 

Xiaomi had sued the U.S. government earlier this year after the U.S. Defense Department under former President Donald Trump issued an order designating the firm as a Communist Chinese Military Company (“CCMC”), which would have led to a de-listing from U.S. exchanges and deletion from global benchmark indexes. As the CCMC designation has been vacated, all restrictions on U.S. person’s ability to purchase or hold securities of the company has been formally lifted. 

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