Editor's note: On the one hand, the stock price is close to the waist, on the other hand, the market value has peaked in the world, can Xiaomi narrow the gap with Apple in 2022?
Author: Simon
Entering 2022, Xiaomi Group has not stopped the pace of repurchase.
On January 3, Xiaomi Group repurchased 1.575 million shares, involving HK$29.2835 million. On January 4, Xiaomi bought back 1.575 million shares again, this time costing HK$29.1758 million.
In the past 2021, Xiaomi Group has become the "buyback king" of Hong Kong stocks: it has repurchased about 343 million shares during the year, costing more than HK$8.4 billion. In March 2021, Xiaomi set a maximum repurchase plan of 10 billion, which means that there is still a lot of room for repurchase in 2022.
Xiaomi 2021 buyback Source: ASDAQ
However, aggressive buybacks have not prevented the stock price from continuing to decline. As of press time on January 5, Xiaomi Group fell more than 3%, a decline of 49.2% in the past year.
On December 28, 2021, Xiaomi released a new high-end flagship mobile phone, the Xiaomi 12 series, and began to fully benchmark Apple. But what makes rice noodles and investors uneasy is that the market value of Apple on the other side of the ocean once exceeded $3 trillion in the intraday on January 4, while the current market value of Xiaomi Group is less than $60 billion, and the market value gap between the two is as high as 50 times.
Xiaomi, which is fully benchmarked against Apple, what can it learn from Apple? Xiaomi, which continues to buy back, can the stock price return to the upward trend?
First, buyback, a big secret weapon for stock price rise
In addition to excellent products, services and a vast market, Apple's market value hit $3 trillion and is also credited with its huge buyback.
According to data provided by S&P Global Markets, Apple spent more than $467 billion on stock buybacks from 2012 to the summer of 2021, which was rated as a "model" for stock buybacks.
Theoretically, stock buybacks can reduce the supply of shares in the market, thereby pushing up the company's stock price, effectively returning funds to investors at a higher share price. At the same time, the reduction in outstanding shares can also improve earnings per share, which is an indicator used by many value investors to judge the investability of stocks.
Apple's stock price trend in recent years Source: Huashengtong
Because Apple has a huge cash flow and is willing to return the money to investors, the majority of investors regard Apple stock as a "safe asset" and further push up Apple's stock price. Citi analysts expect Apple to update its shareholder return plan to investors when it announces its second-quarter results in April, when it may announce another $90 billion in stock buybacks and a 10 percent increase in dividends.
When Xiaomi announced its car last year, it revealed that the company had 108 billion yuan in cash on its books. Although car manufacturing is a very expensive project, Xiaomi Group still throws out a repurchase plan of up to 10 billion yuan, which can be described as full of sincerity.
In fact, Xiaomi's buyback is not only in 2021. Since the beginning of 2019, the company has carried out a half-year-long repurchase, and then pulled the trough of Xiaomi's stock price out of the quagmire and created a price peak of HK$35.9 along the way.
Xiaomi 2019 repo Source: dbpower
Although the direct effect of the repurchase since 2021 is not obvious, the active repurchase action still highlights Xiaomi's confidence in the future. In addition to Xiaomi, many companies such as Tencent and WuXi Biologics have also launched buybacks in 2021. From the historical data, after each wave of buybacks in Hong Kong stocks, the Hang Seng Index has risen more significantly.
Source: Wind
Second, in 2022, the battle between Xiaomi and Apple will continue
According to IDC data, in the second quarter of 2021, Xiaomi mobile phone shipments reached 53.1 million units, 8.9 million more than Apple, and the market share increased to 16.9%, ranking second in the world.
Lei Jun said on August 10 that Xiaomi's next goal is to achieve the world's first proportion of mobile phones in three years. In fact, in June last year, Xiaomi's mobile phone sales surpassed Samsung and Apple, winning the title of the world's largest smartphone brand for the first time, when the market share was 17.1%.
Source: Counterpoint Research
However, with the launch of Apple's iPhone 13 series, Apple quickly regained the second place in the world. According to Digitimes Research, about 1.32 billion smartphones were shipped in 2021, with the top three still being Samsung, Apple and Xiaomi Group.
However, it is worth noting that since the second half of 2021, the growth trend of global mobile phone shipments has slowed down significantly, with an annual increase of only 6.1%, but the four major domestic brands, including Xiaomi, OPPO, VIVO and Transsion, have maintained double-digit growth.
In June 2010, Apple's epoch-making product, the iPhone 4, was unveiled, redefining the smartphone and opening up the blue ocean of the smartphone market. A year later, in August 2011, the Xiaomi mobile phone 1, known as "born for fever", came out, capturing a large number of fans with extremely high cost performance and low price.
Xiaomi Mi 1 Source: Network
Today, the iPhone series has come to the 13th generation, and the Xiaomi digital series has also continued to catch up, and released the Xiaomi Mi 12 series at the end of last year, officially benchmarking the iPhone. In addition to the digital series that officially moves towards the high-end, the sinking brand Redmi and the folding screen MIX FOLD all show Xiaomi's determination and ability to continuously explore the market and technology.
In the first three quarters of 2021, Xiaomi's global shipments of high-end mobile phones increased to 18 million units, accounting for more than 12% of shipments, and the high-end strategy has begun to bear fruit.
Source: Shenwan Hongyuan Securities
Compared with the single series of Apple's mobile phones, Xiaomi's dual-brand strategy is expected to further open up market space in the future. The high-end is progressing smoothly, and it is only the tip of the iceberg at present, and future sales are expected to explode. On the one hand, many users accumulated by the sinking brand may trigger a wave of high-end model replacement in the future, on the other hand, it is expected to continue to promote the Redmi brand to expand its market share.
In 2022, the battle between Xiaomi and Apple may become more and more intense, and Lei Jun's bold words of being the world's first in three years are not impossible to achieve.
Third, where is the gap between Xiaomi and Apple?
As technology companies with converging business models, Xiaomi and Apple are both developing directions with hardware as the carrier and Internet monetization as the core. Apple's series of products has a high hardware gross margin compared to Xiaomi because of its unique moats such as chips and systems, which may be difficult to catch up. However, Apple's software and services revenue rose sharply from $12 billion in fiscal 2012 to $68.4 billion in fiscal 2021, with a compound annual growth rate of 21.35%, much higher than the hardware growth rate of 9.89%. In fiscal 2020, Apple's software and services revenue accounted for 20%.
With about 1 billion IOS users, Apple's Internet services business has an ARPU (revenue per user) value of about $68. Xiaomi's revenue through Internet services will be nearly 24 billion yuan in 2020, and its ARPU value will be about 60 yuan based on about 400 million MIUI users in 2020.
Last year, MIUI users have broken through the 500 million mark. Shenwan Hongyuan believes that from the perspective of the comparison of ARPU value in the same industry, Xiaomi's Internet business still has 7 times the room for growth.
From the perspective of hardware, Apple has rarely innovated in recent years. Xiaomi continues to develop black technology, leading the trend of mobile phones from many aspects such as full screen, off-screen camera, wireless charging, folding screen, etc., and is expected to narrow the hardware gross profit gap with Apple.
Mobile phone and IoT businesses continue to lead and are expected to continue to expand their market share in the future, while Internet businesses have great growth potential. Coupled with the company's continuous repurchase of shares, the stock price stabilizes and reverses may occur quickly. As the first brand of mobile phones in China, the gap with Apple's 50 times market value is indeed a bit too large.
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