Text/Chen Gen
At the end of the Year of the Ox, Xiaomi's stock price suffered another break. On January 27, Xiaomi Group plunged 5.5% to HK$16.48 per share, reducing its total market capitalization to HK$412 billion. It is worth noting that this is another time that Xiaomi has fallen below the issue price of HK$17. On January 28, Xiaomi's stock price fell again by 1.33%, closing at HK$16.26 per share.
Until February 8. Hong Kong xiaomi group stock prices continue to decline, once fell more than 3% intraday to 15.76 Hong Kong dollars per share, the total market value fell below 400 billion Hong Kong dollars. The leading Kuaishou is less than HK$20 billion. The share price of HK$15.76 per share is the lowest in 52 weeks for Xiaomi Group. If calculated at the highest 32.3 Hong Kong dollars per share in 52 weeks, Xiaomi's stock price was once again slashed in 52 weeks, and the market value evaporated by more than HK$400 billion.
You know, if you look at the price of 35.9 Hong Kong dollars / share set by Xiaomi at the beginning of last year, Xiaomi has fallen by 54%, and the market value has evaporated by about 460 billion Hong Kong dollars - Xiaomi seems to have returned to the trough. In fact, Xiaomi's valuation has been controversial in the market, and the question is: Why is it that Xiaomi, which has grown in revenue and market share, has always been difficult to get the disapproval of the capital market? Sluggish Millet, is there still a chance?
Xiaomi is sluggish
On July 9, 2018, Xiaomi Group was listed on the Hong Kong Stock Exchange at an issue price of HK$17 per share, corresponding to a market value of HK$380.394 billion, equivalent to US$48.47 billion. Embarrassingly, in only 10 days, from July 19, Xiaomi's stock price began to turn around and fall. Lei Jun's promise to "double the stock price of investors who bought millet on the day of listing" also came to naught.
On August 30, Xiaomi closed at HK$17.14 per share, the last time Xiaomi's shares closed at an IPO offering price above HK$17. The next day, Xiaomi's stock price fell to HK$16.8 per share, officially broke, and never returned to more than HK$17. In the following four months, Xiaomi's stock price continued to fluctuate and fall, remaining at about HK$12 per share.
The decline is not over. In January 2019, affected by the news such as the lifting of the ban on 3 billion restricted shares, Xiaomi's stock price continued to dive, falling all the way below HK$12 and HK$11. On January 16, Xiaomi stock officially fell below HK$10 and closed at HK$9.7 per share, setting a record low at that time. It was also on this day that Xiaomi announced a stock repurchase for the first time - Xiaomi paid 3.6 billion Hong Kong dollars of real money and bought a large number of Millet stocks with an average price of 9.35 Hong Kong dollars per share to stabilize Xiaomi stocks.
Since May 2020, as Xiaomi has marched into the high-end market, Xiaomi's stock price has begun to rise, and finally rose to a peak of HK$35.9 per share in January 2021, and Xiaomi's stock price has finally doubled from the issue price of HK$17 per share, with a total market value of nearly HK$900 billion. Lei Jun's two-year-late promise was finally fulfilled. However, just one year ago, now, Xiaomi has once again suffered a break.
On January 27, Xiaomi Group plunged 5.5% to 16.48 Hong Kong dollars per share, reducing its total market value to 412 billion Hong Kong dollars, and even rushed to the hot search with the term "Millet Break". Even Lei Jun said that the Weibo message that prepared the "Year of the Tiger Limited WeChat Red Envelope Cover" for fans was a discussion of Xiaomi's stock price. Some netizens said that "Xiaomi stock broke, save Xiaomi", and some netizens shouted Lei Jun, so that "Xiaomi stock price should be supported." ”
At the same time, according to the Forbes real-time rich list, Lei Jun's current net worth has shrunk to 14 billion US dollars, about 89 billion yuan, falling out of the 100 billion rich club and withdrawing from the list of the world's richest people.
The pressure on Xiaomi is also evident from the decline in its domestic market share of smartphones. Smartphones have always been Xiaomi's main business, accounting for about 60% of revenue in recent years. Since entering 2021, xiaomi's first quarterly report, mid-report, and first three quarters of smart phone performance growth rate is significantly higher than in 2020, 69%, 78% and 44% respectively. Of course, this is related to a certain extent to the Huawei incident.
However, by the third quarter of 2021, with the comeback of Honor's heavy restructuring, Xiaomi's sales have declined compared with the previous two quarters. According to Counterpoint, December 2020 to April 2021 was the period when Honor's monthly phone sales and market share were at the lowest, but after experiencing a low of 3%.
At present, the glory market share has achieved a bottoming rebound. In 2021Q3, the number of mobile phone shipments reached 14.2 million units, and the market share rose to 18%, surpassing Xiaomi to rank third. In the latest release of the fourth quarter of 2021 data, Xiaomi China's market share further declined to 13%, and the ranking fell again, ranking fifth, behind Apple, Vivo, Oppo and Glory.
In the face of a sharp decline in stock prices and market value, compared with Apple's static price-earnings ratio of 28 times, Xiaomi's static price-to-earnings ratio is only 19 times, and the valuation difference between Apple, which is the first mobile phone sales, is 10 times, coupled with the decline in the domestic market share of smart phones, Xiaomi seems to have returned to the trough.
Why does the capital market not recognize Xiaomi?
You know, the essence of investment is risk sharing, and valuation is the present value of future cash flows. Investing is an endorsement of current management and strategy, and it is natural to take the risk of the aftermath. As far as Xiaomi is concerned, the decline in stock prices does reflect the market's disapproval of strategy and future development prospects, after all, the function of the market is pricing. But the strange thing is, why does the capital market just not recognize Xiaomi?
To see Xiaomi, we must first understand who Xiaomi is and who Xiaomi wants to be. At present, Xiaomi's core business is divided into three parts: smart phones, IoT and consumer goods (self-produced + ecological chain), and Internet services.
Among them, for smart phones, although Xiaomi's smartphones are increasingly recognized by consumers, and began to burn money for research and development, towards the "high-end" - in the first three quarters of 2021, Xiaomi's high-end mobile phone shipments exceeded last year's entire year. In this process, Xiaomi has been able to solve many known or unknown problems, such as self-developed ring cold pump heat dissipation technology, further optimize the use experience of mobile phones under high load operation, and launch miUI12.5 enhanced version to optimize the use experience from the underlying framework.
But a fact that is always difficult to avoid is that no matter how Xiaomi packages its own Mi U system, this system is always grafted on Top of Google's Android, facing the possibility of Android charges at any time, once Android wants to implement charges, the so-called Mi U system is just a wedding dress for Google. In this regard, it is clear that Xiaomi can neither convince itself nor the market.
At the same time, although Xiaomi started with mobile phones, Lei Jun did not position Xiaomi as a mobile phone company or a hardware company, but positioned Xiaomi as an Internet company. However, although it is an Internet company, Xiaomi is more about providing and selling mobile phones, digital and household appliances; saying that it is an Internet of Things enterprise is obviously not, because Xiaomi only adds products to the Internet networking function, and this function can be realized by all enterprises, including Gree, Midea, Haier and Huawei.
Moreover, the hidden concerns of lack of hardware core technology and software systems also exist in Xiaomi's Internet service and Internet of Things home appliance business. Xiaomi, which has neither hardware core technology nor software system, is like an emperor wearing new clothes. If we take off Xiaomi's emperor's new clothes, what is the big difference between Xiaomi and Midea, Gree and other home appliance manufacturing companies? To put it bluntly, the essence of Xiaomi so far is still at the level of manufacturing and assembling brand owners, and there is no essential difference between traditional home appliance companies, and even Lei Jun himself can't tell what company Xiaomi is.
You know, the level of profitability reflects the high level of business ability. Great companies are often also companies that have the ability to consistently maintain reasonable profit margins in the face of competition. This is also why Buffett believes that "the gross profit margin of enterprises reaching more than 40% is the real core competitiveness of enterprises." But for Xiaomi, it is Lei Jun's "hardware comprehensive net profit margin will never exceed 5%" cost-effective proposition, which is commonly known as "small profits but high sales".
Although the return on investment is more like an increase in the scale of the enterprise, as long as the scale can increase, even if it is not profitable, the stock price can rise. But the problem is that under the condition that there is no breakthrough in the core technology and the hardware only earns 5%, can the profit of the overall enterprise be improved? Even if it is not profitable, the logic that the stock price can rise is that in the early stage of listing, the capital market will give companies a certain opportunity to prove their business realization and growth. Xiaomi has obviously passed the patience time of the capital market, and Xiaomi's pricing at the beginning of the listing has far overdrawn its future growth. Therefore, after Xiaomi goes public, the first thing to do is to maintain the stock price that has been overdrawn in advance with the help of high growth and high profit acquisition. After that, once it can't build its own strong moat, it can't convince the capital market to pay for its blueprint.
In addition to improving the profitability of Xiaomi's mobile phone hardware, another strategy to enhance commercial capabilities is to ensure that other businesses have sufficient profit margins. Amazon's profit margin is not high, even for about 20 consecutive years, but Amazon is still one of the highest market capitalization companies in the world, and the fundamental reason lies in the imagination space of amazon in other fields, such as Amazon, in addition to its own operation, there are third-party platforms, private-label Amazon Bess, cloud computing and other high-profit businesses.
In his final letter to shareholders, Amazon founder Bezos itemized all the value Amazon created for everything from shareholders, employees, to third-party sellers and customers in 2020, and conservatively estimated that the value Amazon created for all customers this year was $164 billion. Amazon's success confirms the logic of valuation: you can lose money in the early stages, but the focus is on being able to make the overall cake bigger and bigger. Xiaomi, on the other hand, until now, its non-hardware business, that is, the revenue of interconnection services, has not exceeded 10% of the total revenue, and Internet services are truly high-profit businesses.
Therefore, at present, xiaomi's valuation cannot be said to be cheap, but it is also difficult to see a large room for growth. One of the most critical reasons is that Xiaomi itself is unwilling to admit it, but the clear thing in the capital market is that the core technology has not yet broken through. In terms of valuation, although xiaomi is not cheap, it is difficult for the market to give xiaomi a higher valuation because there is no reason.
Does Xiaomi still have a chance?
In the face of a sharp contraction in stock prices and market value, car manufacturing has become the next outlet for Xiaomi. In fact, since the official announcement of the car in March 2021, the relevant investment institutions of Xiaomi and Lei Jun have invested in dozens of enterprises in the automotive industry chain, covering intelligent driving, chips, power batteries and other fields.
According to the statistics of Guojin Securities, as of the end of September 2021, Xiaomi has invested in the layout of 62 enterprises in the field of intelligent vehicles, including 17 intelligent driving layouts, 13 intelligent electric layouts, and 6 intelligent cockpit layouts, of which 22 companies are new investments in 2021.
Recently, Xiaomi also invested in the new energy auto parts manufacturer Zhejiang Fute Technology Co., Ltd., automotive control chip manufacturer Qixin Micro, etc., in addition, the former president of Jihu Automobile Yu Liguo joined the Xiaomi Automobile Department, Lei Jun also said that the Xiaomi Mobile Phone Department will transport talents to the automotive business in the future. According to Lei Jun's plan, Xiaomi Automobile will build a factory with an annual output of 300,000 vehicles in Beijing, and the car is expected to be mass-produced in the first half of 2024.
But the question is, can car-making really reverse the status quo of Xiaomi's downturn? You know, in the current tide of car manufacturing, it has been involved in apple, Baidu and other technology giants, but Xiaomi does not have much accumulation in the field of automatic driving and car networking, and there is no core competitiveness in the most critical car intelligence. The core problem of Xiaomi car manufacturing is almost the same dilemma as Xiaomi mobile phones and so-called Xiaomi ecological chain products, that is, there is no core competitiveness in software systems and hardware products.
The difficulty of building cars and mobile phones is not an order of magnitude, and the supply chain and technology of automobiles are more complex than mobile phones. In addition, Xiaomi car manufacturing also faces the same dilemma as mobile phones, that is, the software system relies on the application of other manufacturers, the hardware depends on other automobile manufacturers, and what it can do is to assist the car appearance design, as well as the relatively low price war to enter the new energy vehicle market. In the model of price war, in the end, it is still impossible to answer the question of how to create higher value.
At the end of the day, Xiaomi is just an assembly plant that then acquires the market with a more aesthetically pleasing industrial design and a relatively low price. Different from Apple, in addition to the huge differences in hardware core technology, no matter how many users Xiaomi accumulates, it is difficult to realize the follow-up value through apple-like App Store; the gap with Samsung is that Xiaomi does not have its own core hardware research and development and manufacturing capabilities, but is just an assembly plant model.
Undoubtedly, the brand high-end of any enterprise needs the construction of hard power behind it, and now although Xiaomi has developed its own chips, is determined to build cars, and continues to explore a new model of Intelligent Manufacturing in China, the erection of high-end brands is naturally not so easy, and brand high-end will still be a long-term battle for Xiaomi.
Lei Jun once said, "Standing on the wind outlet, pigs can fly." Still want to fly, for Lei Jun there are only two choices: one is to become an "innovation-driven Internet company" as he said, running to the current BAT efforts, but at present, the running in this direction is obviously not a good direction; the second is to launch subversive products, like Jobs's Apple completely subverted Nokia, Motorola, it is necessary to make up its mind to pay more research and development investment, accept the pain of the downward trend of stock prices, like Huawei to learn, build their own hard-core technical strength. But at least for now, Xiaomi's future seems slim.