On the evening of March 17, Huami Technology announced its financial report for the fourth quarter and full year of 2021. According to the data, the company's annual report net profit attributable to common shareholders of the parent company in fiscal 2021 was 138 million yuan, down 39.76% year-on-year; operating income was 6.250 billion yuan, down 2.85% year-on-year.
At the time of the decline in performance, and affected by the US stock market, Huami Technology closed down 4.49% on the day, quoted at $2.98, close to a 52-week low of $2.35. So far, Huami Technology has fallen by nearly 42% during the year.
As the first company in the Xiaomi ecological chain to go public in the United States, the stock price is now far below the issue price of $11, and the reason for this may be glimpsed from the financial report.
Shipment growth has slowed down, and the profit of independent brands still accounts for less than half
According to the financial report data, Huami Technology's own brands Amazfit and Zepp will increase shipments by 59.6% and revenue by 45.8% in 2021. The cumulative shipment volume of the whole year ranked among the top five in the world, exceeding the overall growth rate of the market.
While the full year was impressive, There was a marked decline in shipment growth in The fourth quarter of Amazfit and Zepp. According to the data, Huami's own brands have achieved strong results in Q1, Q2 and Q3, with a year-on-year increase of 111.1%, 114.3% and 89% year-on-year, respectively, but the year-on-year increase in Q4 is only 14.3%.
This is mainly because the global impact of the epidemic is still continuing, resulting in a tight supply of chips, which in turn restricts the production capacity of enterprises. According to the public account also has a way of economic interview data, the lack of cores led to a lengthening of the supply period, the original delivery time of about 16 weeks of the core chip, now basically extended to about 40 weeks. And the cost of chips is also rising, the industry generally increased by 10%-20%, if it is an emergency transfer, the price will be higher.
This naturally has an impact on the production cycle of Huami products, causing the company to produce less than market demand during the holidays.
At the same time, Huami Technology is also expanding its overseas business, and the data shows that the company's shipments in North America will increase by more than 200% in 2021. However, the pandemic may prolong the logistics time for its products to reach their destinations, especially in overseas markets, which will not only increase the company's costs, but also affect shipments.
In addition, although Huami wearable devices have considerable sales data in the world, it is still difficult to compete with the head power. According to data from China Business Intelligence Network, in the fourth quarter of 2021, Apple led the way with a market share of up to 34.9%, followed by Xiaomi, Samsung, Huawei and Imagine Marketing. The five major manufacturers occupy a total of more than 60% of the market, and the remaining less than 40% are divided by other players, which is a challenge for Huami Technology, a single business line.
The decline in shipment growth directly affected Huami's revenue and profit, and the data showed that the company's revenue in the fourth quarter of 2021 was 1.662 billion yuan, down 16% year-on-year, and the net profit attributable to the company was 36.3 million yuan, down 69% year-on-year.
At the same time, in order to better promote the brand, Huami has carried out global marketing and promotion activities, as well as overseas staff recruitment, resulting in rising costs. According to the data, the company's Q4 marketing expenses increased by 30.2% year-on-year to 152.1 million yuan, and although the operating expenses decreased year-on-year, they only fell by 0.1% to 310.6 million yuan, accounting for 18.7% of the current revenue.
Although According to Huami CFO Deng Cheng, its own brand products contributed 46.5% of revenue and gross profit in the fourth quarter, its road to milletization seems to have worked. However, from this point of view, the contribution revenue of millet products still accounts for more than half, which shows that Huami wants to get rid of its dependence on millet, and its future revenue may still be affected, and its financial report data also discloses that the main reason for the decline in Q4 revenue is the decline in xiaomi bracelet shipments.
And according to Huami's balance sheet, as of December 31, 2020 and December 31, 2021, its inventory was about 1.218 billion yuan and about 1.249 billion yuan, respectively. According to the new financial information, the shipment of Xiaomi products is strictly in accordance with the order, and it is unlikely that there will be a large-scale inventory backlog, in other words, the sales volume of Huami's own brand may not be ideal.
Such a large inventory will not only occupy the company's working capital, the price of electronic products is also easy to reduce with the extension of the backlog time, so the longer the time, the more inventory, the greater the loss of Huami Technology, and it will further affect the net profit.
And in terms of products, Huami Technology has been jokingly called "surface sea tactics, there is always a suitable for you", it can be said that Huami is not developing new products, or on the way to develop new products. As of June last year, Huami Technology's own brand Amazfit smart watch products cover 7 series and 31 products on sale.
Although the "surface sea tactic" can provide customers with a more free and cost-effective choice to a certain extent, it also helps Huami better compete with opponents in the price range. But at the same time, this side shows that Huami has not yet had a product that can be "popular", so he needs to explore and invest in research and development to find a more powerful foothold.
Will betting on great health be the panacea for Huami?
Relying on Xiaomi's growth, Huami Technology is always inseparable from its dependence on Xiaomi behind its revenue. According to historical data, from 15 to 18 years, the revenue contributed by xiaomi products accounted for 97.1%, 92.1%, 78.8% and 66.9% respectively, even in the fourth quarter of 2021, it still accounted for a considerable proportion.
Judging from the information disclosed in its financial report, the company, in its forward-looking statements, regards the cooperation with Xiaomi as a factor that may cause material differences.
Although on March 16, Xiaomi officially announced that it would rename the "Xiaomi Sports" app "Zepp Life" to make it a sports health app operated by Huami alone, which looks like Huami is accelerating its "de-milletization". However, at the end of October 2020, Huami announced that the strategic cooperation agreement with Xiaomi would be extended for another three years, which shows that in the short term, Huami still cannot leave Xiaomi.
In addition, in the wearable market, Huami does not have enough strength to compare with giants such as Apple and Huawei, and in order to seize more market share and develop overseas business in the context of the global epidemic, It is no small challenge for Huami, which "does not have a phenomenon-level product". Therefore, Huami chose to bet on the field of big health.
With the acceleration of 5G technology and the accelerated integration with life and health, big data and artificial intelligence, various wearable devices have joined the management applications such as health, promoting the rapid growth of the industry while bringing new technology and health experiences to more users. Overall, wearable devices with smart watches, wearable headphones, etc. as the core have been cultivated for many years, and this will be one of the largest consumer technology markets outside of smartphones.
Earlier, Huami changed the company's English name to Zepp Health Corporation, and its CEO Huang Wang said that the new name can better reflect the company's deeper commitment to the mission of "technology connecting health".
But as we all know, the cost of big health is higher. In terms of medical aesthetics alone, CITIC Construction Investment found that in the total cost of medical aesthetic institutions, marketing channels and sales expenses accounted for 50% and 20% respectively, plus consumables, operations, labor and other expenditures, the net profit margin of medical aesthetic institutions was generally only 1% to 10%.
Although the field of big health is vast and has gradually developed into an industry with a market size of nearly 10 trillion yuan, according to the data of the medical think tank, about 1/5 of the players in the list of the top 500 companies have participated, including giants such as Ali and JD.com. The Huami first-mover advantage is lacking, the business is still in the investment period, coupled with the independent brand still needs to be larger than the R & D investment, it is conceivable that the cost investment in Huami Technology will also increase.
In general, for Huami, the choice of track is not only for better development, but also needs to prove to the outside world that he has enough strength to make blood independently. Choosing the track of great health is not only the trend for Huami Technology, but at the same time there are many tests, how to tap greater growth potential in this field may also be the key to reshaping the new value of Huami Technology.