Xiaomi will "throw money" more in 2021: revenue increased by 33.5% year-on-year Marketing and research and development increased by more than 40%.

Economic Observer Network reporter Qian Yujuan on March 22, after the Hong Kong stock closed at 14.2 Hong Kong dollars / share, an increase of 6.13%, Xiaomi Group announced its 2021 annual results: compared with 2020 year-on-year growth of 33.5%, 328.3 billion yuan of total revenue, the adjusted net profit in the past year attracted attention: 22 billion yuan, an increase of 69.5% year-on-year.

According to the above data, it seems that Xiaomi is more profitable, in fact, based on the data changes of the two indicators of marketing expenses and research and development expenses, Zhang Gang, chief analyst of Southwest Securities, saw that Xiaomi is "throwing money" more in 2021.

Advertising and R&D are highly invested

According to the data, Xiaomi's expenditure on sales and promotion increased by 44.3% from 14.5 billion yuan in 2020 to 21 billion yuan in 2021, and the increase in the financial report was explained in part: mainly due to logistics expenses and publicity and advertising expenses.

Zhang Gang saw that Xiaomi's investment in product and brand promotion, its advertising expenses increased by 1.7 billion yuan in the past year, "a large amount of advertising investment, the effect remains to be seen." ”

Like the change in marketing expenses that increased by more than 40% year-on-year, Xiaomi's expenditure on research and development also expanded from 9.3 billion yuan in 2020 to 13.2 billion yuan in 2021, an increase of 42.3%. Xiaomi attributed the increase in expenditure on this project in its annual report to the increase in the salary of R&D personnel, and Xiaomi executives repeatedly emphasized the importance and investment in technology at the performance conference call, and also believed that Xiaomi's performance growth benefited from the improvement of technical strength.

Supplementary data shows that xiaomi's R & D expenditure in the past 5 years has grown at a compound growth rate of 43%. Just after the 2021 annual report was issued, Lin Shiwei, CFO of Xiaomi Group, said that in the next five years, Xiaomi will invest 100 billion yuan in technology research and development.

Compared with the above-mentioned investment planning and deployment of smaller meters, Zhang Gang pays more attention to whether the high investment in research and development has contributed to a substantial increase in net profit in the follow-up." Obviously, the effect reflected in the annual report just released is not obvious, the research and development increased by more than 40% year-on-year, while the revenue growth rate is not flat, and the net profit under the GAAP has declined year-on-year.

When the outside world focuses on Xiaomi's revenue and adjusted net profit growth, due to the excessive year-on-year increase in marketing and research and development expenses, Zhang Gang saw that Xiaomi's net profit in 2021 (intra-year profit) also shrank by about 1.03 billion yuan compared with 2020.

In addition, due to the more active investment activities, Xiaomi's cash flow is also decreasing. To this end, Xiaomi also explained in the financial report that it has invested in more than 390 companies in the past year, with a total book value of 60.3 billion yuan, an increase of 25.7% year-on-year.

Not only based on cash flow data indicators to make investment decisions, in view of Xiaomi's financial data differentiation under different accounting standards, Zhang Gang also suggested that institutional investors do a good job of evaluation.

Production costs are being effectively controlled

After the annual report was issued, Wang Xiang, president of Xiaomi Group, highlighted the following data, Xiaomi smartphone global annual shipments of more than 190 million units, with a market share of 14.1%, ranking third in the world.

Under the influence of the global shortage of core components in 2021 and the continuation of the new crown epidemic, Xiaomi can also achieve the above growth globally, and Wang Xiang used such a word, "rare". In his view, "in the global volatile environment, Xiaomi has shown strong growth resilience. ”

Zhang Gang also agreed that in addition to the domestic market share, he saw from the financial report that Xiaomi's share in the international market is also improving, of which the overseas market revenue increased by 33.7% year-on-year to 163.6 billion yuan, which has been able to account for 49.8% of the total revenue.

Speaking of global business, Lin Shiwei introduced on the earnings call that Xiaomi's overseas channel capabilities have been further enhanced, and in 2021, Xiaomi's overseas operator channels (excluding India, Sri Lanka, Nepal and Bangladesh markets) will ship more than 25 million smartphones, an increase of more than 120% year-on-year. Among them, Xiaomi's share of carrier channels in the European market also increased from 7.9% in 2020 to 16.8% in 2021.

The increase in market share indicates that Xiaomi has expanded its scale around the world, and while the external market is rolling out, Xiaomi's own "optimization" is further reflected. The financial report shows that Xiaomi's gross profit in 2021 achieved a year-on-year increase of 58.5%, while the annual gross profit margin increased by 17.7% year-on-year.

Especially as the core of the two major businesses of smart phones and AIOT, the gross profit margin increased year-on-year, which made Zhang Gang feel, "It is rare, and the production cost can be effectively controlled." ”

The volume and price of high-end mobile phones need to fly together

After the beginning of this year, a high-end strategy seminar was held within the Xiaomi Group, at which not only a high-end strategy working group was formally formed, but also Lei Jun, founder, chairman and CEO of Xiaomi Group, further clarified under the goal of "winning the first place in the market share of domestic high-end mobile phones in three years", "The high-end road is the only way for Xiaomi to grow, and it is also the battle of life and death for Xiaomi's development." ”

In fact, the high-end strategy has become the general direction of Millet's efforts as early as 2021, and in view of its progress, this annual report also gives a set of quantifiable data: the annual shipment of high-end smartphones reached 24 million units, achieving a year-on-year doubling growth, and the penetration rate increased from about 7% in 2020 to about 13% in 2021.

Xiaomi said that the growth of high-end smartphone shipments has greatly optimized Xiaomi's overall mobile phone product structure, and also made the user group diversified. Especially in the highly saturated, fiercely competitive Chinese market, Xiaomi is also showing growth through user growth, and in 2021, Xiaomi has nearly 130 million MIUI monthly active users in Chinese mainland, an increase of 17.0% year-on-year.

Lin Zhi, chief analyst of Wit Display, said in an interview with reporters that although he affirmed the increase in Xiaomi's high-end smartphone shipments, he still felt that "Xiaomi's high-end performance was mediocre".

According to the following two sets of comparative data: the average price of Xiaomi smartphones in 2020 is 1039.8 yuan, and the average price in 2021 is 1097.5 yuan, "the average price has increased by 57.7 yuan, and the chip price increase is not only this number." ”

Linzhi also saw that Xiaomi's smartphone shipments increased by 44 million units in 2021, while revenue increased by 57.6 billion yuan, which deduced that the average price of the increased part of the mobile phone was 1309 yuan. This data shows in reverse that Xiaomi's increase in smartphone shipments is mostly low-end models compared with 2020.

"The breakthrough of Xiaomi's high-end mobile phone is still a product force, whether it can make differentiated products to meet the quality needs of high-end users." In LinZhi's view, since 2015, Xiaomi has begun to lay out and impact the high-end market, but it has not been successful for a long time due to problems such as channels and product strength, "just let the mobile phone products break through the 3,000 yuan price segment.".

Until the first half of 2021, Huawei was forced to sell high-end market share due to chip supply, "Xiaomi originally had the opportunity to impact the high-end market", Lin Zhi pointed out that at that time, Xiaomi not only encountered OPPO, vivo and glory, but also had to prevent Apple's "dimensionality reduction attack".

Obviously, when Apple strives to seize the low-end market share through price suppression, Xiaomi not only seeks to break through in the high-end, but also faces a challenge - whether it can firmly hold the low-end market it has occupied in the past.