After proposing the mobile phone to officially benchmark Apple, Xiaomi finally handed over its first report card. From the performance point of view, this achievement is not lack of good news, the annual revenue increased by 30% year-on-year, and the adjusted net profit increased by nearly 70% year-on-year. For this, the recent downturn in the secondary market, its stock price also responded with a 4% increase.
However, under a closer look, there are no hidden worries, such as a sharp decline in profits and a decrease in the fair value of investment in the second half of the year. As the main business of mobile phones abroad by Apple blocked, domestic glory surpassed, market growth showed weakness. Entering the high-end market, what are the opportunities for Xiaomi?
Revenue increased, and net profit fell sharply in the second half of the year
According to the financial report, Xiaomi achieved total revenue of RMB328.3 billion in 2021, an increase of 33.5% year-on-year, and profit during the year fell from RMB20.31 billion in the same period last year to RMB19.28 billion, down 5.1% year-on-year; adjusted net profit reached RMB22 billion, an increase of 69.5% year-on-year.
Xiaomi 2021 results. Image source Xiaomi announcement
Overall, in the absence of cores and the market downturn, Xiaomi achieved positive revenue growth, but not quarterly, the second half of the year's net profit year-on-year changes showed a cliff-like decline, and its trend is not optimistic.
Xiaomi's fourth quarter results in 2021. Image source Xiaomi annual report
According to the financial report, in the fourth quarter of 2021, Xiaomi achieved revenue of 85.547 billion yuan, an increase of 21.4% year-on-year, while the net profit in the single quarter fell sharply by 72.2% year-on-year to 2.443 billion yuan, and fell 83.8% to 790 million yuan in the third quarter. Compared with the year-on-year growth rate of 98.8% in the first half of the year, the trend in the second half of the year is quite steep.
This can also be seen from the research and development expenditure invested by Xiaomi. Financial disclosure. In 2021, Xiaomi continued to increase investment in research and development, with expenditure reaching RMB13.2 billion, an increase of 42.3% year-on-year. It is understood that the current scale of Xiaomi's automotive business research and development team has exceeded 1,000 people. These investments are bound to drive up Xiaomi's research and development expenses and affect net profits.
In addition, the change in the fair value of Xiaomi's investments included in the profit or loss at fair value decreased by 38.3% from the previous year's income of 13.2 billion yuan to 8.1 billion yuan in the reporting period, which is also one of the factors affecting Xiaomi's net profit. The financial report shows that this is mainly due to the decrease in fair value gains on listed common stock investments. In this regard, Lin Shiwei, CFO of Xiaomi Group, explained that because the stock prices of the invested listed companies recorded in Xiaomi's portfolio under the equity method continued to decline, the company made corresponding investment impairments.
Regarding the report card handed over by Xiaomi, Ding Shaojian, the founder of Nail Technology, believes that the fundamentals are good overall, but some important breakthroughs are lacking, such as the share in the high-end market. In addition, under the current complex and severe macroeconomic situation, shareholders will pay more attention to the profitability of enterprises, the returns to shareholders, and the performance of millet in profits has slightly disappointed the outside world.
High-end market battle, what are the opportunities for millet?
From a business point of view, mobile phones still account for the majority of Xiaomi's revenue. In 2021, smartphone revenue reached 208.9 billion yuan, an increase of 37.2% year-on-year, accounting for 59% of total revenue. Full-year shipments were 190 million units, up 30% year-on-year.
This data looks quite eye-catching, but from the perspective of market share, Xiaomi is still trapped by competitors inside and outside.
Global smartphone shipments in 2021. Image source Canalys public account
According to market research agency Canalys data, in the second quarter of 2021, Xiaomi briefly surpassed Apple to the second place in the world, and then was surpassed by Apple for two consecutive quarters, which is not unrelated to Apple's release of a new machine iPhone 13 in the second half of the year and rapidly seized market share. Apple's strong growth is also reflected in the domestic market, ranking first in the Chinese market with a market share of 25% in the fourth quarter of 2021, and Xiaomi's market share of 16% in the same period. In addition, under the strong return of Glory, Xiaomi has also been overtaken for two consecutive quarters, squeezing out the top three in the Chinese market and ranking fourth.
Smartphone shipments in the Chinese mainland market in the fourth quarter of 2021. Image source After Canalys Public
Although the second half of the year has continuously released new machines such as MIX 4 and Xiaomi 12 series, Lei Jun even proposed to officially benchmark Apple's bold words, reflected in the market, and its performance is still weak.
Judging from the financial report, Xiaomi's efforts on high-end machines are not without results. According to its disclosure, in 2021, Xiaomi's global shipments of high-end smartphones priced at 3,000 yuan in Chinese mainland or more than 300 euros abroad exceeded 24 million units, exceeding the level of 10 million units in 2000. In terms of shipments, the proportion of high-end smartphones increased from about 7% in 2020 to about 13% in 2021. Due to the increase in shipments of high-end machines, the ASP of Xiaomi mobile phones increased by 5.6% from RMB1,039.8 per unit for the year ended December 31, 2020 to RMB1,097.5 per unit in the reporting period, and increased to RMB1143.6 in the fourth quarter.
Obviously, this data is far from Apple's pricing of more than 5,000 yuan, and its shipments are still driven by the parity market that focuses on cost performance. How much is Xiaomi growing in the high-end market? Major General Ding said that after the strategy of independently going out of Redmi and establishing a high-end market, some progress can indeed be seen, but overall, the sales volume of 24 million units and the sales volume of nearly 200 million large markets are still not high enough, and there is still a very large gap compared with the head of high-end brands, such as Samsung and Apple.
As Glory, OPPO and Vivo begin to enter the high-end market, "there are still opportunities left for Xiaomi, but the challenges will be very large," Said Major General Ding.
Sell hk$10 billion repurchase program
At the same time as the financial report was announced, Xiaomi also released a heavy repurchase plan of HK$10 billion. According to the announcement, on 22 March 2022, the Board of Directors formally resolved to exercise the share repurchase authorization to repurchase shares on the open market at an irregular rate of up to HK$10 billion in aggregate, which will be repurchased in accordance with the Listing Rules.
Xiaomi HK$10 billion repurchase program. Image source Xiaomi announcement
This announcement also reflects Xiaomi's confidence. The Announcement said the Board believes that the share repurchase under the current circumstances demonstrates the Company's confidence in its business outlook and prospects, and will ultimately bring benefits to the Company and create value for shareholders, and the Company's existing financial resources are sufficient to support the share repurchase while maintaining a solid financial position.
However, for this repurchase plan, it remains to be seen whether the market will buy it and how the market will move in the future. According to Oriental Wealth, since xiaomi's stock price climbed to a high of 35.9 Hong Kong dollars / share last year, it has been showing a trend of shock and decline, as of the close of trading on March 23, it was quoted at 14.8 Hong Kong dollars / share, the stock price fell by nearly 60%, and the market value evaporated by more than 6 billion Hong Kong dollars.
Aoyi news reporter Feng Xiaohui