Producer: Sina Finance Listed Company Research Institute
Author: Kun
After 6 years of listing, Huami Technology stepped down from the altar from "the first stock of Xiaomi ecological chain to be listed in the United States" and became a penny stock.
Recently, Huami Technology released its 2023Q4 and annual financial report. In 2023, Huami Technology will achieve an operating income of 2.495 billion yuan, a year-on-year decrease of 39.77%, and a net loss of 212 million yuan, which is the second time that Huami Technology has fallen into a loss after turning from profit to loss in 2022, and the loss amount has narrowed by 26.43% year-on-year.
The performance was poor, investors naturally "voted with their feet", and the stock price of Huami Technology also fell all the way. In 2018, when Huami Technology was listed on the NASDAQ, the issue price was $11, and it was the same at that time. In February 2021, Huami Technology's stock price reached an all-time high of $19.59 per share. But since then, the highlights have been gone, and the stock price of Huami Technology has also been declining. As of the close of trading on April 24, 2024, Huami Technology's share price is only $0.85 per share, which has shrunk by 92% compared with the issue price, and the current market value is only 360 million.
Source: wind
Behind this, Huami Technology often attributes the reason for the decline in performance to the active separation from the Xiaomi ecological chain. But in fact, not only is the sales of Xiaomi, which has signed contracts, declining, but also the sales of Huami's own brands are inevitably declining, with a year-on-year decrease of 24.34% in 2023, resulting in an increase in inventory turnover days to 159.14 days.
It should be noted that in 2023, the important reason behind the narrowing of Huami Technology's losses is the contraction of various expenses, but blindly compressing expenses is obviously unsustainable, and if you want to compete in the highly competitive smart wearable device market, Huami Technology may need further investment, or will further affect profit margins.
Revenues have shrunk, shipments have nearly halved, and losses have continued
Around 2018, Huami Technology had the halo of "the first stock of Xiaomi ecological chain to be listed in the United States", which was not only recognized by investors, but also had great potential for performance. In 2019, one year after listing, Huami Technology achieved high growth of 69.15% and 59.44% in operating income and net profit respectively.
But the highlight moment is fleeting, and since 2020, Huami Technology has fallen into a decline in performance. From 2020 to 2023, Huami Technology's net profit will gradually decline and even turn from profit to loss, with 229 million yuan, 138 million yuan, -288 million yuan, and -212 million yuan respectively, down 60.23%, 39.76%, and 309.22% year-on-year, respectively, and the loss will narrow by 26.43% in 2023. At the beginning of 2022, the revenue scale of Huami Technology began to shrink significantly, of which the operating income from 2022 to 2023 will be 4.143 billion yuan and 2.495 billion yuan respectively, a year-on-year decrease of 33.72% and 39.77% respectively.
In 2023, the revenue scale in the four quarters will be basically flat, and only the third quarter will barely achieve a profit of less than 3 million yuan, and the rest of the quarters will be in the red.
Behind the sharp decline in revenue is the significant decrease in the shipment of Huami Technology products in recent years.
From 2018 to 2022, Huami Technology's shipments were 27.5 million units, 42.3 million units, 45.7 million units, 36.1 million units, 20.3 million units, and 12.1 million units, respectively, and it can be seen that after reaching the peak of shipments in 2020, Huami Technology's watch shipments have been declining, and in the following years, they have decreased by 21%, 43.80%, and 40.39% year-on-year respectively, and will almost halve in 2023, and the scale of shipments is even less than half of that in 2018.
Revenue shrinks, shipments plummet, in the financial reports of previous years, Huami Technology often attributes the main reason to the decrease in shipments of Xiaomi's OEM bracelets. Since 2019, Xiaomi has launched its own Xiaomi watch series, Redmi watch series and other products, which has weakened the competitiveness of Huami Technology's OEM products to a certain extent, so Huami Technology has gradually developed its own brand.
From 2021 to 2023, the sales of Xiaomi wearable products accounted for 53.5%, 41.0%, and 25.8% of Huami Technology's revenue, respectively, which has decreased significantly, compared with its own brand, and the proportion of sales has increased from 27.85% in 2019 to 74.16% in 2023.
But in fact, not only the decline in Xiaomi's shipments and sales, but also the scale of Huami Technology's revenue from its own brands has also declined significantly, although the proportion has increased. From 2021 to 2023, Huami Technology's own brand sales will be 2.909 billion yuan, 2.446 billion yuan, and 1.850 billion yuan respectively, of which 2022-2023 will decrease by 15.93% and 24.34% year-on-year.
What's more, despite taking the initiative to "de-milletize", Huami Technology still renews the contract with Xiaomi many times. According to the financial report, Huami Technology signed a strategic cooperation agreement with Xiaomi in 2017, and the cooperation agreement will be extended for three years in 2020. In February 2023, Huami Technology and Xiaomi signed a new business cooperation agreement for the next two years, which will end in January 2025. It is conceivable that, combined with the current significant decline in sales of its own brands, if it completely "parted ways" with Xiaomi in the future, Huami Technology's performance may suffer another blow.
In addition, in addition to the increase in the overall gross profit margin brought about by the increase in the proportion of its own brands, part of the important reason why Huami Technology will be able to narrow its losses in 2023 also comes from strict control of expenses. In 2023, Huami Technology's sales expenses, management expenses, and R&D expenses will be 315 million yuan, 189 million yuan, and 362 million yuan, respectively, a decrease of 31.5%, 19.9%, and 30% compared with the same period last year. However, the blind cost reduction is obviously unsustainable, which is most intuitively reflected in the sharp decline in the current shipments and sales of Huami Technology. In the future, if it wants to compete in the highly competitive smart wearable device market, Huami Technology may need further investment.
It takes 160 days for inventory to turnover, and the market share of products has not been competitive.
Shipments have fallen sharply, and there is naturally a risk of overstocking inventory.
Huami Technology is an OEM for Xiaomi, and its shipments to Xiaomi are carried out according to the orders between the two. Since Huami Technology's shipments to Xiaomi have decreased significantly in recent years, it is generally unlikely that a long-term large-scale inventory backlog will exist. Therefore, the risk of overstocking is naturally more likely to come from private labels that also have a significant decline in sales.
From 2021 to 2023, Huami Technology's inventory will be 1.249 billion yuan, 1.022 billion yuan, and 603 million yuan respectively, accounting for about one-third of current assets. Although the inventory balance has decreased significantly in 2023, the company's operating capacity may not have changed significantly in terms of inventory turnover days. In recent years, Huami Technology's inventory turnover days have continued to increase, from 57.11 days in 2019, to 122.41 days in 2022, and then to 159.14 days in 2023.
In addition, from the perspective of the industry, Huami Technology's own brand may also be at a competitive disadvantage. In the smart watch track, Apple, Samsung, Huawei and other mainstream smartphone manufacturers have been firmly occupying the mainstream market, behind this is because there is a great synergy between smart watches and smart phones, users can collect, view, and analyze the data collected by smart wearable devices through smart phones, so consumers often have more preferences for smart watches of the same type and mobile phone brand that are convenient for data transmission. The Amazfit brand of Huami Technology is an independent brand and does not have the above advantages.
资料来源：Counterpoint Research
According to data from Counterpoint Research, global smartwatch shipments in Q3 2023 will increase by 9% year-on-year, compared with Huami Technology's product shipments, which are significantly inferior to market performance. Amazfit, which originally had a market share of 7% in 2022Q3 and ranked fourth, was also caught up by Huawei in 2023Q3 and reduced to others.