This article was compiled from: Tianfeng Securities “Xiaomi Group: Mobile phone business bucked the trend in 20Q1, with overseas revenue accounting for 50%, and Internet services reaching a record high”, CMB International's “Xiaomi: Benefits on Hua Wei; Lift TP to HK$21”
Summary: Xiaomi is expected to release its Q2 earnings report on Wednesday (August 26). In Q1, Xiaomi's mobile phone business bucked the trend, rising to fourth place in the global market share, accounting for 50% of overseas revenue, and a record high for Internet services. As for the Q2 results, CMB International expects that with multiple benefits, Xiaomi's profit will bottom out. Xiaomi's “darkest hour” is over.
1. 20Q1 review: the global market share of Xiaomi phones rose to fourth place
The Xiaomi Group achieved revenue of 49.702 billion yuan in Q1 2020, an increase of 13.59% over the previous year and a decrease of 13.54pct over the previous month. On the product side, the company's revenue growth is mainly driven by smartphone and IoT business; regionally, the company's revenue growth is mainly driven by overseas business.
Smartphone revenue in Q1 2020 reached 30.3 billion yuan, up 12.3% year on year, accounting for 61.01%. In 2020 Q1, 29.2 million smartphones were sold, an increase of 4.7%; the ASP for smartphones was 1,038 yuan each, an increase of 7.2% over the previous year. The increase in ASP was mainly driven by 5G and other high-end smartphone models released in 2020 Q1.The market share of smartphone shipments rose to 11.1%, ranking fourth in the world. It is one of only two of the top five mobile phone manufacturers to maintain a year-on-year increase in shipments.
Revenue from IOT and consumer products reached 13 billion yuan, an increase of 7.8% over the previous year, accounting for 26.12%. The year-on-year increase in revenue from IOT and consumer products is mainly due to the rapid increase in demand for several IOT products such as smart bracelets and routers. 2020 Q1 smart TV laptop revenue was 4.6 billion yuan, a year-on-year decrease of 8.2%, mainly due to reduced sales activities and production interruptions due to the impact of the epidemic.
Internet service revenue reached 5.9 billion yuan, an increase of 38.6% over the previous year, accounting for 11.87%. All of the company's major Internet service businesses grew steadily in Q1 2020. In March 2020, the number of MIUI monthly active users reached 330.7 million, an increase of 26.7% over the previous year.
2. 20Q2 preview: profit bottomed out, Xiaomi's “darkest hour” is over
CMB International expectsXiaomi's Q2 revenue and adjusted net profit were RMB 53.292 billion and RMB 2.64 billion, up 3% and -27% year-on-year respectively. Xiaomi's profit will bottom out in 2020 Q2.Smartphone demand will recover, mainly benefiting from China/India.
After 10 consecutive quarters of declining market share, Xiaomi is expected to regain market share growth in China (10.4% in the second quarter of 2020 compared to 15.1% in the first quarter of 2018).
At the same time, given Huawei's weakness in overseas markets since 2019 Q3 (-24%/-30%/-28% yoyin4q19/1q20/2q20), Xiaomi's market share in Europe/Southeast Asia will also increase.
CMB International also expects that it will be favored by various factorsThe year-on-year growth rate of Xiaomi phones in Q3 and Q4 this year was -6%/5%, and the year-on-year growth rate in 2021 and 2022 was 16%/16%. Xiaomi's “darkest hour” is over.
III. Business Expectations and Ratings
According to Bloomberg's unanimous forecast, Xiaomi's Q2 revenue will reach 51,275 billion yuan, up 1.37% year on year; adjusted net profit is 2,695 billion yuan, up 4.01% year on year.
editor/jaosnzeng