XIAOMI's performance finally hit bottom and rebounded.

XIAOMI released his Q2 report card after August 20, with revenue of 51.9 billion, up 14.8% from the same period last year, which is actually slightly lower than expected, but it doesn't matter, the most impressive thing is profitability. Gross margin Q2 rose 28% year-on-year, much faster than revenue growth, and gross profit margin returned to a seven-quarter high.

The net profit was 3.63 billion, an increase of 71.7% over the same period last year.It is actually in the net profit.5.5100 million investment disposal income, but even excluding this item, the net profit is still there.30.8Billion, an increase over the same period last year46%It still exceeded market expectations.

XIAOMI's mobile phone finally got rid of the declining trend.

Divided into three businesses, mobile phone revenue is 32 billion, up 5% from the same period last year. IoT revenue is 14.9 billion, up 44% from the same period last year, maintaining rapid growth; Internet revenue is 4.6 billion yuan, up 15.7% from the same period last year.

From the perspective of gross profit marginCan be foundQ2The biggest reason for net profit exceeding expectations----Mobile phone business has improved greatly, up nearly 5 percentage points from the previous month to 8.1%.

The gross profit margin of the mobile phone business is very important. Among XIAOMI's major businesses, the mobile phone business has the largest revenue but the lowest gross profit margin. In previous quarters, XIAOMI's gross profit contribution from Internet revenue remained at half, supporting XIAOMI's profit alone.

However, according to Q2 data, due to the sharp increase in mobile phone gross profit margin, the mobile phone contributed gross profit margin of 2.59 billion, accounting for 35.6% of the total gross profit, sweeping away the declining gross profit in previous quarters.

Q1 mobile phone gross profit hit bottom this year, mainly due to overseas product promotion, inventory clearance and other non-recurrent reasons. Q2 inventory improved, superimposed in the first half of the year launched a number of new machines (XIAOMI 9, red rice Note 7, red rice K20) one after another, gross profit has greatly improved.

In terms of sales volume, the global sales volume of Q2 is 32.1 million, which is basically the same as the same period last year, including 11.5 million domestic units (according to canalys data) and 20.6 million international units. The following picture clearly shows that XIAOMI is in a shrinking trend in China.

The number is decreasing, but the "dual-brand" strategy helps XIAOMI move to the high end, and the second quarterly report mentioned that the domestic average selling price increased by 13.3% compared with the same period last year. However, in the medium and long term, the effect of XIAOMI's extension to the high-end market needs to be observed again, especially under the fierce offensive of Deep-Fried Chicken Huawei.

XIAOMI's response to the fierce competition in the domestic market has always been to vigorously distribute overseas markets. Q2 international income increased to 21.9 billion yuan, an increase of 33.1% over the same period last year, and the growth rate continued to slow. According to the quarterly report, there were 520 overseas Mi Home stores on June 30, 2019, an increase of 92.6% over the same period last year, including 79 in India.

Since XIAOMI mobile phones in overseas markets must use Alphabet Inc-CL C's native Android system, and most of the revenue, including app distribution and advertising, belongs to Alphabet Inc-CL C, even though XIAOMI's international income is growing rapidly, these increments will only provide gross profits from hardware, and the volume of revenue from follow-up Internet services is very small.Therefore, there is no need to pay too much attention to XIAOMI's international income.

The growth rate of Internet revenue is a new low, which can not escape the macro impact.

In terms of MIUI monthly active users, the number of monthly active users rose from 206 million of 2018Q2 to 278 million of 2019Q2, the growth rate slowed for the third consecutive quarter. Mainly because XIAOMI mobile phone shipments in China remain stable, foreign mobile phones can not bring too many new MIUI customers.

In terms of revenue growth, Q2 Internet revenue is 4.6 billion, a year-on-year growth rate of 15.7%, the lowest ever.

Internet services include advertising and value-added services, value-added services include games, financial services, etc., among them, advertising is the absolute majority of Internet revenue, in the context of the macro downturn, XIAOMI's advertising revenue is difficult to escape. According to the quarterly report, the Chinese mainland advertising market is weak and other Internet companies spend less on advertising.

Therefore, it can be predicted that advertising revenue, XIAOMI's very important profit point, will not be easy in the near future. To make matters worse, as the negative impact of advertising cash on the user experience has become increasingly prominent, XIAOMI has begun to vigorously reduce advertising space, including May 22nd.Bai Peng, general manager of XIAOMI's Internet Commerce Department, said XIAOMI is now going to putMIUIThe reduction of advertising space in the system and the recent cancellation of advertising on Huawei TV will reduce XIAOMI's advertising inventory and have a negative impact on future advertising revenue.

IoTWhen will it be qualitatively changed?

XIAOMI IoT products are currently focused on smart speakers, smart TVs and wearable devices. In this year's promotion, XIAOMI bracelets, Xiao Ai speakers and other products won many firsts of JD.com, Tmall, SUNING and other e-commerce platforms.

Quarterly report data show that as of June 30, 2019, the number of IoT devices (excluding smartphones and laptops) connected to XIAOMI's IoT platform reached about 196 million, an increase of 69.5% year-on-year and 14% month-on-month.

This number is still very staggering, and according to the best-selling degree of XIAOMI bracelet 4, the number will continue to grow at a high speed. XIAOMI IoT business has been highly expected by the market, when the number of IoT devices connected to the Internet is enough, the value generated by huge data will be qualitatively changed.

However, XIAOMI's Iot business is not easy, such as smart TV, Huawei also added to enter. Like the mobile phone market, Huawei brand focuses on high-end, while Glory brand focuses on performance-to-price ratio, and will release smart TV products with "smart screen" as the core strategy in the second half of the year. XIAOMI TV has obvious marketing and product advantages against domestic traditional home appliance manufacturers, but compared with Huawei, there is a lot of uncertainty about whether this advantage can be maintained.

Summary

The outstanding performance of the mobile phone business led to a sharp improvement in the gross profit margin of this quarter's results, with profits exceeding expectations. XIAOMI showed his resilience and stabilized his turf under the depressed macro environment and the strong attack of Huawei.

However, in the long run, XIAOMI still faces greater uncertainty. Because the mobile phone that provides traffic entrance is the starting point of XIAOMI's business model, but under the strong domestic competition from Huawei and OV, XIAOMI mobile phone needs to invest a lot of research and development and marketing expenses to defend the hardware site. At the same time, on the Internet side, there is a lack of high-viscosity products to efficiently cash out, so the investment to the hardware side may not be guaranteed continuously.

For hundreds of millions of consumers, XIAOMI continues to bring high-quality and cheap technology products, is an excellent company. But for investors, XIAOMI's business model is not good enough, and the long-term return on investment may not be good enough.