The company issued a performance announcement. In 2023, we achieved revenue of about 271 billion yuan, a slight decrease of 3% year on year; operating profit of about 20 billion yuan, up about 610% year on year; the company's gross profit was about 57.5 billion yuan, an increase of 21% year on year; and gross margin reached 21.2%, a record high. The adjusted net profit of the company reached about 19.3 billion yuan in '23, an increase of more than 126% over the previous year.
The smartphone dual-brand strategy has achieved remarkable results, and the high-end strategy is progressing steadily. The company's smartphone business revenue in '23 was 157.5 billion yuan, with a gross profit margin of 14.6%, an increase of 5.6 pct over the previous year. According to Canalys data, the company ranked among the top three in global smartphone shipments, with a market share of 12.8%. The Redmi K70 series drove Redmi's cumulative global sales volume to exceed 1 billion units; the high-end strategy achieved a leap forward. For the first time, high-end flagship Xiaomi 14 and Xiaomi 14 Ultra series products were simultaneously sold globally. In '23, smartphone ASP in mainland China increased by more than 19% over the same period last year, reaching a record high.
The IoT and consumer products business achieved year-on-year growth in revenue and gross margin. The company's IoT revenue in 2012 was 80.1 billion yuan, and gross margin increased 1.9 pct to 16.3% year on year, a record high; revenue from the smart appliances business increased nearly 40% year over year, global shipments in the tablet category exceeded 5 million units, and wearable products remained the industry leader. By the end of '23, the number of devices connected to the company's AIoT platform (excluding smartphones, tablets and laptops) had increased by about 26% year over year to 740 million; in December '23, the monthly activity of the Mijia App increased 13% year over year to 85.8 million.
Internet service revenue and gross margin reached record highs. The company's Internet service revenue in '23 was 31 billion yuan, up about 6% year on year, gross profit margin was 74.2%, up 2.4 pct year on year. The company's advertising and game business revenue both reached record highs, with revenue of 20.5 billion yuan and 4.4 billion yuan respectively, up 11% and 7% year-on-year respectively. At the same time, the company's user base continued to expand, driving an increase in overseas Internet service revenue by 24% to 8.4 billion yuan throughout the year.
The automotive business promotes strategic upgrading, and the SU7 series will be officially released. The company adheres to the “full ecosystem of people and cars” strategy and has five core self-developed technologies: electric drive, battery, large die casting, smart cockpit, and intelligent driving. The smart driving system XiaomiPilot is equipped with two NVIDIA DRIVE Orin chips, with a comprehensive computing power of 508 TOPS, and fully empowered by AI applications. The Xiaomi SU7 will be officially released on March 28, '24, and the future is expected to drive further growth in performance.
We forecast that the company's earnings per share for 23-25 will be $0.70/0.63/0.70 (the original forecast for 23-25 was $0.61/0.66/0.71, mainly adjusted for gross margin and profit and loss), maintain a comparable 23-year PE valuation of 25 times, and the corresponding target price is HK$19.31 (the RMB HKD exchange rate is 1:1.103) to maintain the buying rating.
Risk warning
Mobile phone sales fell short of expectations, user APRU deteriorated, IOT business slowed, fair value profit and loss of investment fluctuated, and automotive business progress fell short of expectations.