Encouraging Growth Outlook
Global smartphone shipments grew 5% year-on-year (YoY) in 3Q24, with Xiaomi retaining its third place in the global smartphone market and advancing to fourth place in China. The company’s ecosystem strategy, “Human x Car x Home,” has been instrumental in attracting a wider and more stable consumer base.
Investment Thesis
Xiaomi is a technology product and services company founded in 2010, primarily focusing on smartphones, Internet of Things (IoT) products, and related internet services. The company has expanded its market reach beyond China, becoming the smartphone market leader in India and gaining market share in Europe. According to Canalys, Xiaomi ranked among the top three in the global smartphone market in terms of shipments. The company combines affordably priced, high-quality smartphones with a smart IoT hardware product ecosystem and Internet services-based monetisation. Strong cash flow should support Xiaomi’s foray into the electric vehicle (EV) market. However, the company might face challenges due to overall macroeconomic weakness and stiffer competition.
Investment Summary
Global smartphone shipments saw a fourth consecutive quarter of growth, with an increase of 5% YoY in 3Q24, reaching 309.9 million units. This growth marked the strongest 3Q performance since 2021, driven by aggressive product launches with strong value propositions. Demand remained steady in emerging markets, with early signs of a replacement cycle in North America, China, and Europe. Xiaomi retained third place with 42.8 million units shipped and a 14% market share in 3Q24, benefiting from strategic inventory positioning for new releases in key markets.
Financial Summary
| Metric |
FY23 |
FY24E |
FY25E |
| Revenue |
270,970 |
345,337 |
393,353 |
| Gross profit |
57,476 |
73,851 |
84,758 |
| Operating profit |
20,009 |
19,353 |
23,849 |
| Net profit (adj) |
19,273 |
23,402 |
25,037 |
| Earnings per share (CNY adj) |
0.76 |
0.94 |
1.00 |
Key Ratios
| Metric |
FY23 |
FY24E |
FY25E |
| Revenue growth |
-3.2% |
27.4% |
13.9% |
| Gross margin |
21.2% |
21.4% |
21.5% |
| Operating margin |
7.4% |
5.6% |
6.1% |
| Net margin (adj) |
7.1% |
6.8% |
6.4% |
| Net profit (adj) growth |
126.3% |
21.4% |
7.0% |
Market Performance
The Hang Seng Index showed a steady performance in comparison to Xiaomi’s progress. Xiaomi’s strategic moves and ecosystem strategy contributed to its positive market performance.
Company Financials
Income Statement
| Metric |
FY2019 |
FY2020 |
FY2021 |
FY2022 |
FY2023 |
| Revenue |
205,838.7 |
245,865.6 |
328,309.1 |
280,044.0 |
270,970.1 |
| Gross Profit |
28,554.0 |
36,751.9 |
58,260.9 |
47,577.2 |
57,476.2 |
| Operating Income |
11,760.2 |
24,034.7 |
26,028.7 |
2,816.5 |
20,008.7 |
| Net Income |
10,044.2 |
20,355.5 |
19,339.3 |
2,474.0 |
17,475.2 |
| Basic Earnings per Share |
0.4 |
0.8 |
0.8 |
0.1 |
0.7 |
Profitability Ratios
| Metric |
FY2019 |
FY2020 |
FY2021 |
FY2022 |
FY2023 |
| Return on Equity |
13.16 |
19.86 |
14.82 |
1.76 |
11.36 |
| Return on Assets |
6.14 |
9.29 |
7.06 |
0.88 |
5.85 |
| Operating Margin |
5.71 |
9.78 |
7.93 |
1.01 |
7.38 |
| Net Income Margin |
4.88 |
8.28 |
5.89 |
0.88 |
6.45 |
Credit Ratios
| Metric |
FY2019 |
FY2020 |
FY2021 |
FY2022 |
FY2023 |
| Total Debt/EBIT |
2.36 |
1.97 |
1.47 |
4.29 |
2.04 |
| Net Debt/EBIT |
-5.75 |
-8.20 |
-2.83 |
-6.87 |
-5.33 |
| EBIT to Interest Expense |
28.39 |
19.89 |
25.53 |
5.37 |
12.70 |
| Long-Term Debt/Total Assets |
2.91 |
4.40 |
7.67 |
8.39 |
7.07 |
ESG Updates
In October 2024, Xiaomi’s ESG rating was upgraded due to improvements in corporate governance and expanded recycling efforts. With 89% of its revenue from clean technology, Xiaomi’s environmental score ranks above the industry average. However, its social score is below peers due to heavy reliance on outsourced manufacturing and associated supply chain labor risks. Allegations of indirect involvement in employing ethnic minorities through state-sponsored labor-transfer programs have been noted. Xiaomi is also exposed to data breach risks due to its smart device apps handling personal user data. To mitigate these risks, Xiaomi provides staff training, oversees suppliers for data security, and obtains external security certifications.
Potential Catalysts
- Shipments of smartphones and IoT devices could surpass expectations.
- A faster-than-expected recovery in advertising demand-supply dynamics.
- Monetization of users outside of China could lead to a spike in top-line growth.
Investment Risks
- Margin deterioration due to competitive pressures.
- Operating in a highly competitive smartphone market.
- Trade issues and potential sanctions impacting hardware production.
- A slump in smartphone demand in China.
- Supply chain bottlenecks.
Valuation Analysis
| Company |
Price/Earnings |
Price/Book |
EV/EBITDA |
Dividend Yield (%) |
ROE (%) |
| Xiaomi Corp (1810.HK) |
29.0 |
3.3 |
21.9 |
0.0 |
11.6 |
| Tencent Holdings Ltd (0700.HK) |
17.0 |
3.7 |
13.4 |
1.0 |
21.4 |
| Apple Inc (AAPL.O) |
29.9 |
50.4 |
23.5 |
0.5 |
183.2 |
| Samsung Electronics Co Ltd (005930.KS) |
11.2 |
1.0 |
4.0 |
2.6 |
9.2 |
| AAC Technologies Holdings Inc (2018.HK) |
20.4 |
1.3 |
7.4 |
0.8 |
7.1 |
Company Overview
Xiaomi Corporation, founded in April 2010, was listed on the Main Board of the Hong Kong Stock Exchange on 9 July 2018 (1810.HK). As of 2Q23, Xiaomi ranked among the top three in the global smartphone market in terms of shipments. The company has also established the world’s leading consumer AIoT (AI+IoT) platform, with 655 million smart devices connected, excluding smartphones, tablets, and laptops, as of 30 June 2023. Xiaomi products are present in more than 100 countries and regions worldwide.
Revenue Breakdown
By Segment
- Smartphones: 58.1%
- IoT & Lifestyle products: 29.6%
- Internet Services: 11.1%
- Others: 1.2%
By Geography
- China: 55.1%
- Rest of the World: 44.9%
Monthly Active MI User Interface Users
The number of Monthly Active MI User Interface Users has shown significant growth over the years, indicating Xiaomi’s strong user base and engagement.
- FY19: 309.6 million
- FY20: 396.3 million
- FY21: 508.9 million
- FY22: 582.1 million
- FY23: 641.2 million
