Economic Observer Network reporter Qian Yujuan After the Hong Kong stock market closed on the evening of March 24, Xiaomi Group (01810) handed over its 2022 report card: the total annual revenue was 280.044 billion yuan (RMB, the same below), a year-on-year decrease of 14.7%; the adjusted net profit was 8.5 billion yuan , compared with the previous year when the index was as high as 22 billion yuan, a year-on-year plunge of 61.4%.
Regarding the above operating data, Lu Weibing, president of Xiaomi Group, attended the conference call for the first time and explained that Xiaomi is facing many external environmental challenges such as macroeconomic downturn, intensified global inflation, and severe impact on consumer demand.
Zhang Gang, the chief investment advisor of Southwest Securities, analyzed from the accounting subjects, behind Xiaomi’s plunge in adjusted net profit, research and development expenses increased by 23%, and sales expenses and administrative expenses also increased slightly. In 2022, Xiaomi’s fair value change profit and loss will be 1.6 billion yuan, which is a profit of 8.1 billion yuan in the previous year.
In addition, judging from the revenue of Xiaomi’s business sector, except for the slight increase in Internet service revenue, the rest of the business has experienced a decline in revenue to varying degrees. Among them, “smartphones, both in terms of revenue and shipments, fell by about 20% year-on-year.” Zhang Gang believes that this has become the main reason for dragging down Xiaomi’s overall performance.
Mobile phone shipments are still in crisis
The financial report shows that Xiaomi’s annual revenue from the smartphone business reached 167.2 billion yuan. Although the scale exceeded half of the company’s total annual revenue, it decreased by 19.9% compared with the previous year.
The decrease in revenue is inseparable from the severe decline in mobile phone shipments. At the conference call, Lu Weibing gave a set of data: In 2022, the global smartphone market will fall by 12% year-on-year, which is the lowest point in the past nine years. , fell back below 300 million unit shipments.
Lu Weibing added that Xiaomi’s annual global smartphone shipments reached 150 million units, maintaining its stable third position. In this regard, a Futu investment researcher analyzed, “The demand for the entire smartphone market is already at the bottom of the cycle.” The current market consumption is far from recovery, and Xiaomi’s mobile phone shipments and market share are still in crisis.
The above-mentioned Futu investment researcher suggested to pay attention to when the inflection point of the market will appear. “If the demand picks up, it will drive the cycle upward, which is good for Xiaomi.” operation and construction.”
The financial report shows that in 2022, the number of connected devices on the Xiaomi AIoT platform will achieve a year-on-year increase of 35.8%, reaching 589 million units. However, Zhang Gang noticed that the revenue of Xiaomi’s AIoT business segment in 2022 will decrease by 6.1% year-on-year, the revenue of smart TVs and laptops will decrease by 13.3% year-on-year, and only Internet service revenue will increase by 0.4% year-on-year.
The above-mentioned Futu investment research personnel feel that maintaining the competitiveness of hardware products and ecological construction are equally important to Xiaomi. “These will not contradict the strategic development of the core mobile phone business segment.”
High-end Xiaomi wants to “go out”
“Manufacturers rely on low-end and low-end sales, and it is very hard to make money.” An upstream person in the mobile phone industry chain pointed out that mobile phone manufacturers focus on high-end products, mostly considering profit.
Lu Weibing introduced that in the fourth quarter of 2022, Xiaomi won the first market share in the price range of 3,000 yuan to 4,000 yuan in the Chinese mainland market. According to other data, in this quarter, the ASP (average selling price) of Xiaomi’s smartphones in mainland China increased by more than 14% year-on-year.
It is reported that the ASP of Xiaomi smartphones has been rising year after year, reaching 1111 yuan in 2022. Lu Weibing believes that Xiaomi’s exploration of high-end, strategic upgrades such as software and hardware collaboration and imaging, will be emphatically reflected in the second half of 2022, especially the 12S Ultra, the folding screen flagship MIX Fold2, and the Mi 13 series released at the end of the year. Of course, the increase in ASP is closely related to the “high-end stable price” strategy maintained by the first two high-end models during their life cycle.
Judging from the financial report of Xiaomi Group, 75% of the global shipments of smartphones in 2022 will come from overseas markets. The above-mentioned people in the upper reaches of the industry chain believe that the “scale” overseas depends on Xiaomi’s low-end and mid-end models, and most of the high-end flagships that are truly “profitable” are in the domestic market where shipments account for only 25%.
“Focus on stable operations and differentiate our strategic markets.” Lu Weibing emphasized on the conference call that Xiaomi will promote high-end brands in key markets around the world. It is reported that the international version of the Xiaomi 13 series has been released in March this year. Whether the high-end flagship of Xiaomi it represents can bring new market growth overseas is worthy of attention.
Cautious optimism in 2023
Xiaomi regards high-end and folding screen mobile phones as the key strategy of the company’s mobile phone business sector. Futu investment research personnel agree, but he still pointed out the practical problems of insufficient innovation in the mobile phone industry and weakening demand for replacement phones. “If smartphone manufacturers want to break out of the competition, they can only continuously improve their own moats and achieve differentiated advantages.”
To realize the high-end leap of the brand, manufacturers need to make efforts in technological innovation. In this regard, Lu Weibing also emphasized that increasing investment in technological innovation is the focus of Xiaomi. It is reported that Xiaomi will not only invest 3.1 billion yuan in innovative businesses such as smart electric vehicles in 2022, but also spend as much as 16 billion yuan in technology research and development. The five-year compound growth rate of investment is 38.4%.
Looking forward to the next five years, Lu Weibing expects Xiaomi’s total R&D expenditure to exceed 100 billion yuan. In addition, he emphasized that Xiaomi should remain cautiously optimistic about the market in 2023, focus more on improving quality and efficiency, “strengthen risk management, and focus on stable operations.”
At the end of the analysis, Lu Weibing briefly mentioned “inventory relief”. The inventory pressure of Xiaomi mobile phones was once the key to the outside world‘s assessment of the health of its business development. The above-mentioned Futu investment researcher pointed out that the inventory level of manufacturers is linked to factors such as inventory and inventory turnover days in the upstream of the industrial chain. He learned from tracking Xiaomi through data that since the second quarter of last year, Xiaomi’s inventory level has gradually declined.
“In 2022, we will carry out inventory management prudently, and the results will be remarkable.” Lin Shiwei, vice president and chief financial officer of Xiaomi Group, gave a set of data. down 4.8%.
The benefits brought about by the execution of inventory clearing are reflected in the “Inventory” column of current assets in Xiaomi’s 2022 annual report. Compared with 2021, the data of this indicator has decreased by nearly 2 billion yuan.
Speaking of 2022, Lu Weibing believes that it will be a year when Xiaomi’s capabilities will be reborn, and now it is “handing in the papers”. Looking forward to 2023, Xiaomi will still “go through the cycle”. He said, “The macro environment will gradually improve, and a full recovery will still take some time.”
Considering the above-mentioned practical challenges, Xiaomi put forward for the first time the business idea of ”emphasizing both scale and profit”. Lu Weibing frequently emphasized in the conference call that “steady operation” means that he hopes to improve Xiaomi’s internal efficiency and achieve precise profit targets at the execution level. management.
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