20200310-尚乘集团-小米集团-W-01810.HK-Expect_solid_FY19_results_based_on_smartphone_GM_recovery_and_healthy_IoT_growth_6页_1mb

Xiaomi FY19 Results Summary

Core Content Overview

This report provides an analysis of Xiaomi's expected financial performance for FY19 and FY20, with a focus on revenue growth, profit margins, and strategic initiatives. It highlights the company's recovery in smartphone gross margins, strong IoT growth, and the introduction of new subscription services to offset the decline in online advertising revenue. The report also includes a price target, valuation metrics, and key financial forecasts.

Key Financial Forecasts

Revenue Growth and Profit Margins

• FY19 Revenue: Expected to grow by 18% YoY to Rmb207bn, driven by smartphone gross margin recovery and healthy IoT growth.
• FY20 Revenue: Projected to grow by 23% YoY to Rmb255.46bn.
• Smartphone Revenue: Expected to grow 9% in FY19 and 18% in FY20, with 10% of growth attributed to ASP increase.
• IoT Revenue: Expected to grow 33% in FY20, supported by the expansion of core IoT products and product portfolio diversification.
• Smartphone Shipment: Reached 32.8mn units in 4Q19, a 31.1% YoY increase, marking the strongest quarter since Q2 2018.
• Gross Margin: Expected to rise to 14.1% in FY20, up from 13.8% in FY19.
• Non-IFRS Net Margin: Maintained at 5.6% in both FY19 and FY20.

Strategic Highlights

• 5G Leadership: Xiaomi launched the most affordable 5G smartphone in December 2019 and the 5G version of Mi10 in early 2020, positioning itself for 5G market growth.
• Spin-off of POCO: To counter competition in India, Xiaomi announced the spin-off of POCO as an independent brand in January 2020.
• Subscription Services: New subscription services on smartphones and TVs aim to offset the decline in online ad revenue.
• Monetization of Mi Ecosystem: The company is diversifying its monetization strategies through IVAS (Internet Value Added Services) and other ecosystem offerings.

Valuation Metrics

Price Target and Upside

• Price Target: HK$22.0, representing an 82% upside from the current price of HK$12.1 as of 9 March 2020.
• Market Cap (HK$ m): 289,703 (as of 9 March 2020).
• Market Cap (US$ m): 37,289 (as of 9 March 2020).

Revenue Mix and Performance

Key Operating Metrics

• Smartphone Shipment (YoY %): 128mn units in FY19 (up 8%), expected to reach 146mn units in FY20 (up 14%).
• Smartphone ASP (Rmb): Increased to Rmb974 in FY19 and Rmb1,008 in FY20.
• IoT and lifestyle product sales per smartphone: Rose to Rmb486 in FY19 and Rmb569 in FY20.
• IoT and lifestyle product sales per MIUI MAU: Increased to Rmb215 in FY19 and Rmb234 in FY20.
• MIUI MAUs (End of FY19): Reached 289mn, up 20% YoY.
• Internet ARPU (Rmb): Expected to be Rmb65 in FY19 and Rmb68 in FY20.

Outlook and Risks

• Growth Drivers for FY20: 1) First-mover advantage in 5G, 2) Strength of core IoT products, 3) Diversification of Mi ecosystem monetization.
• Challenges: Uncertainties from the impact of the COVID-19 pandemic are still present, but online sales channels and production ramp-up are expected to mitigate these risks.

Analyst Information

• Analyst: Brian Li
• Stock Code: 1810.HK
• Rating: Buy
• Contact:
  • Brian Li: +852 3163 3384, brian.li@amtdgroup.com
  • Halsey Wu: +852 3163 3220, halsey.wu@amtdgroup.com

Important Disclosures

• The report is based on information from reliable sources.
• No personal advice or recommendation is provided, and no liability is accepted for any financial consequences.
• Past performance is not indicative of future results, and investments may fluctuate.
• Confidentiality: The report is strictly confidential and not to be reproduced or redistributed without prior written consent.