Xiaomi Group (1810. HK) released its fourth quarter 2021 financial report (ending December 2021) on the evening of March 22, 2022 Beijing time, as follows:
1. Overall performance: decent, basically in line with expectations. $Xiaomi Group- W.HK Achieved revenue of 85.58 billion yuan in the fourth quarter, which seems to exceed expectations (81.46 billion), but it is actually decent. The company's revenue for the quarter included $2.8 billion from the sale of apartments and materials, which was only slightly above expectations after exclusion. The company's gross margin for the quarter was 17.1%, in line with market expectations (17%), and gross margin declined seasonally due to factors such as holiday promotions.
2, mobile phone business: price becomes the main driver. In the second half of 2021, Xiaomi's quarterly shipments fell back to less than 50 million units in the face of tight supply and intensified competition. The 44.1 million units shipped in the quarter were less than satisfactory. The increase in mobile phone prices has become the main focus of the company's mobile phone business. Xiaomi's average shipment price this quarter reached a record high of 1144 yuan, which maintained the growth of mobile phone business while also making up for the decline in mobile phone gross margin to a certain extent.
3, IoT business: new tablet products to promote growth, panel prices or profit increase incentives. In terms of the growth structure of the IoT business in the quarter, the TV & Notebook business can still maintain a growth of 20%, and the recovery performance in this quarter is mainly driven by new products such as tablets. Also seeing that the gross profit margin of the IoT business has rebounded in the quarter, TV as an important part of the IoT business, Dolphin Jun believes that the decline in panel prices may have a positive impact on the gross profit margin of the IoT business to a certain extent.
4, Internet services: not afraid of industry pressure, advertising continues to grow. The proportion of advertising business in Xiaomi's Internet business has gradually increased, and the growth of advertising business has also led to an increase in both revenue and gross profit margin of Internet service business. Since the second half of 2021, the Internet advertising industry as a whole has come under pressure while from Xiaomi and $Apple. US's advertising business can still achieve growth, reflecting the voice position of hardware entrance.
5, the cost of expenses: the trend is higher. With the advancement of Xiaomi Automobile, before the realization of revenue, Xiaomi's increased investment in research and development in the automobile business has directly increased the cost. From the perspective of the company's research and development expense ratio, it has increased from about 3% in the past to more than 4%, and may continue to maintain a high level. The increase in sales expenses is more due to seasonal promotions. The overall cost and expense side may still show a trend higher trend in the next few quarters.
Overall, Xiaomi's financial performance this time is decent, and there is no point that clearly exceeds expectations. Since Xiaomi is a global company with a two-wheel drive model of "hardware + software", Xiaomi also starts from both hardware and software.
Hardware side: Xiaomi adopts the strategy of "mobile phone x AIoT"
Mobile phone is a mature market, 1.3-15 billion units of shipments throughout the year, and Xiaomi has achieved about 200 million units of the world's top three shipments, the growth of mobile phone business is no longer mainly driven by volume, but rely on price increases. The financial report of Xiaomi's mobile phone business has reached a new high in price, bringing double-digit growth in mobile phone business.
The growth of the IoT business mainly comes from the launch of explosive products. TVs and notebooks as major IoT products play a role in stabilizing business, and in order for IoT services to continue to grow, there is still a need for explosive products. The performance of the IoT business recovery in the quarter was mainly driven by new tablet products.
Software side: Xiaomi adopts the idea of "hardware customer acquisition, software monetization"
Xiaomi's revenue on the hardware side in 2021 has once again reached the previous profit target of "no more than 5%", and the money is still mainly from the software side. Judging from the continuous rise in Internet revenue, Xiaomi's business ideas have also achieved results. At present, Xiaomi has accumulated more than 500 million MIUI users, and the user base is not a problem, and making money mainly depends on whether the user side can realize or not. From the perspective of separate markets, the domestic single-quarter change has now reached 40-50 yuan, while the single-quarter realization ability of foreign users is less than 5 yuan. How to give full play to the monetization potential of overseas parts is the key to whether Xiaomi's money-making model can be sustained.
In terms of this quarter's financial report, Xiaomi's performance is basically in line with market expectations, and there is still pressure on the cost side before the mass production of automobiles. However, combined with the stock price of Xiaomi in the Hong Kong stock market, even if Xiaomi may face a slowdown in growth, it is still expected to achieve positive growth in the company's profits through the increase of mobile phone price bands and the enhancement of Internet monetization capabilities. A profitable, interesting global hardware entrance company, with a valuation of only 11-12 times, still has a certain allocation value.
Dolphin Jun for Xiaomi Group's 2021 four quarterly report, mainly focus on the following issues:
1. The mobile phone business is the largest source of Xiaomi's revenue and gross profit. Judging from the data released by IDC earlier, xiaomi's mobile phone shipments this season have been expected by the market. The most concerned thing about the mobile phone business is whether the shipment price of Xiaomi mobile phones has increased? And is the gross profit margin of Xiaomi's mobile phone business solid?
2. The performance of the IoT business in the previous quarter was significantly affected by the supply side, and the gross profit margin declined significantly. The IoT business, which was originally the main source of growth for Xiaomi Group in addition to mobile phones, also showed signs of weakness. Looking at this quarter, can Xiaomi's IoT business growth pick up? Has the impact on the supply chain continued to deteriorate during the quarter?
3. Internet services are one of Xiaomi's continued to exceed expectations, showing a trend of accelerated growth and high gross profit margin. So in this quarter, in the case of the global Internet encountering a cold winter, can Xiaomi's Internet business achieve growth against the trend again?
4. In 2021, Xiaomi officially announced the construction of cars. While building cars will bring new points of view to Xiaomi's future business, it will also bring an increase in the cost side of the company as a business in the table. Before the mass production of Xiaomi cars, it undoubtedly brought pressure on the cost side to Xiaomi's performance during this period. So what is the situation of Xiaomi's entire expense side this quarter? Is the impact of car building great?
The following is the text, Dolphin Monarch should look at the xiaomi group's financial report from many aspects:
First, the overall performance: in line with expectations, decent
Xiaomi Group's total revenue in the fourth quarter of 2021 was 85.6 billion, an increase of 21.4% year-on-year. Directly comparing the market expectation (81.46 billion), it seems that this quarter has exceeded expectations. However, Dolphin Jun believes that Xiaomi's revenue this quarter is basically in line with expectations.
Looking closely at the composition of Xiaomi Group's revenue, the company's other products in the quarter have a sudden increase. Other product items soared from $600 million in the year-ago quarter to $2.8 billion in the quarter, with revenue coming mainly from condominium and material sales. Excluding the impact of this revenue, Xiaomi's performance in total revenue this quarter is basically in line with market expectations.
In the main businesses of Xiaomi Group in the quarter, smartphones, IoT and Internet services accounted for 59%, 29.3% and 8.5% of revenue, respectively. The mobile phone business remains the largest source of revenue for Xiaomi Group, but it has declined in the total revenue ratio, partly due to the global supply shortage.
Source: Company financial report, Longbridge Dolphin Research
Xiaomi Group's gross profit margin in the fourth quarter of 2021 was 17.1%, an increase of 1pct year-on-year, which was basically in line with market expectations (17%). Although from a year-on-year point of view, the profitability of Xiaomi Group is still improving. Compared with the gross profit margin of the previous quarter, it can also be seen that Xiaomi's gross profit margin is facing certain pressure in this quarter.
From the business composition of the Xiaomi Group, we analyze the changes in gross profit margin. Although Xiaomi Group's Internet business has a high gross profit margin of more than 70%, because Xiaomi's largest revenue comes from the hardware side, the hardware side directly affects the company's overall gross profit margin level. The reason for the quarter-on-quarter decline is also due to the hardware side, the fourth quarter is the traditional promotion season, the company's profit promotion policy has eroded the gross profit margin; the shortage of supply chain, but also the profitability of the hardware side of the squeeze.
Second, mobile phone business: price has become the main driving force for growth
In the fourth quarter of 2021, Xiaomi's smartphone business achieved revenue of 50.5 billion yuan, an increase of 18% year-on-year. Xiaomi Group was still affected by the shortage of supply side this quarter, but it was warmer than the performance of the third quarter.
Xiaomi continues to promote its dual-brand strategy. On the Xiaomi brand, the company launched the Xiaomi 12 and Xiaomi 12Pro phones in December 2021. In terms of the Redmi brand, the company also launched the Redmi K50 series of mobile phones.
Splitting Xiaomi's smartphone business into volume and price to see the main driving forces of the smartphone business in this quarter:
Volume: Xiaomi smartphone shipments in the fourth quarter of 2021 were 44.1 million units, an increase of 4.3% year-on-year, which is already the 6th consecutive quarter of Xiaomi's shipments of more than 40 million units. Xiaomi fell back from quarterly shipments of 50 million units in the second half of 2021, mainly due to the impact of parts supply, the revival of Honor and the release of Apple's new machines. The shipment of 44.1 million units in this quarter also stabilized the decline in Xiaomi's shipments in this off-season.
Price: The average price of Xiaomi smartphone shipments in the fourth quarter of 2021 was 1144 yuan, an increase of 14% year-on-year, another record high. The increase in price is the main reason for the growth of Xiaomi's mobile phone business this quarter. Since Xiaomi entered the high-end market in 2020, the shipment price of Xiaomi mobile phones has shown an upward trend, from less than 1000 yuan at the end of 2019 to nearly 1150 yuan. In the global 1.3-1.5 billion mobile phone market, Xiaomi has nearly 200 million units of the share, the increase in volume can not bring more impetus to Xiaomi, and the key to the future growth of Xiaomi's mobile phone business is still mainly in whether the price can continue to increase.
In the fourth quarter of 2021, the gross profit of Xiaomi's smartphone business was 5.12 billion yuan, an increase of 14.5% year-on-year. It accounts for 34.9% of the company's gross profit. Gross margin for the smartphone business in the fourth quarter was 10.1%, down 4pct year-over-year. The fourth quarter is the company's traditional promotion season, because policies such as promotion and profit will erode the gross profit margin. However, gross margins in the quarter also experienced a year-on-year decline, which was also affected by the shortage of supply since the second half of 2021 on the increase in material costs.
Third, IoT business: new tablet products to promote growth, panel prices or profit increase incentives
In the fourth quarter of 2021, Xiaomi's IoT business achieved revenue of 25.1 billion yuan, an increase of 19% year-on-year, mainly due to smart TVs, Xiaomi Tablet 5 launched in August and smart watches. Although the company was affected by factors such as overseas sea freight logistics in the second half of 2021, the company's overseas IoT business still maintained strong growth, and revenue hit a record annual high.
Xiaomi's main IoT products mainly cover TVs and notebooks, and in the fourth quarter of 2021, the main IoT products achieved revenue of 8.7 billion yuan, an increase of 23% year-on-year, mainly from smart TV shipments and average shipments.
In the fourth quarter of 2021, Xiaomi Smart TV shipped 4.2 million units worldwide. Xiaomi TV ranked first in shipments in Chinese mainland for three consecutive years, ranking in the top five in the world. In March 2022, Xiaomi continued to release the New TV Redmi MAX100" with a high brush rate of 120HZ.
In the fourth quarter of 2021, Xiaomi's other IoT products achieved revenue of 16.37 billion yuan, an increase of 17% year-on-year, mainly due to sales growth of smart Xiaomi tablet 5 and smart watches.
The Release of the Mi Tablet 5 in August 2021 led to the growth of Xiaomi's other IoT products in the second half of the year, rising to fourth in the ranking of Chinese mainland tablet shipments in the fourth quarter of 2021.
In the fourth quarter of 2021, the gross profit of Xiaomi's IoT business was 3.27 billion yuan, an increase of 28.4% year-on-year. Gross margin for the IoT business in the fourth quarter was 13%, up 0.9pct year-over-year. IoT quarterly gross margin stopped falling and rebounded, mainly due to higher margins of overseas IoT products and the launch of higher gross margin IoT products. Dolphin Jun believes that TV as an important part of the IoT business, the decline in panel prices, is also a reason for the recovery of the gross profit margin of the IoT business.
Fourth, Internet services: not afraid of industry pressure, advertising continues to grow
In the fourth quarter of 2021, Xiaomi's Internet service business achieved revenue of 7.27 billion yuan, an increase of 18% year-on-year, accounting for 8.5% of the company's total revenue. Internet services revenue still grew, but slowed.
Look at the sub-items of Internet services:
Advertising services: is the largest component of the company's Internet services. In the fourth quarter, Xiaomi's advertising services achieved revenue of 4.9 billion yuan, a new single-quarter high, an increase of 32.4% year-on-year. Mainly due to the growth of global pre-installation revenue and overseas revenue, in addition, brand advertising revenue still achieved steady growth under the pressure of the industry.
Game Revenue: Stay stable. In the fourth quarter, Xiaomi's game revenue was 900 million yuan, an increase of 9.5% year-on-year. After the impact of game sharing faded, the company's game revenue returned to growth.
Other value-added businesses: Xiaomi's revenue from other value-added services in the fourth quarter was 1.7 billion yuan, which remained basically stable. Mainly due to the company's strengthening of risk and active control of the scale of the fintech business.
From the perspective of the value-added business of Xiaomi and Apple, under the pressure of the Internet advertising industry, the companies that occupy the hardware entrance have a strong ability to resist risks and have a higher right to speak.
Splitting Xiaomi's Internet service business into volume and price, the growth of Internet business in this quarter mainly comes from the growth of MIUI users:
Number of MIUI users: As of December 2021, the number of monthly active miui users reached 509 million, an increase of 28% year-on-year. With the growth of Xiaomi hardware shipments, MIUI users exceeded 500 million for the first time, with a net increase of 113 million users in 2021. From the first quarter of 2018 to the present, the number of Xiaomi MIUI users has achieved more than 20% growth for 16 consecutive quarters. Dolphin Jun believes that with the growth of Xiaomi hardware shipments, the number of Xiaomi users is expected to continue to maintain high growth.
ARPU value: Comprehensive MIUI user number, calculate the ARPU value in a single quarter. In the fourth quarter, the ARPU value of Xiaomi Internet service was 14.3 yuan, down 8% year-on-year. The reason for the decline in Xiaomi's ARPU value in this quarter is that the ARPU value of domestic users has declined and the proportion of overseas users with low ARPU value has increased significantly.
In the fourth quarter of 2021, the gross profit of Xiaomi's Internet service business was 5.53 billion yuan, an increase of 30.9% year-on-year. Gross margin for Internet services continued to improve in the fourth quarter, to 76.1%, up 7.7 pct year-on-year.
The gross profit margin of Internet services in the quarter continued to remain above 70%, mainly due to structural changes in the Internet services business. The advertising business had higher gross margins, while other value-added services had lower gross margins. In the quarter, the value-added of the company's Internet services mainly came from the advertising business with higher gross profit margins, which further increased the gross profit margin level of the entire business.
Fifth, overseas markets: overseas realization is a drag, but also a potential
In the fourth quarter of 2021, Xiaomi's overseas revenue was 41.6 billion yuan, an increase of 23.3% year-on-year. Last quarter, Xiaomi's overseas business was affected by maritime logistics and did not achieve significant growth year-on-year. Judging from this season, Xiaomi's overseas business has returned to high growth. The proportion of Xiaomi's overseas revenue continued to remain at about 50% in the quarter, and it continued to implement a globalization strategy.
The advantage of the "globalization strategy" is that the fluctuations of any country and region have a relatively weak overall impact on millet. In 2021, Xiaomi ranked first in smartphone shipments in 14 countries and regions around the world, and ranked in the top five in 65 countries and regions around the world.
Xiaomi Group also operates around the "hardware + software" model. While hardware shipments, Xiaomi is also accumulating a large number of MIUI users. From the distribution of MIUI users, Xiaomi already has 500 million MIUI users at the end of 2021, of which another 379 million are from overseas markets. In other words, although Xiaomi comes from Chinese mainland, overseas users now account for nearly 3/4 of the company.
However, because the ARPU value of overseas users is much lower than that of domestic users, with the expansion of Xiaomi in overseas markets, the company's overall ARPU value has been structurally lowered by overseas markets. Longbridge Dolphin Jun estimates that the ARPU value of Xiaomi Group's domestic users in the fourth quarter was 43.91 yuan, while the ARPU value of overseas users was only 4.22 yuan, and the difference between the two was more than 10 times.
Although the overseas ARPU value is still very low, the overseas ARPU value is constantly increasing. At the beginning of 2019, the overseas ARPU value was only 1.5 yuan, and now it has increased to more than 4 yuan. Due to the continuous development of markets such as Europe and the Americas and the gradual upward movement of the mobile phone price band, Xiaomi's overseas ARPU value is expected to continue to increase.
Sixth, the cost and performance of the situation: the trend of the three fees is higher, the performance is decent
In the fourth quarter of 2021, Xiaomi's three expenses totaled 11.43 billion yuan, an increase of 20.7% year-on-year. The increase in operating expense ratio of 1.4pct was mainly due to higher selling expenses such as R&D investment and seasonal promotions.
R&D expenses: $3.85 billion for the quarter, up 24.1% year-over-year and accounting for 4.5% of revenue. The growth of R&D revenue continued to outpace revenue, mainly due to the growth of the company's R&D personnel. Xiaomi's employees increased by 1,900 in the quarter, of which R&D personnel increased by 673 in the quarter.
Judging from Xiaomi's financial report, the current xiaomi car personnel has exceeded 1,000 people, and the 1,000 people are mainly R & D personnel, which has increased the company's research and development expenditure. Before Xiaomi Cars achieved revenue, the increase in research and development expenditure increased the company's expense level. From the perspective of R& D expense rate, Xiaomi's original R & D expense rate of about 3% has increased to more than 4%, and may continue to continue in the future.
Selling expenses: $6.25 billion for the quarter, up 22.9% year-over-year and accounting for 7.3% of revenue. The increase in sales expense rate in this quarter has seasonal factors, due to the double eleven, Christmas and other holidays, the company's advertising, promotional concessions, logistics expenses, etc. have increased the company's sales expenses. With the promotion season passing, Xiaomi Group's sales expense ratio is expected to decline in the first quarter.
Administrative expenses: $1.33 billion for the quarter, up 4% year-over-year and accounting for 1.5% of revenue. The overall proportion was stable, and the growth was mainly due to the increase in administrative and management salaries.
In the fourth quarter of 2021, Xiaomi's overall gross profit margin was 17.1%, an increase of 1pct year-on-year, and the company's gross profit margin improvement mainly came from the profitability of IoT business and Internet services. The gross profit margin of the company's most important mobile phone business declined slightly, mainly due to the shortage of supply and seasonal promotions.
Adjusted net profit for the fourth quarter of 2021 was RMB4.47 billion, slightly exceeding market expectations of RMB4.13 billion. Xiaomi Group's revenue exceeded expectations, including 2.8 billion yuan in revenue from the disposal of apartments and materials, and the overall revenue after excluding this impact was basically in line with market expectations. Gross margin of 17.1% is also basically in line with market expectations. The overall performance of Xiaomi's financial report this quarter is decent and basically in line with market expectations.