Weiduo real estate

Text | Off-Form (ID: Excel-ers), Author | Zhou Xiao Liu Mi (Senior Researcher), Editor | Renault, Data Support | Insight Data Research Institute.

On the second anniversary of listing, Xiaomi, whose share price has been lying on the ground for many months, finally rose sharply. Since May, its share price has risen by more than 7 1% in two months, and recently reached a maximum of 17.5 Hong Kong dollars.

"The soaring share price of Xiaomi" has also become a hot topic in the recent investment market, which has also triggered bursts of discussions in the scientific and technological circles.

Then, in this "longevity" summer of 2020, why is the market suddenly enthusiastic about Xiaomi? This paper is divided into the following three parts to analyze this problem in detail:

① At the business level, there are signs of bottoming out.

(2) driven by quantity and price, with high performance flexibility.

(3) When the bull market strikes, millet also rises.

When it comes to Xiaomi, some post-90s people may have the impression of "young people's first mobile phone", but after 95 or even 00, they began to know Xiaomi from the electric balance car and Xiao Ai classmates. Behind this different impression, the share of Xiaomi mobile phone in the domestic market has been declining and IOT star products are constantly emerging.

However, at the beginning of this 5G outbreak, Xiaomi returned to the stock price issue point. Is it because the market has seen the relevant signals presented by the Xiaomi series?

Mobile phone business: domestic 5G is coming, and overseas 4G is in a period of rapid growth.

Xiaomi mobile phone was born in 20 1 1. In the following ten years, although the mobile phone industry was turbulent, Xiaomi mobile phone always held the trump card of "cost performance", which made it gain a place in domestic and foreign markets.

Therefore, to explore the present situation and development of Xiaomi mobile phone, we should mainly start from the domestic market of Xiaomi mobile phone; And the more popular western European market and Indian market abroad.

At present, China's 5G commercial technology is in the forefront of the world. In order to seize the tide of 5G replacement in the domestic market, Xiaomi is also prepared. The company expects to release more than 10 5G mobile phones this year. So will domestic consumers buy Xiaomi's account?

In fact, despite the impact of the epidemic, the purchasing power of domestic consumers for 5G mobile phones still exists in a wide range. Judging from the current domestic sales situation of 5G mobile phones, after the sales volume fell under the impact of 1 and the epidemic in February this year, the domestic sales volume of 5G mobile phones began to rise rapidly in March, and the entire 5G mobile phone market began to rebound. According to China Information and Communication Research Institute, by May 2020, domestic sales of 5G mobile phones will account for 46.3%.

As we mentioned in the previous article, when mobile phone products undergo technological changes, such as switching from 4G to 5G, the mid-range and cost-effective mobile phone manufacturers often benefit first, because such mobile phones satisfy the instant experience and consumption of some users. When the general replacement cycle comes two years later, these users will choose to buy mobile phones with higher price positioning.

Xiaomi, as a representative of the cost performance of smart phones, also complied with this part of the market in the early stage of changing machines, attracting the favor of some users who changed machines. This is also reflected in the sales of Xiaomi mobile phone in the past three months. In the third quarter of 20 19, the market share of Xiaomi mobile phone in Greater China dropped to 9%, and it began to rebound in the next two quarters, especially in Q 1 quarter this year, the market share rebounded to 10.6%, showing signs of continuous rebound.

Secondly, let's talk about the internationalization of Xiaomi's mobile phone, which is also more auspicious than the past two years.

The first is the European market. At present, most European countries are still in the period of popularization and rapid expansion of 4G. By 20 19H 1, the proportion of 4G mobile phones in western Europe was 57.6%, which was only equivalent to the popularization level in China in 20 16 years. Central and Eastern Europe only accounts for 7%, and the 4G frenzy is coming soon.

As a cross-validation, observing the data of Q 1 in 2020, we can see that in the Western European market, Xiaomi's sales data soared by 79%, making it the fourth mobile phone company in Western Europe. In contrast, Samsung Huawei has fallen sharply. At the same time, in the Turkish and Polish markets in Eastern Europe, Xiaomi also grew well, and Huawei, Samsung and Apple were all defeated.

The last thing to mention is the Indian market of Xiaomi. After Xiaomi 20 14 entered the Indian market, it localized its hardware manufacturing in India and quickly won the Indian market with lower price and better after-sales service.

Up to now, Xiaomi's market share in India has been in a leading position for a long time-walking on the streets of India, 3 out of every 10 smartphone users use Xiaomi.

Although the epidemic situation in the Indian market and some political factors have a certain impact on Xiaomi's subsequent sales and share, thanks to the supply chain and product localization policy implemented after Xiaomi entered India, in the short term, under the network effect and brand effect, the Indian market's enthusiasm for Xiaomi will not change rapidly.

IOT continues to grow: enriching SKUs and dual-drive star products.

As early as 20 13, Xiaomi began to lay out the IOT ecology. Since 20 18, Lei Jun has repeatedly said that in the next five years, mobile phones and IOT will be the "dual engines" for Xiaomi's development.

By March 3, 2020, the number of IOT devices connected to Xiaomi IOT platform will reach 252 million, up 42.6% year-on-year.

The rapid expansion of IOT is inseparable from its explosive products, such as smart TV and smart wearable device (mi band). ) and smart speakers have long been in the leading position in China. These products can be said to be more competitive in the market. Among them, the realization of mi band is the most striking. According to Konashe's estimated shipment of wearable bracelets, mi band 4 is the best-selling wearable bracelet product in the world from the third quarter of 20 19 to the first quarter of 2020.

In addition to explosive products continuing to dominate the market, Xiaomi's IOT system is constantly improving and diversifying. Since May 2020, Xiaomi has officially released washing machines, band 5, smart doors, organic light-emitting diode TVs and other products, continuously enriching its IOT ecology. The subsequent popularization of 5G may provide better technical support for the ecological development of its IOT and contribute to its IOT layout.

Internet service: traffic portal is open.

Good expectations for mobile phones and IOT products in the future can theoretically further open the traffic portal for Xiaomi's Internet business.

From the data point of view, the number of users of Xiaomi is increasing, and by 2020, Q 1 quarter has exceeded 300 million. According to Xiaomi Q 1 quarterly financial report, the number of monthly users of artificial intelligence "Little Love Classmate" also exceeds 70 million.

This shows that Xiaomi has mastered a large number of traffic portals, which also brings more opportunities for later traffic realization and expands the company's growth engine to some extent.

From a business perspective, Xiaomi mobile phone benefits from the domestic and international pattern, and the continuous growth of IOT will be a strong support for online marketing traffic access.

But in the long run, these favorable factors will still be affected by some uncertain events.

The first is the fierce competition in the domestic 5G mobile phone market. Although the cake in the entire 5G market is getting bigger and bigger, other mobile phone manufacturers have joined the battlefield, explored thousands of mobile phones, and implemented the "cost-effective" strategy, which intensified competition and avoided it.

At the same time, the marginal experience improvement of 5G mobile phones may also be a problem. When we transition from 3G era to 4G era and use mobile phones, the user experience brought by traffic increase has made a significant breakthrough. Whether 5G can bring users a breakthrough in the 4G experience in that year is hard for us to imagine at the moment. If there is no substantial difference experience in 5G products, it is obvious that the expectations of 5G may fail.

Followed by the international market.

In recent months, the sales of Xiaomi in the European market have soared. In addition to the structural benefits brought by its own 4G mobile phone, the departure of friends is also a factor that cannot be ignored.

In September last year, under the influence of the "Sichuan Founding" policy, the United States restricted the import of Huawei chips, and Google interrupted Huawei's GMS service. This does not have much impact on domestic users; But for foreign users, only by installing Google can they download most of the applications on the market. Without Google services, mate 30 is just a scrap metal machine.

Furthermore, in fact, a large part of the 47 million sales of Huawei 2020Q 1 in the European market comes from the "Glory" low-end model, which is the same cost-effective mobile phone as Xiaomi.

Without this "trade war", in the European market with the peak of 4G growth, Huawei Glory, like Xiaomi, is a beneficiary model in the cycle. On the one hand, the rapid rise of millet is caused by the law of "high-speed growth period, low-priced products are all the rage", on the other hand, it is also caused by eating a piece of "Huawei cake".

Therefore, Xiaomi's outstanding performance in the European market is partly due to the slow competition, and once this competition in the European market intensifies, we still have to question whether Xiaomi can maintain its structural advantage.

In the Indian market, despite the limited impact on Xiaomi in the short term and the political and epidemic "black swan" factors, we observed that the share of vivo in the Indian market actually increased rapidly, from 19q 1 to 260+0 in 2020Q 1 in one year. In the Indonesian market, vivo sales have occupied the first place. The strong growth of Vivo will also erode the share of millet, which is a risk factor that cannot be ignored.

From a business perspective, Xiaomi seems to have caught up with the double cyclical income of domestic 5G and overseas 4G, but for investors, what is more important is whether the growth at the business level can bring financial level, that is, profit growth.

The financial report shows that the average revenue growth of each mobile phone of Xiaomi is always lower than the gross profit growth of each mobile phone. 2020Q 1 revenue per mobile phone increased by 9% year-on-year, and gross profit increased by 16% year-on-year.

If income growth is compared to train running, gross profit is like running on a running train with acceleration superimposed. In this way, enterprises can earn more gross profit on each mobile phone while their income increases.

In the IOT business, we can also see that such gross profit has increased year-on-year, which is greater than the year-on-year growth of revenue. Especially after 20 18Q3, this trend is more obvious. (20 19Q4 revenue growth is greater than gross profit growth because of the year-end promotion, the sales of smart TV and some star products have soared, but there is not enough cost scale advantage at this time, so the year-end promotion is to "make profits" to a certain extent. )

There are actually two reasons behind the data performance of Xiaomi mobile phone and IOT: the cost side and the income side.

In terms of business nature, Xiaomi is actually a sales-driven or sales-sensitive enterprise. In other words, with the increase of sales volume, the manufacturing cost of each commodity will continue to decline, so that after the sales volume is opened, even if the price does not rise, the profit will grow faster.

In 20 17, new technologies such as APP ecology, touch screen and fingerprint identification brought the second mobile phone boom in the domestic 4G era. In order to keep up with this "trend", Xiaomi must upgrade its hardware. Behind the unlocking of the screen password and the fingerprint of the home button are a series of production costs such as raw materials and processing.

The financial report shows that the average production cost of each mobile phone of Xiaomi has risen from 789 yuan in 20 17Q2 to the highest point of 986 yuan in 20 18Q3.

When this wave of technology has passed and new technological innovations have not yet been ushered in, various brands of mobile phones have begun to be similar. The greater the sales volume, the lower the unit cost due to the scale advantage.

The cost of a single mobile phone of Xiaomi has dropped from 20 18Q4 to 20 19Q4 and to 87 1 yuan, the highest point a year ago. At this time, the production cost of each mobile phone decreased 1 15 yuan.

2020Q 1, due to the arrival of the technological innovation of 5G mobile phones, the cost of each mobile phone began to rise again, reaching 955 yuan. However, in absolute value, compared with the high point of 986 yuan of 20 18Q3, it still has a certain cost advantage.

Behind the cost reduction of each mobile phone, in fact, with the increase of sales, the manufacturing cost is decreasing.

Generally speaking, product manufacturing costs are divided into raw materials, labor and equipment workshop costs. But when we analyze the cost of equipment and workshop, we find that its depreciation increases greatly after 20 19Q 1.

Before 20 18Q4, its equipment and property depreciation accounted for about 0. 1% of revenue. But from 20 19Q 1, the data suddenly soared to 0.48%, and then it was basically above 0.45%.

Under normal circumstances, there must be corresponding events behind the sudden increase and decrease of data.

The Paper's detailed investigation found that Xiaomi's Wuhan headquarters building was officially started on 20 18 1 1, with a total investment of 340 million. According to its 20 18Q4 financial report, its property and equipment assets also surged, accounting for a sharp increase in revenue from 5% in the previous quarter to 1 1%.

That is to say, Gai Lou's incident is first reflected in the increase of assets of 20 18Q4 in the financial statements, and then depreciation starts from 20 19Q 1. In this way, the "equipment and workshop expenses" in Xiaomi's manufacturing expenses were "polluted" by the Gai Lou incident, and it is difficult for us to judge the changes of expenses with the increase of sales volume from this level.

On the other hand, although the cost of equipment and workshop has soared, the overall cost we mentioned earlier has declined, which theoretically shows that the reduction of labor and raw material costs is actually great, covering the increase of new building costs.

That is to say, with the increase of sales, Xiaomi can lower the price of purchasing raw materials, and the staff cost of dividing goods equally is also reduced, thus reducing the overall cost and improving the gross profit.

This also proves that Xiaomi has a certain operating leverage, or it is indeed a sales-driven business.

On average, the gross profit of each mobile phone has increased, not only because of the gradual scale of costs, but also because of the gradual price increase of Xiaomi. In other words, while the cost side is decreasing, the unit price of the income side is also increasing. And we believe that due to the slowdown in the market competition environment, there will be more room for price increases after Xiaomi.

After 20 14, when the domestic 4G mobile phone replacement tide just started, the mobile phone market can be described as blooming everywhere, with thousands of mobile phones blooming everywhere. ZTE, Coolpad, Asus, all manufacturers are fighting price wars.

Now, it is not surprising that the price-performance ratio advantage of Xiaomi is 20 14. Xiaomi launched Redmi Note in the price war, and the price dropped below 1,000 yuan, but the prices of brands such as ZTE and ASUS were basically at the same level. At that time, in order to seize the market, these mobile phone manufacturers couldn't wait to keep the price to a minimum, let alone raise the price.

After 20 18, many thousand yuan machine brands have fallen, and brands such as Coolpad, HTC and Vito have gradually faded out of public view, and the competition in the whole market has slowed down. Xiaomi survived the melee, and its share was basically stable at the high point of 13%. At the same time, it began to increase the price slowly.

20 18Q2, Xiaomi's share in Greater China increased to the highest point 13.9%. This quarter, Xiaomi launched flagship machine Xiaomi 6, and the price was set at more than 2,000 yuan. ASP rose from 8 18 to 953 yuan.

After the price increase of 20 18Q2, supplemented by the increase in sales volume, we can see that the gross profit of Xiaomi's mobile phone has obviously increased, from 44 18q 1 to 524 yuan in 0 yuan, and then to 64 1 yuan in 20 18Q3. 20 18Q4, Xiaomi pursued the victory and launched mid-to high-end models such as Mi 8 and Xiaomi MIX 3, and the unit gross profit surged to 835 yuan.

Back in 2020, when 5G started, we think that the domestic 5G mobile phone market is more oligopoly, and the market competition will be less than the 20 14 that blooms everywhere, and the price of millet will be relatively high.

At present, only Huawei, Samsung, OPPO and Xiaomi (including Redmi) have launched 5G mobile phones in China, and only Redmi focuses on 5G models below 2000 yuan.

Since Xiaomi seems to have a relatively loose price increase space at present, can it be boldly assumed that the gross profit of its single mobile phone will actually have a good room for improvement?

According to our above analysis, on the one hand, because Xiaomi is sales-driven, as long as sales are turned on, profits can theoretically grow faster; On the other hand, due to the slowdown of market competition, Xiaomi seems to have some room for price increase and profits will increase.

Driven by the same amount and price, Xiaomi's future profit growth actually has a good imagination.

If the core reason for Xiaomi's soaring share price is the above-mentioned good performance expectation and better profit expectation behind this expectation, then the secondary reason may also be inseparable from the upward trend of the entire stock market.

The epidemic "black swan" seems to cover the global economy, and countries around the world begin to release money to boost the economy.

The Federal Reserve announced that it will maintain zero interest rate until the economy recovers, and personally replenish liquidity to the market (buying corporate bond ETFs, etc.). ). The balance sheet once exceeded $7 trillion from the initial $4 trillion, and the supply of M2 in the United States surged.

As after the 2008 financial crisis, funds did not flow into the real economy as expected. On the contrary, funds flowed into the stock market, and the Nasdaq index formed new "historical highs" again and again.

The domestic central bank has also cut interest rates and RRR many times. 1October 6, 65438 RRR was lowered by 0.5PCT, 7-day reverse repo rate was lowered on February 3, RRR cut policy for small and medium-sized banks was implemented on April 15, LPR was lowered again on April 20, and interest rate was lowered by 20 basis points on June 18.

As a result, a large amount of funds flowed into the stock market, and the A-share market, led by the heavyweights of brokers, launched an impact on the index, opening a new round of bull market, and countless investors and funds poured into the market. With the arrival of this bull market in the A-share market, some southbound funds choose to flood into the Hong Kong stock market to raise funds.

The Shanghai Composite Index rose to the closing price of 3,443.29 on July 13, up more than 27% from the lowest point in March. The Hang Seng Index also closed at a high of 26,339 on July 6, up 2 1.8% from the March low.

On the other hand, with the recovery of the domestic economy, the market has resumed its expectations for Xiaomi's 5G mobile phone business to a certain extent, and many investment banks and brokerage analysts have raised the target price of Xiaomi.

Xiaomi himself also passed the proposal on repurchasing no more than 10% shares at the shareholders' meeting on June 23rd. The adoption of the proposal shows that Xiaomi is optimistic about the company's subsequent revenue and profits. The capital market also responded immediately: on June 24, Xiaomi's share price showed a long-term Dayang line, which rose more than 9% that day.

Affected by multiple factors, Xiaomi's share price, which plummeted in March, also started to rebound in May, and gradually began to rebound sharply. In July 10, the highest price of millet rose to 17.5 yuan, and finally stood back to the issue price two years ago.

Today, two years later, we have certain expectations for Xiaomi's business growth and the profit acceleration behind the business growth. It is precisely because of this expectation that Xiaomi finally stood back to the issue price.

However, whether Xiaomi's current U-shaped stock price line can continue to be painted as a "cross-test" depends on the extent to which domestic 5G expectations can be implemented, whether foreign 4G advantages can be sustained, whether profit growth can be realized as scheduled, and whether market sentiment will rapidly cool down. And other factors.

If the above-mentioned core indicators can meet expectations, this "just showing the sharp corner" stock price may be just the beginning.