As the Xiaomi IPO approached, more and more related news came out.
Recently, some media have exposed a so-called Xiaomi Pre-IPO financing promotion material, which clearly shows Xiaomi’s income, profit, user, valuation and market value data.
Suspected exposure of financing materials
According to the materials, Xiaomi still lost 9.8 billion yuan in 2015. In 2016, it earned 913 million yuan. In 2017, it is expected to reach 7.582 billion yuan. The profit rate is 6.5%, and it is expected to increase to 18.831 billion yuan in 2019.
In the four years from 2016 to 2019, the compound annual growth rate of millet's net profit could reach 174%.
In 2017, Xiaomi’s revenue was estimated at US$17.6 billion (approximately RMB111.3 billion), and Internet service revenue increased to 31.7%. In November 2017, Lei Jun had publicly stated that it had completed a sales target of RMB100 billion.
It is estimated that by 2019, Xiaomi's annual revenue will reach 38.2 billion U.S. dollars (approximately 241.6 billion U.S. dollars), and Internet service revenue will account for more than 50%.
According to the materials, Xiaomi currently has a valuation of US$68 billion (approximately RMB430 billion). If it is listed in the fourth quarter of 2018, the market value will be in the range of US$8,451,351 million (approximately RMB54,048,545 million).
As for users, Xiaomi’s daily life was 132 million, monthly activity was 165 million, and daily average user usage time was 312 minutes (5.2 hours).
Xiaomi did not disclose the overall profitability data. Earlier, Wang Yanhui, secretary-general of the China Mobile Alliance, once said on Weibo that Xiaomi’s profit in 2017 will not be less than one billion US dollars. The data released by the financing promotion materials also meet the expectations of the industry.
For the above financing materials, Xiaomi declined to comment on the "Securities Daily" reporter.
Hardware companies and the Internet
It is worth noting that according to the financing materials mentioned above, in 2016, 79% of Xiaomi’s revenue composition came from hardware and 21% came from internet service business. The net profit margin of the hardware business is only 2.8%, while the net profit margin of the Internet service business is over 40%. Xiaomi is expanding the proportion of its revenue from Internet service business. In 2017, it is expected that the revenue from Internet service business will account for 68.3%. It is estimated that by 2019, the proportion of revenue from Internet service business will exceed hardware revenue.
From this we can see that Xiaomi does not make much money from hardware devices, mainly relying on related Internet services.
The industry has been arguing around whether Xiaomi is a hardware company or an Internet company.
Some media reports said that fund managers do not favor hardware company stocks. Some fund managers said they would not buy stocks issued by Xiaomi IPO, because Chinese hardware companies all face low profit margins, vicious price wars, and low consumer loyalty.
Millet's supporters believe that the company is not a pure hardware company, but like Apple, has a series of competitive products, including sports bracelets and rice cookers and many other Internet connection devices. Millet browsers and app stores can generate advertising and game revenue, and profit margins are much higher than smartphones.
In Xiaomi's official website, Xiaomi claimed to be an innovative technology company focusing on the construction of high-end smart phones, Internet TV, and smart home ecological chains.
P/E multiples to apples
The valuation of millet given by the above financing materials is obviously far below the 100 billion dollar valuation of market rumors. However, judging from the expected market value of the stocks listed in the fourth quarter of this material, Xiaomi may increase its valuation during this year and reach a market value of about one hundred billion US dollars in the IPO.
Chen Meng, Executive Director of Chanson Capital, said in an exchange with a reporter from Securities Daily that Xiaomi’s aura is even greater, and it is also an imitator of Apple or Google. The revenue and valuation now exposed is too high, especially the price-to-earnings ratio High.
Apple's current market capitalization is 913.17 billion U.S. dollars, and its price-to-earnings ratio is 18.34 times. Based on this price-to-earnings ratio, Xiaomi’s current valuation of US$1 billion in profits should be around US$18.34 billion, much lower than the company’s current valuation in the private equity market.
In the past year, Tencent has become the highest valuation technology company in China and currently has a P/E ratio of 63.7 times. Even at such P/E ratios, Xiaomi’s valuation is only US$63.7bn, which is still far below the low end of the valuation range of 80 billion US dollars as many people have said.
The media quoted Kiranjeet Kaur, an analyst at International Data Corp., as saying that Xiaomi's equipment, applications, and services must form an ecosystem like Apple's. I am afraid there is still a long way to go.
There are even opinions that Xiaomi is unlikely to develop to such an extent. Some people think that Xiaomi will not become Apple, nor will it become Tencent with a huge social media base. Xiaomi is just a hardware company.
It is worth noting that Lei Jun has already resigned from the chairman and director of Cheetah Mobile, chairman of the Gathering Times, gradually decentralized, to avoid suspicion of excessive connected transactions before Xiaomi's listing.
With the news of A shares calling for unicorns, Xiaomi’s news on the listing of A shares and H shares also came out.
For this news, Xiaomi still does not comment.
In Shen Meng's view, the structure of Xiaomi A+H is almost impossible, because Xiaomi is a VIE structure, but it is not ruled out that after the listing in Hong Kong, the A shares can be traded indirectly through the CDR.