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Economist: Xiaomi's valuation may reach 80 billion US dollars

via:新浪科技     time:2018/5/14 15:31:42     readed:319


Analysts believe that Xiaomi plans to conduct an IPO on the Hong Kong Stock Exchange, raising 10 billion US dollars (the valuation and financing targets have not yet been announced in the prospectus), but may reach a market value of 80 billion US dollars. The market value is already close to China’s largest search engine. The market value of Baidu's Baidu company is US$ 91 billion (Baidu is a member of BAT, the three largest Chinese technology company; the other two are Alibaba andTencent).

However, discussing these 18 months ago was somewhat impractical. In 2016, Xiaomi’s mobile phone sales dropped sharply, and its share in the Chinese market fell from No. 1 to No. 5. Lei Jun, the founder of Xiaomi, blamed rapid growth for causing supply chain congestion. Other views are that the company is over-expanding. From rice cookers to drones, Xiaomi released many Internet-connected devices and created a hardware ecosystem that can be manipulated by mobile phones. Last year, these hardware and cost-effective mobile phone sales accounted for 91% of Xiaomi’s total revenue of US$18 billion, but it only contributed 8.8% of the gross profit margin. In contrast, Apple’s mobile phone sales contributed to Apple’s 39% gross margin.

But since then, Xiaomi has rebounded again. At the Shanghai conference in March this year, Lei Jun took a big step forward with a pair of white sneakers. The audience sat full of rice noodles. Lei Jun said that this new smart phone, the MIX 2S, surpassed Apple’s.iPhoneX. In the next release of the millet game, rice flour boiled because the game allows users to order food delivery in one click.

The re-emerging millet said that rice noodles can submit feedback and opinions online, with high loyalty. In addition, excellent products and affordable prices also prompted more people to buy millet products. Xiaomi said that 1.4 million users already have more than 5 hardware products. By 2022, Xiaomi expects to open 1000 offline stores to sell mobile phones, notebooks, and more than 300 kinds of Xiaomi's lifestyle products (mainly operated by Xiaomi’s startup company that owns shares). The revenue of physical stores can reach 10 billion yuan. In the US dollar, Lei Jun announced last month that a shock to potential investors: His goal is to keep the overall net profit margin of all these hardware below 5%. For a long time, Lei Jun’s approach was to attract consumers to Xiaomi’s system with the highest price-to-price ratio in order to earn money through internet services.

Xiaomi company does service through the Internet and in itselfDevelopmentThe advertisements on the App have achieved a huge profit margin of up to 60%. These apps are built in advance on MIMI's self-developed MIUI operating system based on the Android system. These services and apps include Xiaomi Music and Xiaomi Mall. From 2015 to 2017, the average income of MIUI users has doubled. A banker who helped Xiaomi marketed said that Xiaomi’s prospects in India are very promising and its potential is huge. At the end of last year, Xiaomi surpassed Samsung as the company with the highest sales volume of smart phones in India. This is one of the main reasons for the rebound in Xiaomi’s sales volume. Last year, 28% of millet sales came from overseas markets, up from 6% in 2015. It is worth mentioning that half of Xiaomi's sales in the first quarter of 2018 came from overseas and it is a member of Chinese companies seeking overseas business.

At the same time, Xiaomi also faces some challenges. Its domestic competitor Huawei, its sales growth in India in the first three months of this year was higher than Xiaomi. Neil Shah, an analyst with market research firm Counterpoint in Mumbai, said that unlike China, India’s Google services have not been banned, and it’s difficult for Xiaomi to maintain its service-based profit model. Lei Jun hopes to bring Xiaomi phones to the United States this year. However, in view of the troubles faced by Chinese mobile phone manufacturers such as ZTE and Huawei, Shelly Jing of IDC, another market analysis company, stated that Xiaomi “is unlikely to pour resources into such a difficult market”. . In the domestic market, Xiaomi also faces pressure to increase the average price of mobile phones and improve quality (the current average price is 881 yuan, equivalent to 138 US dollars). In addition to one-time expenses, Xiaomi’s net profit last year was US$700 million.

If the recent forecast is accurate, this IPO will be the largest IPO since Alibaba was listed on the New York Stock Exchange in 2014 (Alibaba’s financing was $21.8 billion). Xiaomi is eager to prove to investors that it is an internet company, which is a much higher valuation than a single hardware company. Xiaomi said Xiaomi’s IOT platform has connected more than 100 million devices and invested in more than 210 companies and is an incubator. Fu Sheng, the founder of Cheetah Mobile, said, "In the near future, perhaps BAT will become ATM, M stands for Xiaomi and will replace B-Baidu."

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