On June 11th, Xiaomi Group ("millet") issued a CDR prospectus, raising funds to be used mainly for global business expansion, core product R&D, and eco-chain related businesses such as IoT and consumer products. The company will simultaneously apply for listing on the Hong Kong Stock Exchange. Multi-Source Sources disclosed to the China Securities Journal reporter that the application for the Xiaomi CDR issuance has either been approved soon, or it has broken the 24-day listing history currently maintained by Ningde.
Many details have not been disclosed
From the current situation, the key information such as the issue price, issue volume, issuance ratio, and how the underlying stocks are converted has not yet been disclosed. It is expected that the time of issuance and listing will also be in a state to be determined.
According to the prospectus, plans are made to adopt a market-based method of inquiry to determine the issuance price based on factors such as the company's fundamentals, investor demand, market affordability, and funding requirements for future development.
On June 7, nine documents, including the "Administrative Measures on Depositary Receipts and Transaction Management (Trial)", were issued to remove obstacles for CDR issuance. According to the regulations, the issuer and its lead underwriter shall scientifically design the issuance plan according to the respective conditions of the enterprise, establish a reasonable and effective incentive and restriction mechanism for the participation of institutional investors in the inquiry, and promote the active participation and prudent pricing of professional institutional investors.
Sun Jinyi, an analyst of New Era Securities, believes that Xiaomi's CDR may be consistent with the pricing of Hong Kong stocks, and it is expected that its CDR issuance price-earnings ratio may not be based on 23 times, with reference to the company's "H-share + ADR" distribution model.
The rights of depositary receipt holders are clearly stated in the prospectus. Xiaomi stated that holders of depositary receipts can enjoy the rights of the company's Class B ordinary shareholders, including obtaining cash dividends, share dividends and other property distributions, exercising the rights to share options, and exercising voting rights.
Promote internationalization strategy
The prospectus shows that 40% of Xiaomi’s raised funds will be used for global business expansion, 30% will be used to develop core autonomous products, and 30% will be used to expand and strengthen IoT and consumer products and mobile internet services (including artificial intelligence). ) Eco-chain related business.
According to the Hong Kong stock prospectus disclosed by Xiaomi, 30% of the funds used are for global expansion, 30% for R&D of independent products, 30% for expanding and strengthening IoT and consumer products and mobile Internet services, and 10% for operations. Funds and general company use.
"Global expansion" has become a key investment in millet financing. Since 2014, Xiaomi has actively promoted its internationalization strategy and achieved good results. Xiaomi CDR prospectus shows that Xiaomi has entered 74 countries and regions, and sales in 14 countries and regions have entered the top 5.
Xiaomi’s overseas income has increased year by year. In the 2015-2017 and first quarter of 2018, overseas income was 4.056 billion yuan, 9.155 billion yuan, 32.081 billion yuan, and 12.47 billion yuan respectively, accounting for 6.7%, 13.38%, 27.99%, and 36.24% of the company's total revenue. .
Millet has made significant achievements in exploring the Indian market. In 2017, Xiaomi’s mobile phone market was the highest in India’s smartphone market share. According to IDC statistics, in the first quarter of 2018, Xiaomi’s market share in China was 15.1%, ranking fourth; the market share in India was 30.3%, ranking first; the global comprehensive market share was 8.4%, second only to Samsung and Apple. Huawei ranked fourth.
The CDR prospectus disclosed millet's data for the first quarter of 2018. In the first quarter of 2018, Xiaomi’s operating income and net profit attributable to shareholders of the parent company were RMB 34.412 billion and RMB 7.705 billion, respectively. After deducting non-recurring gains and losses, the net profit attributable to ordinary shareholders of the parent company was RMB 1.038 billion.
Xiaomi’s revenue comes from four major businesses, including smart phones, IoT and consumer products, Internet services and others. The smartphone business accounts for about 70% of Xiaomi’s revenue. In the first quarter, Xiaomi’s smartphone business revenue was 23.239 billion yuan, accounting for 67.53% of revenue.
The revenue of IoT and consumer products reached 7.697 billion yuan in the first quarter, accounting for 22.37% of revenue. Xiaomi said that it has built the world's largest consumer IoT platform and connected more than 100 million smart devices (excluding mobile phones and laptops). Based on the number of connections, Xiaomi’s consumer IoT hardware global market share in 2017 was 1.7%.
Internet services have the highest gross margin. In the first quarter of 2018, Xiaomi’s comprehensive gross profit margin was 15.55%. Among them, the gross profit rate of Internet services was as high as 65.58%, while that of smart phones was 8.49%, and that of IoT consumer products was 14.77%.
In the industrial chain, the upstream smartphone business includes chips, cameras, screens, housings, batteries, etc. The main suppliers include Ouffy Technology, Changxin Technology, Helitech (9.58-1.54%, stocks for diagnosis), Wentai Technology, and Xinwang. Tatsu, Shenzhen Tianma, Sanhuan Group, Lansi Technology and other A-share companies.
In the IoT and consumer goods business, the upstream companies are mostly companies that have invested in millet stocks. For example, the related party of the millet bracelet is Huami Technology, which has now landed on the NYSE. As of March 31, 2018, Xiaomi established an ecosystem of more than 210 companies through investment and management. Among them, more than 90 companies are involved in the research and development of smart hardware and consumer products.
From 2015 to 2017, Xiaomi paid purchases to related parties of RMB 4.4 billion, RMB 7.148 billion, and RMB 13.255 billion respectively, which accounted for 7.09%, 11.96%, and 13.74% of operating costs in the current period.