Second profitable quarter in a row for Xiaomi due to IoT, smartphone, and lifestyle products growth
The Beijing company signs an exclusive, 30-year international licensing deal with Meitu, a smartphone and selfie app provider
It is the second consecutive profitable quarter for the world’s number 4 smartphone supplier Xiaomi Corp. Q3, which ended on September 30, helped alleviated some of the concerns regarding the excessive saturation of the Chinese smartphone market and the general economic slowdown.
On Monday, the company reported a Q3 net profit of 2.5 billion yuan, or US$360 million. This impressive result demonstrates a complete rebound from the 11billion yuan losses in the same period of the previous year, which was made possible by growing international smartphone shipments and the IoT and lifestyle product segments notably expanding.
Driven by these factors, revenue increased 49%, amounting to 50.8 billion yuan from 34 billion just one year before.
Xiaomi CFO Chew Shou Zi stated in a conference call that the results were in line with internal expectations, but exceeded market expectations.”
The optimistic report demonstrated that the Xiaomi’s increased focus on overseas markets, where it is striving to obtain more than 50% of its annual earnings, is paying off. The company reached a 9.7% global market share with 34.3 million smartphone shipped in Q3. This is a new record for the company, according to industry experts.
Xiaomi’s shares in HK were rather sluggish since the IPO in July 2018, but at the market close on Monday they were up 5.1% to HK$13.60 on the heels of the good news.
Global sales accounted for 43.9%, or 28.5 billion yuan of the entire revenue in Q3, according to the regulatory reports by the company.
Smartphones were up 69% to 34.9 billion yuan, and accounted for 75.4% of the total revenue. The higher selling prices, increased presence I the segment of mid-to high-priced segments, as well as growing shipments to India and Western Europe.
16.7%, or 10.8 billion yuan of all the revenue came out of the IoT and lifestyle products segments, particularly the smart TV and laptop sales,
The internet services business segment amounted to 7.5% of the revenue, which equaled 4.7 billion yuan due to the increase in the advertising income.
However, currency volatility is still an issue, despite the growth shown in all the business segments.
The depreciation of both the renminbi and India’s rupee have had a significant effect on the company, with the currencies losing 6.9% and 14.2%, respectively.
India, where Xiaomi leads the way in smartphone shipments, is the most important source of Xiaomi’s international revenue, as another expert report suggests.
Over 60% of the company’s smartphone bill of materials is priced in USD, and the company is thus made vulnerable by the dollar’s appreciation against the rupee.
Among other expert concerns are the slowdown of China’s economy, weak domestic demand for smartphones and an unstable situation in China’s hi-tech industry in general.
Xiaomi’s still bound to be affected by the general industry slowdown, even though there are some aspects that allow the company to offset the losses. Revenue from the rising smart TV sales and online ads is among the positive developments.
The firm keeps increasing its smartphone segment via the multi-brand marketing strategy, while the company’s intention to build a high-growth internet company is still in place.
On Monday Xiaomi and Meitu (smartphone and software manufacturer) entered into a strategic collaboration. The latter will license its brand, a number of technologies and domains. The agreement entails a 30-year development deal for Xiaomi, which will concentrate on engaging female users.
Three months ago, Xiaomi came out with a distinct brand of smartphones, Poco, in order to compete with such giants as Samsung and Huawei in the Android premium segment of the international market.
The next step for Xiaomi is the US market, and the company is already taking preparatory steps in order to make an entrance there.Source