The rapid rise of Xiaomi is a phenomenon-level event in the Internet business circle in recent years.
On May 3rd, Xiaomi Group (“millet”) submitted a listing application to the Hong Kong Stock Exchange and was considered to be the largest IPO in the world this year. The prospectus shows that CITIC CLSA, Goldman Sachs, and Morgan Stanley are joint global coordinators. Person, joint bookrunner and joint lead manager.
With the publication of the prospectus, the outline of the millet business empire has gradually become clear. The original 'black technology' product that Xiaomi claimed was not to be the 'muji of the scientific and technological community'. What Rebs really meant was through Massive hardware, achievements of millet's Internet of Things hegemony.
So you always think that Xiaomi is only a hardware mobile phone? NO! Xiaomi emphasized that he is an Internet company, but the Internet is big, what left to Lei Jun?
BAT seized the track, Tencent took social games, and the game made strong contact with people; Ali monopolized the connection between people and goods; Baidu ruled the connection between people and information; leaving Lei Jun left only the Internet of Things.
With hardware as the core, 'millet line not only expanded the industry chain, increased sales performance, improved the efficiency of the millet's home, but also through many aspects of the millet's ecological chain, culture and entertainment, business services, and e-commerce. Users, have established investment barriers, created a closed-loop intelligent IoT network, mastered pricing, and focused on investing in a non-controlled investment model. Xiaomi's products penetrated every link in life.
IoT farming, smart streetlights, smart appliances, sweeping robots, millet's 'home' app... All kinds of grounding gas applications spring up in life.
Overall, the Reebs circuit looks smooth and unobstructed. But can it support Xiaomi's 100 billion dollar valuation?
Xiaomi submits listing application in Hong Kong
At the moment of the biggest changes in the 25 years since the HKEx brewing, after publishing the new policy of listing shares with different rights, it was not surprising that Xiaomi completed the final puzzle of IPO preparation and submitted a listing application in Hong Kong on May 3. It is estimated that it will be officially listed at the end of June or early July, and then consider the listing in the form of CDR (Chinese Depositary Receipts) in the Mainland.
Xiaomi chairman Lei Jun said in an open letter that Xiaomi is not a pure hardware company, but an innovation-driven Internet company. Specifically, Xiaomi is an Internet company with mobile phones, smart hardware and the IoT platform at its core.
From the 'Triathlon' business model, through the 'eco-chain' company cluster, from the 'user-involved Internet development model' to the new retail path of Xiaomi's online and offline lines, Xiaomi found another one in the gap between BAT. road.
Lei Jun believes that the reason why Xiaomi can break out of a survival path is mainly due to its business model. Although hardware is an important user portal for Xiaomi, it does not expect it to become the main source of Xiaomi's profits. By opening up the upstream and downstream industrial chains, Most smart hardware companies that do not have a brand effect by participating in stocks cut their unnecessary costs through resource integration and the premium of Xiaomi's brand, and then deliver directly to the new retail channels through online or offline direct sales. User hands.
Therefore, what kind of business model Xiaomi created in the end is exactly what kind of business model? Xiaomi hardware does not make money, how Xiaomi’s ecological chain is constructed, and how it is used to raise funds. We may be able to glean from the draft prospectus and get answers.
1. The A-share millet concept shares in the stock market but there is no large-scale daily limit
The news that Xiaomi is about to land in Hong Kong stocks also stimulated the performance of a number of concept stocks.
Proton, Jingda shares rose sharply in intraday trading, Jinsheng intelligence, Zhuo wing technology also performed once in the session, but the stock limit of the daily limit has not appeared.
Some analysts believe that this may be due to the fact that Xiaomi has been warming up for a long time and the related concept stocks have already reacted in advance. In addition, different concept stocks have different levels of benefit, and there is a big difference in stock price performance.
According to the exchange's interactive platform, Pu Lutong is Xiaomi's supply chain service provider. The company stated that the sales volume of millet products will have a positive impact on the company.
Jinsheng Smart said in an interactive platform in March this year that the company supplies Xiaomi customers with precision mobile phone components.
Zhuo Wing Technology stated that the company has a good relationship with Xiaomi. The cooperation products mainly include millet mobile power supply, cycling meter, millet smart bracelet, small ant smart camera, air purifier, millet mobile phone, etc. Millet models of mobile phones are all produced in cooperation with the company. With the continuous deepening of the company and millet cooperation, the field of cooperation is also constantly enriched.
2, The explosive growth of income in 2017, why the financial report also shows a huge loss? Detailed reading is as follows
Millet's latest three full-year key financial data scenarios From 2015 to 2017, Xiaomi’s specific core financial data are as follows:
income
Numbers: 66.811 billion yuan, 68.434 billion yuan, 114.625 billion yuan respectively.
Interpretation: In 2015, revenue was almost stagnant compared to 2015, but in 2017 it ushered in a big explosion that almost doubled from the previous year.
Research and development expenses
Figures: 1.512 billion yuan, 2.104 billion yuan, 3.151 billion yuan respectively.
Interpretation: With regard to research and development, Xiaomi’s spending has been rising year by year. In 2017, it was already twice as fast as in 2015. Xiaomi’s R&D expenditure as a percentage of total revenue is not particularly high among tech companies, but the current total R&D expenditure has become a scale.
Operating profit
Numbers: 1.373 billion yuan, 3.785 billion yuan, 12.215 billion yuan respectively.
Interpretation: Operating profit rose rapidly year by year, showing that overall performance of its main business continued to improve.
Annual profit (loss)
Figures: They were a loss of 7.627 billion yuan, a profit of 492 million yuan, and a loss of 439.89 billion yuan.
Interpretation: The huge loss shown in the 2017 financial report was mainly due to a huge deduction of RMB 54.272 billion under the item 'Change in the fair value of convertible repurchaseable preferred stock'. If the impact of this factor is deducted, the 2017 profit will be lower. In 2016, it increased dramatically.
How do we understand the losses arising from changes in the fair value of convertible redeemable preferred stocks? Analysis means that such losses will generally only appear in companies reporting under the International Accounting Standards (IFRS), which is only an accounting treatment and the actual continuation of the company. The business will have no impact, and it will be affected by the pre-IPO valuation of the company. The more the valuation rises, the greater will be the losses from the fair value. In addition, the preferred stock will be converted into common stock when it is listed. Losses incurred by this project will disappear in the next fiscal year after listing.
For many companies listed in Hong Kong, the financial statements are affected by changes in the fair value of the repurchaseable preferred shares. Prior to Xiaomi, the most significant company affected by this project was Mito listed in Hong Kong.
According to the statistics, Meitu’s 2016 loss was RMB 6,261 million, including a loss of RMB 5,606 million from the change in the fair value of convertible repurchaseable preferred stocks. However, by 2017, Meitu’s losses have been substantially reduced to RMB 197 million, including one The important reason is that there has been no change in the fair value change of convertible repurchaseable preferred shares in 2017.
Comparison of Key Financial Data between Mito 2017 and 2016 Financial Statements
3, Lei Jun said that the comprehensive net profit of 5% is high or low?
In an open letter, Lei Jun stated that at the beginning of the establishment of Xiaomi, there was an ambitious ideal: To change the general low efficiency in the business world. From 2018 onwards, Xiaomi's annual comprehensive net business interest rate will not exceed 5%. There are more than one part, we will give back to the user.
Previously, the Times had already analyzed that the so-called net profit rate of an enterprise is a final financial data obtained after subtracting costs, expenses, and corporate income tax from enterprise revenue. It means removing costs and expenses related to hardware products. The word “integrated” shows that costs and expenses do not only refer to the hardware product’s own materials and production costs, but also include R&D, marketing, and management.
Is the comprehensive net profit rate of 5% so low for the domestic mobile phone industry?
We compare Xiaomi’s data with Huawei. Huawei is a leader in domestic mobile phone manufacturers in recent years. Its revenue and profit are good. In 2017, Huawei’s revenue was 603.6 billion yuan, net profit was 47.5 billion yuan, and its net profit rate was 7.87. %. As we all know, except for mobile phone services, Huawei's services include communications equipment and enterprise services. The profits of the latter two are relatively high. The net profit margin of Huawei's mobile phone business is actually less than 7.8%. Xiaomi uses smartphones as its main business. Reached Lei Jun's 5% net profit rate, then it is expected to have a net profit margin with Huawei's mobile phone business.
It is not difficult to see that the 5% net profit rate set by Lei Jun, although it sounds low, is by no means a domestic manufacturer's ability to get on the tip of the tip. It requires enterprises to make great efforts to achieve it.
4, Millet 'Triathlon' business model
The prospectus shows that mille's unique 'triathlon' business model consists of three pillars that work together: 1. Innovative, high-quality, well-designed and user-experienced hardware 2. Cost-effective price-selling products and high efficiency New Retail 3, Rich Internet Services.
Specifically, hardware is Xiaomi's hardware products that are developed independently or developed jointly with ecological chain companies, focusing on innovation, quality, design, and user experience. Products include smart phones, notebook computers, smart TVs, artificial intelligence speakers, and intelligent routers. As of March 31, 2018, Xiaomi connected more than 100 million devices (excluding smart phones and laptops) to interconnect these products, which not only improved the user ecosystem, but also provided an exclusive platform for Xiaomi's Internet services.
In terms of new retail, the omni-channel new retail distribution platform is a core component of Xiaomi’s growth strategy. Xiaomi’s official website has been focusing on online direct sales of products. According to IDC statistics, Xiaomi’s online smartphones in mainland China and India in the fourth quarter of 2017 Shipments are ranked first. Since 2015, Xiaomizhijia Store has expanded its offline retail direct sales network and opened up online and offline sales channels.
In terms of Internet services, as of March 31, 2018, Xiaomi’s Android-based MIUI has 190 million monthly active users, forming an open platform and providing a range of Internet services including content, entertainment, finance, and performance. tool.
5, the establishment of millet ecological chain: shareholding not holding
The prospectus shows that in order to maintain Xiaomi’s rapid growth and product pricing power, Xiaomi must work effectively with more partners. As of March 31, 2018, Xiaomi established an ecosystem of over 210 companies through investment and management. More than 90 of them participate in the research and development of smart hardware and consumer products.
China Merchants Securities Research Report pointed out that as of the end of 2017, Xiaomi IoT has access to more than 800 kinds of intelligent hardware, a total of 85 million IoT devices, more than 10 million daily active devices, has become the world's largest intelligent hardware IoT platform.
Since Xiaomi decided to lay out its ecological chain, foreign investment has increased dramatically. By the end of February 2018, Xiaomi’s accumulated foreign investment reached 199, concentrated on 46 smart hardware, 32 cultural and entertainment and 21 game services, and comprehensive layout. IoT.
In Xiaomi's ecological chain layout, there is no extension of the way that general companies adopt industrial capital to invest in mergers and acquisitions of related industries within the industry or expand strategic cooperation. According to Xiaomi, whether ecological chain companies lose their independence due to acquisitions, Either the terms of mutual protection in the strategic cooperation type have reduced efficiency, Xiaomi adopted the 'investment + incubation, shareholding non-controlling' model for the ecological chain layout to carry out the IoT layout.
6. How many worths of millet, Lei Jun will become the richest man?
On May 2nd, according to the financial news agency, millet IPO pricing was basically determined at between 100 billion and 120 billion US dollars, and cornerstone investors were priced at more than 80 billion US dollars.
In fact, Xiaomi’s valuation does not exceed US$100 billion in accordance with the view of mainstream brokerage firms. The draft prospectus’s section on Xiaomi’s shareholding structure shows that the entire interest in Smart Mobile Holdings Limited and Smart Player Limited is held by Lei Jun and his family members. , The percentage of ownership is 31.4124%. Including 429,518,772 Class A shares with a face value of $0.000025 per share, ten votes per share can be cast.
With an IPO millet market value of 100 billion U.S. dollars, Lei Jun has a 31.4124% shareholding, which corresponds to a value of at least 31.4 billion U.S. dollars. However, this figure still has a certain gap from the current richest man.
In addition, according to the prospectus, Xiaomi uses the same rights of different shares, divided into two types of stock rights, A shares can be voted 10 votes per share, B shares vote for each vote. Class A shares beneficiaries Lei Jun and Lin Bin.
Among them, the founder of Xiaomi Company, Chairman and CEO Lei Jun holds 31.41% of shares. If counted in the option pool of the headquarters ESOP employee stock ownership plan, Lei Jun holds 28% of shares. Through the dual shareholding structure, Lei Jun’s proportion of voting rights exceeded. 50%, is the controlling shareholder of Xiaomi Group.
7. After Xiaomi is listed on the Hong Kong stocks, will she still go for A-shares?
Not surprisingly, Xiaomi should be the first listed new economic company after the implementation of the Hong Kong Stock Exchange's new administration. At the same time, the domestic CDR of the A-shares is also in constant circulation.
At the beginning of this year, CDR was rumors buzzing. There are a number of Chinese Internet listed companies that have expressed their desire to return to A. Xiaomi was also reported to have Hong Kong + CDR achieve Hong Kong stocks and A shares at the same time. Legends have been guessed as an annual suspense drama. .
Now that Xiaomi is listed in Hong Kong, let the rumors be determined first. Will the news of the CDR be heard in the near future? The prospectus is still not clearly stated.
8. Xiaomi is listed. Does the former 1000 employees achieve financial freedom?
According to the prospectus, in 2015, 2016 and 2017, the highest remuneration of the five executives was RMB 2.51 million, 2.81 million and 1.96 million. The above remuneration includes basic salary, housing allowance, other allowances, retirement plan contributions, etc. .
Administrative expenses increased by 31.2% from RMB 900 million in 2016 to RMB 1.2 billion in 2017, which was mainly due to the increase in administrative staff and salary and benefits.
According to Xiaomi’s human resources strategy, Xiaomi provided employees with competitive remuneration packages. As of March 31, 2018, more than 5,500 employees held share-based rewards.
There are rumors that the health of Xiaomi employees can be roughly judged based on the job number. Early access to Xiaomi has options. If nothing else happens, the former 100 employees may become billionaires in the future, and the former 1000 employees may become future. Multimillionaire.