Another 10 billion repurchase, bargain-hunting Xiaomi at the right time?

​$XIAOMI-W(01810)$  announced the 2021Q4 and the whole year results on Tuesday. The company's revenue and net profit exceeded market expectations, showing full resilience under the headwind of tight supply chain and weak demand.

While the fundamentals improved, Xiaomi announced a new round of HK $10 billion repurchase plan, following Ali's $25 billion. Can the 10 billion repurchase for two consecutive years save Xiaomi's share price?

Key points of performance are as follows:

Q4 revenue was 85.575 billion yuan, a year-on-year increase of 21.4%, exceeding expectations;

Q4 adjusted net profit was 4.473 billion yuan, a year-on-year increase of 39.6%, exceeding market expectations;

In 2021, smartphone revenue was 208.9 billion yuan, a year-on-year increase of 37.2%; The annual mobile phone shipments were 190 million units, up 30% year-on-year. Looking at the world, high-end pushes up ASP

​

Focusing on the worldwide, high-end pushes up ASP

Since the second half of last year, Xiaomi has had a hard time. The global supply chain is tight, and the competition in the domestic smart phone market is fierce. In particular, Apple's expansion in the middle and high-end smart phone market leads to weak demand for Android phones, which has greatly impacted Xiaomi's core mobile phone business. During the vacuum period from Q3 financial report to Q4, Xiaomi's share price fell by nearly 50%.

Despite this, Xiaomi resisted the pressure in the fourth quarter. Couterpoint data shows that Xiaomi mobile phone shipments in the fourth quarter of 2021 were 45 million units, a year-on-year increase of 4.6%; Xiaomi's market share reached 12%, ranking third in the world (11% in the fourth quarter of 2020).

Throughout the year, Xiaomi shipped 190 million smartphones worldwide in 2021, up 30% year-on-year, with a market share of 14.1%. Among them, the global shipments of high-end smart phones exceeded 24 million units, and the proportion of high-end smart phones increased from about 7% in 2020 to about 13%.

Shipments maintained positive growth in headwinds and market share steadily increased, which may be attributed to Xiaomi's expansion in Europe and Latin America, offsetting the slowdown in demand in China and India. According to the financial report, Xiaomi's mobile phone shipments rank among the top five in 62 markets, among which 14 markets rank first, and overseas revenue accounts for about 50%. Xiaomi is one of the few companies to truly globalize the exhibition industry.

In addition, the remaining demand for 5G replacement is an internal driving factor. By the end of 2021, the market share of 5G mobile phones in smart phones has reached 28%, which is 2.3 times higher than the market share of 8.5% at the end of 2020.

At the same time, Xiaomi's richer matrix of high-end mobile phone products continued to increase the average selling price (ASP), and the selling prices of Xiaomi 12 released at the end of last year reached 3,699 yuan. Roughly calculated, in 2021, the revenue of smart phones will be 209.8 billion, and the shipments will be 190 million units, so the ASP will be 1,099 yuan, which is a significant increase compared with before. It is based on the ever-improving ASP that Xiaomi can achieve revenue growth exceeding expectations.

Non-mobile phone business boosts profits

1)AIOT, Xiaomi's second largest business, is also expanding steadily, and the market penetration rate of tablet, notebook computer, smart home appliance and wearable device is constantly increasing. In particular, the global shipment of smart TVs reached 12.3 million units, achieving contrarian growth and ranking first in China for three consecutive years.

Q4, Xiaomi IoT and consumer products revenue reached RMB 25.1 billion, up 19.1% year-on-year. As of December 31, 2021, the number of AIOT connected devices reached 43.4 million, up 33.6% year-on-year.

2) With the continuous supervision of the Internet industry, the revenue growth rate of Xiaomi's Internet sector slowed down as expected, and Q4 increased by 17.7% year-on-year. However, the scale of Internet users maintained rapid growth. In December 2021, the monthly active users of MIUI in the world reached 50.89 million, an increase of 28.4% year-on-year, with a net increase of 11.25 million monthly active users of MIUI in the whole year.

The expansion of user scale has driven both at home and abroadRevenue from advertising business. According to the financial report, the advertising revenue will reach 18.1 billion yuan in 2021. It increased by 42.3% year-on-year.

Thanks to the non-mobile phone business with high profit margin, the adjusted net profit of Xiaomi Q4 reached 4.473 billion yuan, up 39.6% year-on-year, which also exceeded market expectations.

3）Regarding the car-building business that the market cares about, the company said that since the announcement of the car-building plan in March 2021, Xiaomi's smart electric vehicle business has progressed beyond expectations. Up to now, the R&D team of automobile business has exceeded 1,000 people, and will continue to expand R&D in core areas such as autonomous driving intelligent cockpit in the future, which is expected to be officially mass-produced in the first half of 2024.

Another 10 billion repurchase, and bargain-hunting is at the right time?

Recently, the Hang Seng Index ushered in a long-lost rebound, but Xiaomi's rebound was far weaker than that of other Internet companies. It seems that Xiaomi's priority in the eyes of investors is not high.

Indeed, the emotional and capital risks of Hong Kong stocks have not been completely lifted at present. And in 2022, Xiaomi and other domestic mobile phone manufacturers still have to face the challenges of chip shortage and slowing demand, and Apple stands out and further squeezes the Android camp.

During the extremely sensitive period of the market, the role of Xiaomi's financial report is self-evident, showing Xiaomi's high-end strategy and the continuous growth of global market share.

More importantly, in addition to releasing the signal that the fundamentals are improving, Xiaomi also announced a new round of stock repurchase program to buy back shares in the open market at a maximum total amount of HK $10 billion from time to time. Previously, Xiaomi had two repurchases of HK $10 billion in March last year and 2019 respectively, and this time it paid another 10 billion to show the company's confidence in its business development prospects.

Most institutions set the target price of Xiaomi at around HK $30, corresponding to 20 times PE (TTM). At present, the forward PE of Xiaomi 11.9 times is also underestimated historically. We have reason to believe that the fundamental improvement combined with the repurchase of real money and silver basically meets the conditions for the stock price to bottom out.