Xiaomi (China) - Press Release: Adjusted Net Profit Reaches RMB3.2 Billion, Beating Estimates.
Xiaomi Corporation (“Xiaomi” or the “Group”; stock code:1810), a consumer electronics and smart manufacturing company with smartphones and smart hardware connected by an Internet of Things (“IoT”) platform at its core, announced its unaudited consolidated results for the three months ended March 31, 2023. With a strong focus on optimizing operational efficiency and premiumization strategy, Xiaomi reported a solid performance with total revenue reaching RMB59.5 billion. Adjusted net profit reached RMB3.2 billion, representing a year-over-year (YoY) increase of 13.1% and a quarter-over-quarter (QoQ) surge of 121.3%.
In the first quarter of 2023, the group effectively executed its core operating strategy of "dual emphasis on scale and profitability" and have delivered initial results. The Group’s overall gross profit margin reached a record high of 19.5%. Gross profit margin of the Group’s smartphone business was 11.2%, an increase of 3.1 percentage points QoQ. The total inventory was RMB 42.6 billion, down 24.1% YoY, hitting its lowest level in the past nine quarters.
Mainland China’s smartphone ASP hits a record high, boosted by increased competitiveness in premium smartphone segment:
Xiaomi’s premiumization strategy yielded impressive results in the fiercely competitive industry landscape. Its smartphone shipments in the RMB4,000-RMB5,000 price segment ranked No. 1 in mainland China among Android smartphone brands, with a market share of 24.1%, representing a YoY increase of 7.7 percentage points, further unlocking its potential. For the premium smartphones priced at or above RMB3,000 in mainland China, the shipments increased by 4.0 percentage points YoY. The average selling price (“ASP”) of smartphones in mainland China reached a new quarterly high, up more than 18% YoY.
Global smartphone market faces sustained pressure this year due to lackluster demand, tempered consumer confidence, and sluggish purchasing power. According to Canalys, the global smartphone shipments decreased by 13.3% YoY in the first quarter of 2023. Facing dual pressures at home and abroad, the group has actively implemented the business strategy transformation. Revenue from smartphone business reached RMB35.0 billion, with a gross profit margin of 11.2%, representing an increase of 3.1 percentage points QoQ. According to Canalys data, Xiaomi maintained its No. 3 global smartphone shipment ranking in the first quarter, with shipments reaching 30.4 million units and holding a market share of 11.3%. The Group's leading position is further fortified by its robust and efficient global operations.
Capitalizing on the resumption of offline channels, the Group displays a favorable business performance due to its inherent strengths. According to third-party data, Xiaomi's offline smartphone shipment market share in mainland China reached 7.9% in the first quarter, a YoY increase of 1.4 percentage points. As a result of the growing synergy between offline stores and premiumization strategy, the offline stores’ gross merchandise value (GMV) of smartphone products recorded both YoY and QoQ growth. As of May 17, 2023, offline channels contributed over 55% of total cumulative sales volume of the Xiaomi 13 Series and the Xiaomi 13 Ultra, underscoring the exceptional performance of new retail operations in bolstering sustainable growth.
During the period, Xiaomi's premium smartphone strategy made steady progress, resulting in impressive sales performance and flourishing reputation. In April 2023, Xiaomi launched its new professional imaging flagship smartphone, Xiaomi 13 Ultra, which features the upgraded Summicron Lens co-developed with Leica, to explore the ultimate mobile optical photography experience. Redmi also unveiled the Redmi Note 12 Turbo Harry Potter Edition, the world's first smartphone launched in collaboration with the Harry Potter Series. As of March 31, 2023, the Redmi Note 12 Turbo Series became the first best-selling smartphone in the RMB2,000-3,000 price segment on the three major e-commerce platforms (JD.com, Tmall and Pinduoduo) and continues to maintain tremendous popularity in the market.
Over 60% surge in smart home appliance revenue, driven by smart living ecosystem:
Xiaomi advanced its smartphone x AIoT strategy, optimizing product structure and upgrading its usage scenorios. During the quarter, revenue from IoT and lifestyle products reached RMB16.8 billion, with a record high gross margin of 15.7%. The revenue from smart large home appliances recorded a YoY improvement for the fifth consecutive quarter.
As of March 31, 2023, the number of connected IoT devices (excluding smartphones, tablets and laptops) on Xiaomi's AIoT platform increased by 29.2% YoY to a record high of 618 million. The number of users with five or more devices connected to the Group’s AIoT platform (excluding smartphones, tablets and laptops) reached 12.3 million, representing a YoY increase of 29.6%. In March 2023, the monthly active users (MAU) of our Mi Home App grew to 78.1 million, an increase of 18.8% YoY.
Home usage scenarios have always been a key focus for Xiaomi. Its smart large home appliance (including air conditioners, refrigerators and washing machines) continued to demonstrate robust growth momentum, with revenue increasing by over 60% during the period. In terms of air conditioners, Xiaomi worked tirelessly to achieve breakthroughs in key technologies, with a focus on our proprietary technology development. As a result, shipments grew by over 60% YoY. Xiaomi's refrigerators shipments were more than three-fold compared with the same period last year. As for washing machines, despite the more than 6% decline in the retail sales of washing machines in mainland China, in the first quarter (data from AVC), Xiaomi’s washing machine shipments exceeded 250,000 units and continued to achieve YoY growth, outperforming the market.
Record high global internet user base demonstrates immense monetization potential:
Xiaomi's Internet services revenue reported solid performance in the first quarter, with revenue reaching RMB7.0 billion and continuous improvement in operational efficiency, resulting in a gross profit margin of 72.3%. As a top-tier Android distribution channel in China, Xiaomi plays a crucial role in game promotion and user acquisition. Benefiting from the recovery of the domestic gaming market, as well as the group's optimized operational capabilities and developer services, Xiaomi's gaming revenue reached RMB1.3 billion during the quarter, representing a YoY growth of 16.3%. This marks the seventh consecutive quarter of YoY improvement, demonstrating the sustained efforts and market recognition of the gaming business.
Xiaomi's Internet services business strengthened its diversified strategy, while focusing on long-term and healthy development, aiming to enhance commercial efficiency and transformation. In the first quarter, Xiaomi's advertising revenue reached RMB4.4 billion, while overseas internet services revenue increased by 16.4% YoY to RMB1.8 billion, accounting for 25.7% of our total internet services revenue, and was up 3.9 percentage points YoY.
As of March 2023, the MAU of MIUI globally and in mainland China reached record highs. Global MAU of MIUI reached 594.8 million, an increase of 12.4% YoY, while MAU of MIUI in mainland China reached 146.2 million, up 7.8% YoY.
R&D investment reaches 4.1 billion as technological advancement becomes the Group’s long-term growth driver:
Xiaomi's core upward momentum stems from the Group's dedication to research and development (R&D). In the first quarter of 2023, Xiaomi's R&D expenses increased by 17.7% YoY, reaching RMB4.1 billion. As of March 31, 2023, the number of R&D personnel reached approximately 16,500, accounting for more than 50% of its employees. Xiaomi's R&D efforts have yielded fruitful results, with the group obtaining more than 32,000 patents worldwide as of March 31, 2023.
Looking forward to the future with confidence, the Group’s management team identifies 2023 as the crucial year for accelerating Xiaomi's growth. Xiaomi will remain resolute in advancing its new business strategy with a focus on high-quality development, anchored on its relentless pursuit of technological advancement.