On January 4, the first trading day of 2021, the share price of Xiaomi Group touched a new record high, reaching $HKD 35.25 per share on the closing bell, with a market cap of up to $HKD 880 billion..
Just 2 years ago Xiaomi landed on the Hong Kong Stock Exchange. On the day of the celebration banquet, Lei Jun, founder and CEO of Xiaomi, made a bold statement: “We want investors who bought on the first day of listing to double their profits.” The stock price has been hovering below 10 dollars for a long time, lower than the issue price of $HKD14.
But in August 2020, the situation was reversed, and Xiaomi’s stock price bounced back and went from zero to hero in the matter of 6 months.
Xiaomi’s profitability has always been questioned. Although the shipment of mobile phones is very high, the problem of low-end and low-price is always unavoidable. In 2018, Xiaomi turned losses into profits, but its net profit margin was only 7.7%. In the first quarter of 2019, it was still 7.28%. The gross profit margin of Xiaomi’s business has been maintained at 11%-13% since 2017. The best-selling products such as mobile phones have not made Xiaomi a considerable profit.
”After ten years of work, everyone thinks that Xiaomi is still low-end, and I am very depressed.” In order to change the public’s impression of Xiaomi’s “low-end, OEM and no technology”, Lei Jun decided to focus on the mid-to-high-end product line . This change started with Xiaomi Mi 10.
In 2019, Xiaomi’s overall gross profit margin increased by 1.2%, from 12.7% in 2018 to 13.9%. In the third quarter of 2020, Xiaomi’s market share returned to the top three in the world, accounting for 13.5% of all mobile phone deliveries. The average selling price of Xiaomi’s products continued to rise, a year-on-year increase of 14.7%.
The hot sale of Xiaomi Mi 11 has become another high-end series “explosive model” after Xiaomi Mi 10 series, further consolidating the position of the Xiaomi brand in the high-end market.
Earlier, Industrial Securities raised the target price of Xiaomi to 37.3 Hong Kong dollars and maintained its BUY rating.