Xiaomi executives interpret the 2021 Q4 financial report

Xiaomi released its fourth-quarter and full-year financial report for 2021. According to the financial report, the company's total revenue in the fourth quarter reached 85.6 billion yuan, a year-on-year increase of 21.4%; adjusted net profit reached 4.5 billion yuan, a year-on-year increase of 39.6%. For the full year of 2021, Xiaomi Group's total revenue reached RMB 328.3 billion, a year-on-year increase of 33.5%; adjusted net profit reached RMB 22 billion, a year-on-year increase of 69.5%.

After the financial report was released, Xiaomi President Wang Xiang, Vice President and CFO Lin Shiwei, and General Manager of the Public Relations Department Wang Hua attended the first financial report conference call that followed, interpreting the main points of the financial report, and answering questions from several reporters.

A reference news reporter asked: Under the influence of regional conflicts and the epidemic, how will the company's global business operations in 2022? What is the overall goal?

Wang Xiang: In fact, in 2021, we have experienced a very, very complicated situation, and the supply situation is very severe, but Xiaomi's performance has proved that we are a very resilient company and should be able to deal with different market environments and large market conditions. environmental changes. This situation will continue in 2022, and the uncertainty of the international situation still exists, but the good news is that from a comprehensive perspective, the supply will improve, and the fundamental improvement will appear after the second quarter, which is the second half of the year. . In order to do a good job in overall performance, I think Xiaomi will continue to work hard in several aspects. One is a technology investment. The continuous technical investment will inject the most core capabilities and motivation for Xiaomi's future growth and growth in the next 10 years. Therefore, increasing investment in technology is definitely something we will insist on doing. In the next five years, there will be an investment of 100 billion to fulfill our commitment. This is the amount invested by the entire group. Investing will continue. In addition, the dual-brand strategy must continue to be promoted, and we must make high-end products. In the Chinese market and the global market, on the basis of stabilizing our traditional customer base, we will make great progress in 2021. By 2022, we will continue to promote the high-end market, and at the same time, we will promote more and more core products such as the Internet of Things and smart TVs to the global market. In general, we still look forward to healthy and stable growth in 2022, and we designed the overall operation plan according to this goal. One more thing to mention about the global market, we are ranked in the top five in more than 60 countries around the world, so we have a good depth and can help us balance risks, so I think we still have confidence in the overall business growth of.

Lin Shiwei: Let me add a few more words. We still feel that the global mobile phone market is still huge. We achieved very good results last year, with shipments reaching 191 million units, compared to our global market share of 14.1%, which is far from the first. There is still a lot of room for improvement with second place, so in 2022, we will pay more attention to our layout in multiple markets to seize more market space. As just mentioned, from the perspective of the IoT business, we will also put more excellent products overseas for expansion, and strive to increase the growth of this part of the business.

Wang Xiang: Regarding the growth of the global business, I have some data to share with you. In 2021, our global shipments will be 191 million. In addition to the Chinese market, we have also achieved good results in many markets, such as Our market share in Western Europe has reached 16%, and the market share in Europe is about 20%. The European market still has relatively good room for growth. The overall market share of both Eastern Europe and Western Europe should be more than 20%, which is the level we should achieve. Another big growth point may be in Latin America. Our market share in the Latin American market is at the level of 12-13%, so the development space is huge and very large. It can be seen that in several large markets, we all have a relatively large room for growth. In terms of our depth in the global market, I see that there are still great opportunities for growth. Of course, we must further control the problems caused by supply, especially in the first quarter due to the troubles caused by supply, as well as the imbalance of global development.

Bloomberg reporter asked: Continuing with the question just now, the company's shipments this year have reached 190 million units. You also mentioned that there is a lot of room for future growth. How confident are you that this year's shipments will exceed 200 million units? In addition, regarding the automotive business, Xiaomi has also invested a lot in R&D and personnel. I would like to ask if the company has any more specific plans to introduce this year?

Wang Xiang: Overall, our shipments last year reached 190 million units. From the numbers I just mentioned, you can see that there is still room for us to continue to grow. As for the 200 million units you just mentioned Estimates, I think it should be within our plan, we will definitely aim at a good growth rate to operate, of course, we must also take into account the risks. In terms of the automotive business, I think maybe what we can share with you now is what Lin Shiwei reported to you just now. First of all, our automotive business has established a very efficient and strong team in a relatively short period of time, with more than 1,000 people, many of whom are R&D personnel, and have begun to go all out to do automotive R&D work. , and our goal is still to be out in the first half of 2024. I think that's all I can report to you at the moment.

China Securities Journal reporter asked: Congratulations to the company for its good performance in 2021, but I have a doubt that the company's adjusted net profit growth rate for the whole year and the fourth quarter is very fast, but operating profit, including other The total profit has declined. How should these two figures be understood? Another question is about the progress of the automotive business. Recently, I saw news that Xiaomi's automotive engineering prototype will be unveiled in the third quarter of this year. I want to ask if this is true? In addition, regarding the company's five-year investment of 100 billion R&D, I would like to ask what is the specific R&D plan until 2022?

Lin Shiwei: Regarding the first question, since our IPO, investors have paid attention to our adjusted net profit, which is the most realistic reflection of our company's operation. As everyone knows, in fact, we have invested in a lot of companies, about 400 companies, some of which are listed companies, and some have not yet been listed. Every quarter, we need to make some adjustments based on their actual valuations. In the profit items, we disclose in accordance with International Financial Reporting Standards (IFRS), but it is difficult to reflect the operation of the company, the adjusted net profit can best reflect the operation of our company. Maybe everyone didn't pay attention before, because our investment companies were all in a state of value-added, but everyone knows that in the past one or two quarters, the market has changed a lot, and many listed companies have undergone many adjustments, resulting in fluctuations in value. . If you look at the income of the company's investment portfolio last year, it was still positive, that is to say, we still made money in terms of investment, but we still insist on adjusted net profit, which can most truly reflect the operation of our company.

Wang Xiang: To sum up, when calculating the fair value, if the company we invest in has been listed, then we should calculate the value of our investment according to the listed price; if it is not listed, we can only use the assessed value. Due to the fluctuation of the stock market, the fluctuation of value leads to the fluctuation of the data you see. What Lin Shiwei mentioned is that what is really related to our operating performance is the adjusted net profit, while other figures are mainly related to our investment portfolio. value is related. Overall, our investments have been very, very successful over the past period of time.

Regarding the second question, I know that everyone is very concerned about the progress of our auto business, including our more than 40,000 employees of Xiaomi. I believe that every employee is very concerned about the progress of our company, and some people also have plans to buy a car because of their own, so I am very concerned and looking forward to it. The current progress is relatively smooth, and some aspects have exceeded expectations. We will definitely find a suitable time to provide more details. It is inconvenient to disclose more now.

Regarding the 100 billion R&D plan, we invested 13.2 billion in 2021, which actually exceeded our previous expectations. It turned out that we were talking about 13 billion, and the exceeding-expected investment also reflects our determination. This year's R&D investment will definitely increase quite well on the basis of 13.2 billion. If on average, it will be 20 billion per year in the next five years, then the absolute value of the investment in the next few years will definitely increase step by step.

A reporter from China Securities Journal asked: What are the key points of the specific layout? Like chips, or foldable (mobile phones) or something?

Wang Xiang: There are a few key points that Xiaomi is very, very concerned about. The first is the imaging part, focusing on the differences in the core user experience of smartphones. The imaging part must be an area that we are very concerned about, and we will continue to invest. In the past few quarters, we have cast water droplets and shot in high-pixel dark light. There is also fast charging. We have also developed our own chips and image processors. Whether it is software or chips, our investment will continue. In 2021, we will recruit 5,000 new engineers, and there will still be fresh blood to join us this year.

A reporter from Hong Kong Economic Times asked: I would like to know about the supply chain this year. Is the current supply chain affected by geographical factors? Have shipments in Europe in particular been affected? In addition, this year's macro situation is relatively hot. Does the management have forecasts for the advertising business and mobile phone shipments? Finally, does Xiaomi Finance have a spin-off plan?

Wang Xiang: First of all, the supply situation for the whole year of this year will be fundamentally better than last year. Now we judge that there will be no supply problems, but there are still great challenges in the first quarter, and the improvement will accelerate from the second quarter, so The first quarter was more difficult. In addition, due to the epidemic, logistics will cause us a lot of trouble. For example, the epidemic in Hong Kong will affect the transportation between Hong Kong, Shenzhen and Guangdong. I believe this is short-term, and I hope that it will continue to improve in the future. I also noticed that normal exchanges will gradually resume in April, which may be good news for us. As far as Europe is concerned, since most of our production is located in central China and Beijing, if the domestic logistics are resolved, and the international logistics are basically restored, I think it should not be a big problem from the second half of the year. , especially starting from the third quarter, I believe there will be no chip supply problems.

Lin Shiwei: Xiaomi Finance has changed its name to Tianxing Digital, focusing on retail finance and supply chain finance. In terms of retail finance, over the past year or so, we have carried out compliance reviews in accordance with regulatory requirements and achieved stable development based on compliance; in terms of supply chain finance, we have provided better credit services for the supply chain industry. Both businesses have been growing. We currently have no plans for a spin-off, and of course, we will make adjustments based on market conditions.

Wang Xiang: Regarding the Internet advertising business, which drives the growth of our Internet business, at present, I think there are two main factors. First, is the continuous growth of monthly active users of mobile phones. Last year, the number of new users reached 110 million, and the number of new users in the Chinese market also reached more than 18 million. The new users will bring about an increase in our advertising and Internet revenue. The second point is that we continue to promote high-end products. High-end smartphone products can lead to an increase in Internet revenue and an increase in revenue per user. Looking at the specific numbers, our high-end mobile phone shipments reached 24 million in 2021, compared to 10 million last year. Coupled with the users who broke the circle of high-end mobile phones, that is to say, our high-end products, including the newly released Mi 12, as well as high-end products such as Mi 11, half of the users are new users, that is to say 50% Neither is a Xiaomi replacement user. Internet regulation is being strengthened and more standardized, but because we have the growth of new users, it has led to the growth of Internet business.

21st Century Business Herald reporter asked: The first question is what strategy does the company have in terms of chips? Will you make some of your own cell phone chips? The second question is about offline channels. Last year, Xiaomi Home developed very fast. Can it maintain the rapid growth of last year this year? Is there an overall plan for the number of stores?

Wang Xiang: For chip research and development, we are currently focusing more on areas directly related to user experience, such as fast charging, imaging technology, and making some products that are most directly related to user experience to accumulate experience, train teams, and attract Better talents join the team and then do other operations. This is the current rhythm. Speaking of channels, more than 10,000 Xiaomi offline stores will be built throughout 2021. I think the most important task in 2022 is to improve store efficiency and fill dead spots. The laying of offline channels is like our high-end business. It is definitely not an overnight thing. The construction and optimization of the network is something that should be done or is being done in 2022. If you are interested in this aspect, we can also arrange leaders and colleagues in China to communicate with you.

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