We divide the ending of Xiaomi into three parts:
1. World-class brand: Based on the awakening of the third consumer wave in China, Xiaomi is the first China consumer brand with extensive world influence.
2. Platform-level technology: Based on the sub-era wave of technology that TOTHING awakens everything, Xiaomi is the first 2T ecosystem of the Internet of Things focusing on human settlements.
3. Eco-level capital: Similar to Tencent's support for WeChat traffic empowerment, Xiaomi is also based on huge terminal throughput, industrial investment empowerment and binding of upstream parts supply chain ecology, becoming the capital ecology of hard technology full stack+full scene.
Flywheel model: a model of continuous growth. We have previously built a flywheel model of Xiaomi's growth based on the core idea of Amazon's original flywheel, and its final realization still needs the rapid positive feedback of the following three flywheels:
1. Smartphone is the starting point of flywheel rotation, with the strategic goal of obtaining traffic and customer base, the tactical goal of sales expansion, and the ultimate cost performance brought by ultra-low gross profit as the means to realize the first step of Xiaomi's ecological opening.
2. The hardware ecosystem of the Internet of Things is the second curve of smart phones. Through thousands of SKUs such as white electricity, black electricity, small household appliances and daily necessities, Xiaomi-style minimalist aesthetics and iPhone-level industrial design are promoted around the world, and finally the tactical goal of expanding sales and retaining customers and the strategic goal of building a sticky MAU are achieved.
3. Internet business is the core foothold for Xiaomi to achieve strategic self-consistency. With the revenue of about 65,438+00%, it achieved nearly 80% net profit, and promoted the sustainable development of Xiaomi's three flywheels through huge profits.
Ultimate essence: creating value for society. The profit of the Internet is not the end of Xiaomi. The end is a higher-dimensional value expression, the essence is the value created for the whole society, and it is an incremental game improved by Pareto, not a zero-sum killing in the stock market. Let's review the three endings of Xiaomi:
1, Xiaomi's Internet of Things ecosystem will be one of the four major scenes in the Internet of Things era, occupying the commanding heights of world science and technology in the future.
2. Xiaomi's world-class brand will use this as a carrier to spread China's modern industrial civilization to the whole world and become China's Sony, MUJI and Volkswagen.
3. Xiaomi's industrial investment will become an important hard technology industrial chain (vertical) Xiaomi ecological chain (horizontal) equity investment ecology in China and even the world, and become the next Tencent investment or hard technology sequoia.
Xiaomi Group: Making profits for consumers. We divide entrepreneurs into two types, and Lei Jun obviously belongs to the second type.
1, excellent entrepreneurs take profit as their ultimate goal;
2. Great entrepreneurs aim at creating social value.
The ultra-low gross profit margin of Xiaomi's hardware forces the supply chain to improve efficiency. Through the ultimate cost control and improving profitability, it has created its own unparalleled efficiency moat, benefiting consumers and creating great social value. Based on this, we reiterate Xiaomi's recommendation rating.
Profit forecast: Long-term optimistic about the corporate culture, product competitiveness and performance growth of Xiaomi Group. We predict that the company will achieve revenue of 2515/3233/398.8 billion yuan in 2022, and GAAP net profit will be11/21900 million yuan respectively, which is recommended.
Risk warning: the epidemic situation may have an impact on the performance in 2020; Industry competition has intensified; Sino-US trade friction has intensified; Product development did not meet expectations.
The text reads as follows:
1 flywheel model of millet growth
Excellent companies earn profits and excellent companies win people's hearts. Regardless of Xiaomi's values, business model or current development path, we all believe that Xiaomi has the genes to develop into a great company like Amazon, and the "flywheel effect" regarded as the truth of Amazon's growth is also applicable to Xiaomi.
We draw lessons from the core idea of Amazon's original flywheel, and construct the flywheel model of Xiaomi's growth from three business segments and four levels.
1) bottom flywheel. Smart phone is the starting point of flywheel rotation, with the strategic goal of obtaining traffic and customer base, the tactical goal of sales expansion, and the ultimate cost performance brought by ultra-low gross profit as the means to realize the first step of Xiaomi's entire ecological opening.
2) The flywheel is on the second floor. The hardware ecology of the Internet of Things is the second curve of smart phones. Through thousands of SKUs such as white electricity, black electricity, small household appliances and daily necessities, Xiaomi-style minimalist aesthetics and iPhone-level industrial design are promoted around the world, and finally the tactical goal of expanding sales and retaining customers and the strategic goal of building a sticky MAU are achieved.
3) The flywheel is on the third floor. Internet business is the core foothold of Xiaomi's strategic self-consistency, achieving nearly 80% net profit with a revenue scale of about 65,438+00%, and realizing the sustainable development of Xiaomi's three flywheels through huge profits.
4) The fourth layer flywheel: Three endings of Xiaomi. We believe that the end of Xiaomi is divided into three parts: based on the next generation of technology wave that TOTHING awakens everything, the end of Xiaomi is the first 2T ecology of the Internet of Things focusing on human settlements; Based on the awakening of the third consumption wave in China, Xiaomi's final result is the first China consumer brand with extensive world influence; Tencent relies on WeChat traffic to empower the Internet ecosystem with capital investment. Xiaomi is also based on huge terminal throughput, and industrial investment empowers and binds the upstream parts supply chain ecology, becoming a world-class hard technology capital ecology.
2 the strategic value of Xiaomi's commercial map
2. 1 Smartphone
The strategic value of mobile phones lies in supporting the whole supply chain system with shipments. Based on the forecast of the future competition pattern, we believe that Xiaomi has the potential to grow into the top three giants in the world.
As the foundation of Xiaomi, smart phone business plays a vital role in its operation. In the second quarter of 2020, Xiaomi's smartphone shipments totaled 28.3 million units, ranking the top 5 in 50 markets and the top 3 in 25 markets. In Chinese mainland, Xiaomi's various mobile phones won the 618 JD.COM sales crown; In overseas markets, shipments of high-end mobile phones increased by 99% year-on-year, among which European smartphones ranked third in the second quarter, with the first growth rate. Huge mobile phone shipments have helped Xiaomi expand its global customer base and gain more high-activity traffic, thus achieving the goal of supporting Xiaomi's upstream and downstream supply chain system.
Looking forward to the performance of Xiaomi mobile phone in the 5G era through the replacement cycle of 4 G, at present, China's 5G construction is at the international leading level, overlapping the current reshaped competition pattern. We expect the wave of upgrading of 5G mobile phones to come soon. With clear product positioning, we believe that Xiaomi will have excellent market performance in the wave of 5G mobile phone upgrading. It is predicted that the growth rate of Xiaomi mobile phone shipments will reach 9%, 24% and 16% respectively in 2020-2022, and the shipments of Xiaomi mobile phones will reach1680,000 and1950,000 respectively in 2026 and 2022.
At present, Xiaomi's smart phone business map runs through the whole low, medium and high-end mobile phone market, and competitive entry-level models are continuously released in the price range below 1,000 yuan; 1000-3,000 yuan Mid-range mobile phones popularize 5G technology to the mass market; The high-end mobile phone market above the price range of 3,000 yuan has gradually stabilized, reshaping the brand positioning of Xiaomi smart phone under the solidification of market thinking. With the arrival of the inflection point of the 5G replacement tide, according to revenue =ASP* shipments, we expect the revenue of Xiaomi Smartphone Division to be 296.52 billion yuan in 2023.
2.2 Internet of Things and Consumer Goods
The strategic value of the Internet of Things and consumer goods business lies in establishing an all-round brand image and realizing Sony's global brand goal in China.
In many fields, Xiaomi has completely changed the face of the industry with first-class quality and pricing close to cost, greatly accelerating the popularization of products. By the second quarter of 2020, Xiaomi has invested in more than 300 IoT equipment start-ups involving more than 2,000 SKUs such as white electricity, black electricity, small household appliances and daily necessities, covering users' diversified life scenes and accurately reaching customers. While helping Xiaomi to continuously expand its user base, IoT plays a multiplier effect with mobile phones to further consolidate the moat of Xiaomi's business model.
In 1970s, Sony was a global leader in consumer electronics, bringing a series of groundbreaking products to consumers, and its industry status was equivalent to that of Apple to mobile phones. Xiaomi's goal is to promote the progress of China's manufacturing industry and realize Sony's global brand goal in China, just like Sony at that time.
The secret of Sony's market development is to constantly develop high-tech new products to win with new ones. Japan's first tape recorder, transistor radio, "Telilong" color TV and many other products representing Sony quickly seized the market with excellent product performance, which laid a solid foundation for Sony's subsequent success. Sony is based in the electronic field, and constantly surpasses the electronic field, carries out diversified operations, constantly expands in new fields, and strengthens Sony's global brand image.
We believe that today's Xiaomi has launched thousands of SKUs such as white electricity, black electricity, small household appliances and daily necessities through R&D and innovation, achieving the tactical goal of expanding sales and retaining customers, and taking building a connectable sticky MAU as the strategic goal. It is expected to become a world-class brand, which can reproduce the glorious history of Sony in the 1970s.
2.3 Internet services
The strategic value of Internet service is the foothold and final sum of enterprise profits.
By controlling the cost performance brought by hardware profits, we can quickly accumulate and expand the user base, bring high activity, high conversion and high retention rate of Internet users, and finally realize traffic realization.
In the previous "Xiaomi Group: Valuation Methodology", we came to the conclusion that the comprehensive after-tax net profit rate of 2020Q 1 smartphone was -2.2%, with a slight loss; The comprehensive after-tax net profit rate of the Internet of Things and consumer goods is 2.5%, which is slightly profitable; The comprehensive after-tax net profit rate of Internet service income is 40.9%, which has the strongest profitability. From the unique business model of Xiaomi's Internet advertising business, we can get a glimpse of Xiaomi's strategic height, which is also the basis for its qualification to define new marketing rules in the Internet of Things era.
3 derivative flywheel: three ends of millet
In the last derivative flywheel, we are divided into three parallel small flywheels, corresponding to three endings of Xiaomi: the first is the world's largest internet of things platform: the leader of AIoT ecology; The second is to make China a world-class consumer brand; The third is Xiaomi Industrial Investment Fund.
3. 1 Last one: the leader of AIoT ecology.
Based on the sub-era wave of technology that TOTHING awakens everything, Xiaomi's end is the first 2T ecology of the Internet of Things based on human settlements.
We define the Internet of Things as the innovation of things, which can be divided into four categories according to the scenarios, namely: home Internet of Things, automobile Internet of Things, urban Internet of Things, and industrial Internet of Things. Because of its mature application scenarios and rich intelligent terminals, home Internet of Things has become the key layout direction of Internet giants, traditional communications, home appliance enterprises and vertical startups. We believe that it is the eve of the AIoT era and the dawn is coming. As the latest landing scene of the whole 2T Internet of Things, Xiaomi has already led the world and occupied the commanding heights of future technology. Xiaomi's Internet of Things ecology will be the final first piece of Xiaomi.
In the family scene of IoT, Xiaomi has been laid out in advance, copying the successful model of mobile phones to all aspects of family scenes. Xiaomi has a strong first-Mover advantage by using the open platform of Internet of Things and a variety of Xiaomi series intelligent terminal products to tap the value of home Internet of Things. By June 30, 2020, the number of connected devices of Xiaomi has reached 2,765,438+million, and the number of users of five or more devices connected to Xiaomi Internet of Things platform has reached 565,438+million. Xiaomi has become the world's leading consumer-grade AIoT platform.
3.2 Final 2: Making China a World-class Consumer Brand.
Based on the awakening of the third consumer wave in China, Xiaomi, as the first China consumer brand with wide world influence, will spread the modern industrial civilization of China to the whole world and become the Sony of China.
Looking at all the successful international brands in history, their uniqueness lies in their distinctive national characteristics, rather than general internationality, and their values that can be accepted by consumers all over the world.
American companies have always been representatives of high technology, and Intel, NVIDIA and Apple are world-renowned technology companies. The Swiss people's persistence and dedication to fine craftsmanship have made Omega and Rolex world-famous watch brands. Made in Japan once swept the world, and global brands such as Panasonic and Sony were synonymous with quality; Although China enterprises shouted the slogan of "going out", few international brands were truly recognized by global consumers, and the internationalization strategies of Haier, Lenovo and other enterprises have not achieved fruitful results.
We believe that an industry that can truly become an international brand should have a global consumption base, and the core value of its brand can be accepted by global consumers, and Xiaomi has the potential of internationalization of this brand. Xiaomi's IoT hardware ecology is all-encompassing, with thousands of SKUs such as white electricity, black electricity, small household appliances and daily necessities. In the future, its tentacles are extending to the diversified application scenarios of users. Xiaomi's minimalist aesthetics and iPhone-level industrial design are gradually being accepted by consumers around the world. Xiaomi's ultimate goal is to become the first China consumer brand with real-world influence and spread China's modern industrial civilization to the whole world.
3.3 Final 3: Exploring the starry sky of industrial investment
Based on the logic of Xiaomi's industrial investment, we believe that Xiaomi's industrial investment, as the last third piece of Xiaomi, will become an important hard-tech industrial chain (vertical) Xiaomi's ecological chain (horizontal) equity investment ecology in China and even the world, or it will become the next Tencent investment or hard-tech Sequoia.
In the past, the gameplay of investing in eco-chain enterprises has allowed Xiaomi's business map to continue to expand. Facing the future, Xiaomi's industrial investment will be a key measure for Xiaomi to deeply lay out the upstream of the industry, making the whole investment ecology hard-core.
Xiaomi's expansion of supply chain industry investment layout mainly focuses on two major directions: First, domestic substitution. The current competitive situation forces the rapid rise of domestic core devices. Facing the golden age of domestic substitution, Xiaomi is willing and able to help China chip grow rapidly. Second, emerging technologies. Emerging technologies with little difference from foreign investment can promote the progress of China's electronic industry chain. Hubei Xiaomi Changjiang Industry Fund is the first step for Xiaomi to invest in the industry.
Changjiang Industrial Fund was established on 20 17, with 42 foreign investments, of which 17 belongs to the chip industry. These enterprises such as Lessing Technology based on RISC-V architecture, remote intelligence of AloT touch interactive sensor, RF analog special chip, core microelectronics designed by ip, BYD semiconductor of power module, etc. Supplementing millet from shallow, medium and deep elements to strengthen its hard technology. The vertical full-stack element innovation of hard technology and the horizontal full-scene innovation of soft technology (Xiaomi ecological chain) can allow Xiaomi to invest in the industry in the future.
Take Tencent as an example, investment is one of the core strategies of Tencent Group. According to Tencent's second quarterly report, if the net income of other income is roughly calculated, Tencent's investment income will account for as much as 26% in 2020Q2. With the successful experience of Xiaomi's investment in eco-chain enterprises, it will be repeated once again in the upstream of the industry. Driven by the new investment structure, Xiaomi has greater strategic expectations. By June 30, 2020, the book value of investment has reached 36.8 billion yuan.
We divide entrepreneurs into two types: 1, and excellent entrepreneurs take profit as their ultimate goal; 2. Great entrepreneurs aim at creating social value. The ultra-low gross profit margin of Xiaomi's hardware forces the supply chain to improve efficiency. Through the ultimate cost control and improving profitability, it has created its own unparalleled efficiency moat, benefiting consumers and creating great social value. Based on this, we re-emphasize Xiaomi's three finals and reiterate Xiaomi's recommended rating: