All indications indicate that Xiaomi Company will soon be listed.
Recently, Xiaomi’s founder and chairman, Lei Jun, made repeated efforts. Firstly, at the Xiaomi 6X conference of the Wuhan University of his alma mater, he announced that the comprehensive after-tax net profit rate for the overall hardware business (including mobile phones, IOT, and consumer products) should not exceed 5%. Subsequently, he sent a letter to all employees to announce a new round of company executives' adjustments. He appointed CFO Zhou as the senior vice president of the company and took over the business of finance, investment, and HR.
According to reliable sources, Xiaomi will apply for an IPO in Hong Kong this week and will be listed from June to July, becoming the first company to adopt the "different rights of the same shares." Although we haven’t waited for Xiaomi's prospectus, we may wish to draw a focus first.
After all, even if you are a "super unicorn," you can't run it. Always take it out.
Aspect 1: Lei Jun said millet hardware net profit rate never exceeds 5%, will face?
This may be the most concern of the entire industry recently. After all, Xiaomi is not just a mobile phone. Lei Jun said that the upper limit of the net profit margin of this hardware is too wide, and the industries affected are really too much. According to Lei Jun’s own words, Xiaomi’s ecological chain penetrates more than 100 industries.
First of all, let's be clear. What is "comprehensive net profit margin"?
There have been media analysis before, if you take a single millet phone such as millet MIX2S, multiplied by 5% to calculate this phone, the price of 3299 yuan, a single product can earn 164.95, but this is not a comprehensive net profit margin.
Comprehensive post-tax net profit is an overall concept. The operating income is deducted from the various cost expenditures, including the R&D, sales, advertising, etc., divided by the operating income.
Sun Yanji, dean of the first mobile phone industry research institute, said that the average comprehensive net profit rate of domestic manufacturers is 10%, and Lei Jun’s 5% of the total is not high. Moreover, according to the industry-wide pre-IPO financing promotion materials, Xiaomi's net profit margin for the hardware business in 2016 was only 2.8%.
Of course, the so-called “financing and promotion materials†do not come from the official millet, but part of this may come from early investors selling old shares. So, for the time being, if these numbers are generally believed to be reliable, there is still a margin between 2.8% and 5%.
So, what's the real data? You have to look at the prospectus. Therefore, when the time is passed by the prospectus submitted by Xiaomi, it will be able to know whether the figure of 5% will be hit. This will be one of the biggest surprises in the prospectus.
Aspect 2: Millet does not make money in the end?
From the first day of Xiaomi’s birth, Lei Jun has been saying that Xiaomi’s mobile phone is hardly profitable.
Miao is wonderful in this "almost", in the end how much profit is considered "almost not profitable"? And Reebs recently announced that the comprehensive net profit rate of hardware does not exceed 5%, which is obviously putting pressure on profitability. According to 5% speculation, Xiaomi’s hardware earning power is basically a measurable figure. Therefore, everyone should care more about Xiaomi’s internet income and investment income.
One thing needs attention. Prospectuses usually have hundreds of pages, and there may be a large number of different data metrics containing “net profitâ€, such as “unaudited net profitâ€, “operating profitâ€, “adjusted net profitâ€, etc. . Moreover, the Hong Kong Stock Exchange and the domestic A-shares, US stocks also have slightly different accounting standards, and it is easy to look confused.
So which data is reliable? You can probably look at two pieces of data. One is "operating profit" and the other is "adjusted net profit."
This "adjusted" is well-known. Everyone must remember the huge loss of the Mito IPO. In fact, there are not many Internet companies listed in Hong Kong, accounting standards are not the same as the United States, Meitu had eaten this "lossy" loss. Let us explain in detail.
Internet technology companies usually issue a lot of preferred shares to investors when they are financing. If the valuation starts from tens of millions of dollars to several ten billion dollars, the value of these preferred shares is also magnified many times. The financial float of shareholders The profit also turned N times. However, these shareholders have not withdrawn, so their investment value will be considered in the financial statements as the company's liabilities to these shareholders. I do not know whether Xiaomi will encounter similar situations this time.
Looking at the profitability of Internet companies, we cannot simply look at net profit. We must also look at operating profits and adjusted net profits. These two figures exclude interference factors such as financial accounting.
Aspect 3: How many shares did Lei Jun occupy in Xiaomi in the end?
Before the media reported that Lei Jun’s share in Xiaomi was as high as 77%. But before the prospectus was released, this figure can only be seen. How many stocks Lei Jun has in Xiaomi in the end, I believe this is what we all want to know. After all, this may be related to the ownership of China’s richest man this year.
In addition, Xiaomi is expected to become Hong Kong’s first listed company with “shares with different sharesâ€. Different shares of the same stock, that is, some of the shares held by the management of the voting rights are much greater than ordinary shares. Simply put, according to the Hong Kong Stock Exchange's New Deal, Lei Jun may have a group of stocks that have super-voting power. Compared with ordinary stocks, the “right to speak†has at least 1 top 2 stocks and a maximum of 1 top 10 stocks. In theory, if Lei Jun owns all the stocks with super-voting rights, at least as long as it has 9.1% of the special shares, it can guarantee that the voting power exceeds 51% and firmly controls the company's control.
In addition, the employees of the 1000-meter Xiaomi Job No. 1000 before the listing of the company will achieve different levels of financial returns. In the latest personnel adjustment, two co-founders of Xiaomi, Zhou Guangping and Huang Jiangji, resigned from management positions for personal reasons. Usually there is no company position, and the restrictions on the realization of stocks after listing are much less.
If the prospectus reveals the proportion of Xiaomi executives’ holdings, and according to a reasonable range of valuation, what will the value of these executives become after Xiaomi’s listing? This is also a problem that everyone cares about.
Aspect 4: Did Xiaomi really be an Internet company like he said?
Xiaomi throws a 5% figure on the eve of the listing. It is more like setting a future goal for Xiaomi and setting a ceiling on the net profit margin of hardware. Tell everyone: “We are an Internet company. We are not relying on hardware to make money on traditional hardware. Manufacturers."
From the current so-called “recommendation†data, Xiaomi’s revenue is 21% from the Internet service business, with a gross margin of over 40%.
So, how can you tell if a company is an Internet company? There are probably several aspects.
First, there must be a large-scale Internet business. If the basic scale of Internet services is not available, then there is no way to talk about it.
Second, internet business is the main source of profit. For example, simply looking at Apple's Appstore, AppleMusic, and other Internet properties business to make more money than many Internet companies, but Apple's profits are still mainly from hardware profits, so Apple is still a hardware company.
Third, the business income of Internet attributes should exhibit rapid growth attributes. Internet companies are all based on massive user bases. The higher the user's viscosity is, the better, the longer the use time is, the better, and the lower the customer cost, the better.
Therefore, Xiaomi is not an Internet company. To find the answer in the prospectus, look at the three groups of data: how much Xiaomi’s Internet income is, how much Xiaomi’s Internet profitability is, and how many live monthly users, usage time, and costs of Xiaomi’s Internet business. .
However, from Xiaomi's business model, it is now known that Xiaomi's Internet business should not have the cost of getting a customer. After all, it can be directly converted by mobile phone users.
Aspect 5: How much is Xiaomi's ecological chain?
Xiaomi began to lay out the ecological chain from 2013, with mobile phones as its core. Its peripheral products include headphones, small speakers, and mobile power, and then it is air purifiers, rice cookers, water purifiers and other small household appliances. There are also some things to play, such as sweeping robots, as well as some necessities of life such as toothbrushes and mattresses.
Some of these companies have even taken the lead in the world and have gone to the capital market. For example, Huami Technology, a millet bracelet, was listed in the United States last year.
How much profit does Xiaomi these products can make? How about the profit rate? In last year's millet eco-chain company has exceeded 100, now this number has become, what is the relationship between these companies and Xiaomi?
Xiaomi's prospectus should have answers.
Aspect 6: After Xiaomi is listed on the Hong Kong stocks, will it be on the A shares?
Not surprisingly, Xiaomi should be the first listed company after the implementation of the Hong Kong Stock Exchange's New Deal. At the same time, the CDRs of the domestic A-shares have continued to have news.
CDR is the English abbreviation of Chinese Depository Receipt (Chinese depository receipt), which means that an overseas listed company will custody some of its issued shares to local depository banks, issued by depositary banks in China, listed on the domestic A-share market, and settled in RMB transactions. Investing certificates for domestic investors.
Internet companies landing A shares, is a "permanent" problem, because A shares IPO audit mechanism, requiring listed companies to continue to profit for three consecutive years, there are restrictions on the ownership structure of enterprises. Therefore, "BAT" selected China's Hong Kong, the United States capital market listing.
Earlier this year, CDR rumors rose. A number of Chinese Internet listed companies have expressed their desire to return to A. Xiaomi was also reported to have Hong Kong + CDR achieve Hong Kong stocks and A shares simultaneously listed. There are different legends that have been guessed as annual suspense dramas.
Now Xiaomi went to Hong Kong to go public and let the rumors be determined first. Will the news of the CDR receive news in the near future? This can be seen in the Xiaomi Hong Kong prospectus has not mentioned this information.
Aspect 7: Millet valuation will not break 100 billion?
Lei Jun can not top China's richest man, in addition to watching how many of his millet shares, but also see how the company's valuation is ultimately.
About the valuation of millet, from 50 billion US dollars, 80 billion US dollars to 100 billion US dollars range. Which exactly is it? This will return to the question of how to look at the valuation model of Internet companies.
Unlike domestic capital markets, we are used to looking at consumer companies and industrial type companies. We are nothing more than looking at the net profit this year. We can then measure the net profit for the next year and multiply it by the average multiple of the industry.
But for internet companies, this valuation model is very difficult. First, this internet company may not be a positive net profit. Secondly, even if it is a positive net profit, the company’s revenue and gross profit growth rate is as high as 100% and 200%. This is not new, but this growth rate is a familiar tradition for us. Business is a figure that cannot be completed.
The valuation of Internet companies is more about the number of users of Chinese companies, the cost of customers, and the growth rate of earnings, that is, the growth of enterprises. Apple's market value is 840 billion US dollars, price-earnings ratio of about 18 times; Tencent's market value of 37.2 billion yuan, price-earnings ratio of about 43 times; Amazon's market value of 750 billion US dollars, price-earnings ratio of 320 times.
Millet can afford more valuations, depending on whether the data in the prospectus shows sufficient growth. Based on previous public reports, compared with the mobile phone business, the changes in revenue and gross profit levels of ecological chain products and Internet services that have more profitable imagining space over the years are more worth paying attention to.
Aspect 8: What about Xiaomi's overseas market?
Xiaomi has been tossing overseas with great success in the past two years. According to the latest news, India has consistently won 31% of this exaggerated market share. In addition, Xiaomi himself promoted it to perform well in Indonesia, Eastern Europe and other places, and now he entered the beginning of the Western European market.
So, overseas market in the end accounted for a large plate of millet? Does Xiaomi really rely on overseas markets to maintain its growth? After all, China's domestic market is already a zero-sum competitive market. Xiaomi’s high valuation must be supported by the long-term high growth rate, which must be seen in overseas markets.
Xiaomi's recent overseas market performance of special books, especially in the Indian market, can be seen in the prospectus's overseas market changes in the past three years.
Of course, the above content is only forecast. What is the actual prospectus? We will pay close attention to it and will interpret it after the announcement of the prospectus.
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