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Xiaomi Q4 revenue beats expectations as production close to full recovery

The company reported revenue of USD 7.97 billion, up 27% year-on-year.

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Beijing-based electronics company Xiaomi (HK:1810) released its financial results for the fourth quarter and full year of 2019, highlighted by better-than-expected revenue growth of 27% year-on-year (YoY) in the quarter to RMB 56.47 billion (USD 7.97 billion).

The company also reported full-year revenues of RMB 205.8 billion (USD 29.6 billion), up 17.7% YoY.

Xiaomi announced that despite the adverse impact of the coronavirus outbreak on its offline sales channels, and production disruptions in February and March, its production capacity has recovered to almost normal levels.

“The (Chinese) market has entered a full recovery stage, and… has already recovered to 80 to 90% of the normal level,” Xiaomi’s chief financial officer Shou Zi Chew said during the company’s earnings call, adding that “if we take reference from China’s experience, I think smartphone demand is resilient. I think it will rebound quickly.”

The company admitted that overseas demand will be affected by the coronavirus, particularly in the second quarter of 2020, but at a measurable scale.

February was a particularly difficult month for smartphone sales worldwide, largely due to the coronavirus outbreak. Counterpoint research estimated that global smartphone sales fell by 14% with further declines expected. In fact, Xiaomi shipped only 6 million smartphones in February, down 32% YoY, but still managed to surpass Huawei as the third largest smartphone vendor in the world.

Xiaomi’s smartphone business continued to make up the bulk of revenues, generating RMB 122.1 billion in 2019, representing a 7.3% increase YoY. In addition, the average selling price of Xiaomi smartphones increased by 2.2% YoY, while the gross margin for smartphones increased to 7.2% from 6.2% in 2018. In an effort to capitalize on the arrival of 5G networks, Xiaomi’s independent sub-brand Redmi, which spun-off in January 2019, released the Redmi K30 5G priced at just RMB 1,999 (USD 282).

Xiaomi’s international business also continues to grow, as overseas revenue reached RMB 91.2 billion, an increase of 30.4% YoY. According to market research firm Canalys, Xiaomi’s smartphone shipments in Western Europe grew 115.4% YoY in the fourth quarter of 2019, largely aided by rival Huawei’s inability to access Google Mobile Services. Xiaomi’s products can now be found in more than 90 countries and regions globally.

Xiaomi’s IoT ecosystem business also saw its revenues in 2019 reaching RMB 62.1 billion, an increase of 41.7% YoY and accounting for 30% of the total revenue compared to 25% in 2018. The company’s IoT user-base continued to expand, with 234.8 million total connected devices in 2019 (excluding smartphones and laptops), an increase of 55.6% YoY. Specifically, Xiaomi’s global TV shipments increased by 51.9% YoY to 12.8 million units.

Meanwhile, the firm’s internet services segment experienced robust growth in 2019. Xiaomi’s TV internet service, dubbed Mi Box, reached around 27.7 million MAU in 2019, an increase of 49.1% YoY, while online gaming revenue increased 44% YoY to RMB 874.4 million. This trend could be set to continue as many around the world consume more online content as they are stuck at home during the coronavirus pandemic.