Shulou(Shulou.com)11/24 Report--

On the evening of March 24, Xiaomi released its results for the fourth quarter and the whole year of 2022 today. According to the financial report, the company's total revenue in the fourth quarter reached 66 billion yuan, down 22.8% from the same period in 2021, while the adjusted net profit was 1.5 billion yuan, down 67.3% from the same period in 2021. It includes 1.2 billion yuan for innovative business such as intelligent electric vehicles.

For the whole of 2022, the total revenue of Xiaomi Group was 280 billion yuan, down 14.7% from the same period last year, while the adjusted net profit was 8.5 billion yuan, down 61.4% from the same period last year.

After the release of the financial report, senior executives such as Lu Weibing, partner and president of Xiaomi Group, Lin Shiwei, vice president and CFO, Sun Qian, vice president of finance, and Wang Hua, general manager of the public relations department, attended the subsequent conference call to interpret the main points of the financial report and answered questions raised by several reporters.

The following is a transcript of the reporter's question and answer session in this conference call: Xinhuanet reporter: we have noticed that the overall shipment rate of smartphones has decreased in 2022. Mr. Lu also mentioned it at the press conference just now, down 12% from the same period last year. Xiaomi's fourth-quarter results also fluctuated significantly. In the view of the group, what are the main reasons behind this and what are the countermeasures? In addition, in the view of the group, when will the mobile phone market pick up this year? Or is there a good situation? What are the driving factors behind this?

Lu Weibing: the first question is about the reasons behind the decline in the company's performance in the fourth quarter. From a year-on-year point of view, there has indeed been some decline in the past fourth quarter. I think there are two main reasons. The first is that the external macro environment is still relatively volatile. We see geopolitics, high overseas inflation, global exchange rate fluctuations, and so on, which actually did not improve significantly in the fourth quarter. (the second reason is) based on Xiaomi's new competitive strategy, we took the initiative to make some internal business strategy adjustments in the fourth quarter, such as overseas (market) destocking, in order to pursue long-term and sound operation. These are the two main reasons in my opinion.

As for the judgment of the overall smartphone market in 2023, from January and February this year, we think that it may take some time for consumption to recover. In the first half of this year, we think there may be some year-on-year decline in the market. Maybe we will see if there will be a big improvement in the second half of this year. The above is basically my judgment on 2023.

Lin Shiwei: we are still optimistic about 2023. We think that the competitive value of the industry as a whole will tend to be rational, and I think the current water level will gradually return to normal. In addition, we will also improve the capacity of our products. As Mr. Lu said just now, Xiaomi has achieved very good results in the past three series of high-end mobile phones. So we are relatively optimistic about the recovery of the market, including the improvement of the capacity of millet products.

Economic Daily reporter: my first question is about inventory. We see that it is mentioned in the fourth quarter financial report that the impairment of inventory first decreases and then increases again. Will this situation continue this year? And at the beginning of this year, some analysts mentioned that Xiaomi's current inventory of spare parts has reached 12-16 weeks. Is this statement correct? Or will management provide us with a different understanding? In addition, in terms of automobile development, we have seen a significant decline in the prices of new energy vehicles in the mainland recently. what impact will this have on the progress and pricing of Xiaomi car development?

Lu Weibing: in fact, the decline in Xiaomi inventory in the fourth quarter is still very obvious. In the fourth quarter, our capital amount is about 50.4 billion, and we can see that it is down 3.7% from the same period last year and 4.8% from the previous month. It should be said that our overall inventory has declined steadily, and I think many of our inventory clearance measures last year are still very effective.

There may be some rumors in the outside world that Xiaomi has some relatively long-term inventory. I would like to take this opportunity to make a simple explanation and clarification. This information is not very accurate. In 2021, the whole industry predicts that the market will grow in 2022, but in fact there is a big decline in the market in 2022. In 2021, we also signed agreements with some enterprises, and now that we have signed, we will start to deploy (some inventory) in 2022 according to the relevant agreement. But there are two important points about these inventories, the first is that they are pulled in at expected future prices, and the second is that these inventories can be digested stably and securely in 2023. So some information may not be very accurate.

Finally, the question about the price war of new energy vehicles. On the one hand, our current progress is consistent with the original expectations, it can be said that we have not been greatly affected in terms of progress. As for the competition in the market, there is still some time for the product to be listed in the future, and we will make some corresponding adjustments according to the market situation.

Lin Shiwei: on your first question, the impairment of inventory has changed from 2.9 billion in the last quarter to 3.5 billion in this quarter. In the case of clearing channel inventory and existing inventory, our inventory will gradually decrease. In addition, General Manager Lu also mentioned just now that our existing inventory has dropped from 53 billion at the end of last quarter to 50.4 billion in this quarter, showing a slight downward trend. So I think we are going in the right direction on the whole.

Thepaper.cn: recently, the topic related to ChatGPT has attracted a lot of attention. On my side, I would also like to ask the management, does Xiaomi have some related layout in ChatGPT? Including AI, how does Xiaomi's Xiao Ai maintain his competitiveness?

Second question, may I ask Mr. Lu about Xiaomi's overseas strategy? At present, is there any change in Xiaomi's strategy in overseas markets? Will there be a shift in strategies, including markets like India?

Lu Weibing: let me first answer the first question about Xiaomi's vision for ChatGPT. In fact, as we all know, Xiaomi Group has made a lot of attempts in the AI model a long time ago, and we have adopted the strategy of multi-technology route parallelism. For example, the Xiao Ai you just mentioned is actually a typical application result of a large model landing. Of course, we will face a lot of challenges from the big model to the landing, but the success of ChatGPT gives us confidence that we are going in the right direction. In addition, we currently have a team of more than 1200 people, and our Xiao Ai has been working for six years. I think we have a very good advantage. We should increase the landing, for example, it (Xiao Ai) can support the integration of our mobile phones, speakers, cars and so on. Currently, by mid-December, (Xiao Ai) has 115 million monthly active users worldwide.

As for your second question, we have not made any major strategic adjustments in our overseas strategy. But we will identify markets that the company considers to be particularly strategic and increase investment in these markets to ensure Xiaomi's very good market competitiveness in these markets. For example, in the European market, we now rank third, with a 21% market share, and it is also a brand highland with a lot of high-end space, so we will increase investment in a situation like this.

As for the Indian market you just mentioned. Indeed, Xiaomi is currently facing greater challenges in India, and we all know that we will have some financial impact, but the current operation of Xiaomi in India is still very normal. At the same time, we will improve Xiaomi's operations in India relatively efficiently. As for legal issues, we will take legal action to protect the interests of the company. at the same time, we also believe in judicial impartiality in India, and we also believe that Xiaomi's operation in India is legal and compliant. We also hope to solve the problem in this way.

Reference news: I just heard the management mention that it was affected by special reasons, including geopolitics, last year. In the fourth quarter of last year, Xiaomi made some adjustments in many strategies or directions. Throughout the year's achievements of Xiaomi AIoT, will the strategic direction of Xiaomi large household appliances business be adjusted in 2023 in the future? For example, what is the long-term strategic direction in the future?

Lu Weibing: you have seen Xiaomi has a very rapid growth in the business of large household appliances in the fourth quarter, with an increase of more than 40% compared with the same period last year. In terms of air conditioning, we have strengthened our self-research ability, and you can see the improvement of air duct efficiency and the application of small diameter copper pipes, which have significantly improved our products in terms of noise, performance and reliability compared with the previous generation of products. its annual sales increased by 50% compared with the same period last year.

In terms of refrigerators, last year can be said to be a very fruitful year, year-on-year sales doubled, Xiaomi has gradually moved to a large-capacity, high-end (product) positioning. In terms of washing machines, although we are affected by the competition of the whole industry and the market, we basically remained stable in the fourth quarter.

After several years of exploration, I think Xiaomi has basically completed the learning curve. Next we will come to the rapid development channel. We have several important strategies (at this stage):

First, we must intelligentize traditional household appliances, develop them into high-tech appliances, and realize the popularization of high-end products.

Second, we must strengthen self-research, that is to say, Xiaomi will do self-research in core technologies such as air conditioners, refrigerators and washing machines, and launch explosive products through self-research.

Third, to take advantage of the advantages of Xiaomijia, we can obviously see that the growth rate of sales of large household appliances under the millet line is faster than that online, so there is still a lot of room for breakthrough in both the sales channels and the number of showrooms offline. This year, you will also see Xiaomi's offline power, which is some of our main thoughts on the business of large household appliances.

Lin Shiwei: let me add some data. The large home appliance business is a high-growth sector for Xiaomi in 2022, with revenue growth of more than 40%.

In terms of air conditioners, our shipments exceeded 3 million last year, an increase of about 5% over the same period last year; refrigerators shipped almost 1 million last year, almost twice as much as in 2021; and washing machines shipped more than 1 million last year.

To sum up, for us, the large household appliance business is first of all a high-growth sector; in addition, the gross profit margin of the large household appliance business is also relatively good, contributing to a certain profit.

Securities Daily: I noticed that Xiaomi maintained its growth in the Internet business last year. With the recovery of the industry this year, how does management view the development of Internet business in 2023? Will Xiaomi benefit from it?

Lin Shiwei: I think we should look at several aspects of the Internet business. The first is advertising. Frankly speaking, the market is under great pressure last year, but we can see that the macro environment is slowly improving. At the same time, we have also noticed that several large factories in the head are still reducing costs and increasing efficiency, so I think it may still be relatively conservative in the first half of the year, and it depends on the macroeconomic recovery in the second half of the year.

Last year was also a very difficult year for the game business, and everyone knows that. But you can see that Xiaomi's game business actually grew by 10.4% last year compared with the same period last year. We see that the country continues to issue game version numbers, which are all positive messages and contribute to the deployment of Xiaomi's game market this year. The above is the situation of the domestic Internet.

Overseas Internet. As I just said, Xiaomi's revenue hit a record high of 6.8 billion last year, up 35% from a year earlier. Overseas Internet business also accounts for 24% of the total Internet. In the future, we will increase the revenue space of Xiaomi's overseas Internet business by expanding new customers and improving liquidity. We also believe that with the continuous improvement of Xiaomi shipments, the number of users and the continuous promotion of high-end strategy, we still maintain a certain degree of confidence in the long-term growth of Xiaomi Internet business revenue in the future.

Caixin: my question is about Xiaomi offline. In fact, Xiaomi has made great progress in expanding offline channels in the past few years. Although there may be a difficult time for offline channels in 2022, I can see that Xiaomi still has more than 10,000 offline stores. I would like to ask the management, as China is gradually coming out of the impact of the epidemic and many offline obstacles have been removed, will Xiaomi further step up efforts to lay the groundwork for offline channels this year? And what is the main strategy of Xiaomi's offline channel this year? What is the main goal?

Lu Weibing: it is true that Xiaomi's offline stores encountered great challenges in 2022, but I am very happy that we withstood the test at the most difficult time last year. In January and February, I just shared with you that the GMV (total merchandise trading volume) of Xiaomi's offline stores has increased by 30%, and the profits of its stores have increased significantly. This is a very good momentum.

The main task of Xiaomi in 2023 is not to open stores, we still hope to achieve store integration and adjustment, so as to achieve better economies of scale. In 2021, we opened stores very fast, so there were not too many customers in stores at that time, and stores were unable to exert its economies of scale.

This year, we have two main tasks: the first task is to complete the integration and adjustment of stores; the second is to continue to deepen the general direction in which stores became effective last year to further improve the profitability of stores. I believe that once these measures are done, there will be the possibility of the next outbreak. This is our strategy for Xiaomi House. (end)

Welcome to subscribe "Shulou Technology Information " to get latest news, interesting things and hot topics in the IT industry, and controls the hottest and latest Internet news, technology news and IT industry trends.