Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Xiaomi Corp (XIACF, Financial) achieved a historical high total revenue of RMB88.9 billion in Q2 2024, marking a 32% year-on-year increase.
- The company's core business revenue from mobile phones and AIoT reached RMB82.5 billion, up 23% year-on-year.
- Gross profit margin remained healthy at 20.7%, demonstrating strong cost control capabilities.
- Xiaomi's EV business showed promising results with the delivery of over 27,000 units of the SU7 model in July and a gross profit margin of 15.4%.
- The company's smartphone market share increased globally, reaching 14.6%, with significant gains in Latin America, Southeast Asia, and the Middle East.
Negative Points
- Despite the strong revenue growth, Xiaomi's innovative businesses, including smart EV, reported a net loss of RMB1.8 billion in Q2 2024.
- The company faces intense competition and supply chain cost pressures, particularly in the mobile phone segment.
- Xiaomi's gross profit margin for smartphones was impacted by rising costs of core components, although it managed to maintain a margin of 12.1%.
- The company is still in the early stages of its EV business, with significant investments required to scale production and improve delivery capabilities.
- Xiaomi's premiumization efforts in the high-end smartphone market face challenges, particularly in the RMB6,000 to RMB10,000 price range.
Q & A Highlights
Q: This quarter, in the first quarter, there was delivery, and the gross profit margin already was 15%. What are the reasons behind this high gross profit margin? And what is your future outlook for gross profit margin?
A: Our gross profit margin of 15.4% exceeded expectations due to strong supplier support, economies of scale from focusing on one vehicle model, and leveraging our management capabilities from other industries. We expect the gross profit margin to improve further as delivery volumes increase and costs decrease.
Q: Regarding your new retail strategy, what are your plans for mobile phone and IoT market share growth?
A: Our new retail strategy aims to cover all categories and expand globally. We plan to open 3,000 retail stores by the end of the year, which will support our premium smartphones and IoT business. This strategy will also be extended to overseas markets to enhance our global presence.
Q: Xiaomi smartphone market share has increased significantly. What core competitiveness has been enhanced, and what are your plans for the second half of the year?
A: Our core competitiveness lies in deep technology mastery, supply chain management, premiumization, and new retail. We will continue to focus on these areas to maintain and grow our market share. We are confident in our long-term goals and will work hard to achieve them.
Q: Your first vehicle achieved good success. What is your next competitive strategy in the intense EV market in China?
A: We will focus on delivery, enhancing production capacity, and developing new car models. We aim to improve cost efficiency and offer services based on user operation to make Xiaomi vehicles more interesting and meet personal needs.
Q: For the whole year, will you revise your EV gross profit margin target upwards? And how will you handle the challenges in the smartphone business in the second half of the year?
A: The EV gross profit margin will rise steadily in the third and fourth quarters. For smartphones, we are confident in our Mix Flip and will continue to target users from all brands. We expect component costs to stabilize and do not foresee significant changes.
Q: What is the reason for the increase in Internet business gross profit margin, and what is the future trend?
A: The increase in gross profit margin is due to the expansion of our user base, improved product structure, and higher overseas revenue share. These trends will continue, leading to sustainable growth in our Internet business gross profit margin.
Q: How do you see the prospect of AI phones in the future?
A: Current AI phones are more accurately AI-featured phones. True AI phones will offer a brand-new experience, and we plan to launch products that will deliver this experience in the coming months.
Q: What are your plans for IoT business development and premiumization?
A: We will continue to focus on self-developed products, master core technology, and expand globally. Our IoT business will see growth in sales volume, revenue, and profit margin. We are confident in our premiumization strategy and will work hard to achieve it.
Q: What factors will lead to an increase in EV delivery, and how will you handle after-sales service?
A: We are enhancing production capacity and ensuring customer experience through a strong after-sales network. We will continue to focus on smart manufacturing for high-value categories like refrigerators, air conditioners, and washing machines.
Q: What is your strategy for smart manufacturing and its impact on IoT business?
A: We aim to build smart factories for high-value categories to ensure product quality and efficiency. We will maintain a balance between self-production and working with partners to achieve optimal results.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
