Xiaomi Corp. China | Information Technology

Updated: Nov 20, 2018

Xiaomi is one of the world’s fastest growing internet companies with a strong focus on producing innovative and affordable products and services. Xiaomi generates over 80% of its revenue via hardware sales (smartphones and Internet of Things – IoT devices) but is increasingly generating more revenue via higher margin internet services (advertising and other value-added services). Xiaomi has a strong direct sales channel that enables it to keep prices of its products low and is a key competitive advantage of the company.

Investment thesis

Xiaomi is the 4th largest smartphone provider globally and a fast growing internet company. With its strong position in key emerging markets, we are positive on

the company’s outlook and expect strong hardware sales to grow its user base, driving high margin internet service revenues going forward.

Software remains key growth driver

Software margins continue to be a significant contributor to high margin advertising revenues which continue to help deliver growth on net income. We expect the user base to grow to 306mn by 2019 and see significant monetization opportunities from the enlarged user base and the potential for monetization outside of China.

Shipments of smartphones and IoT devices could be better than expected, increasing the overall number of devices within the ecosystem.


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