Xiaomi's AIoT business is expected to grow to 100 billion yuan in revenue in the medium term, and with the "cell phone x AIoT" combination, Xiaomi has got a ticket to evolve from the "mobile Internet" to the "AIoT" era to be among the HK$1 trillion market capitalization club, CITIC Securities said in a report released today.
As of Wednesday's close, Xiaomi shares were up 4.36 percent to HK$27.5 in Hong Kong, giving it a market capitalization of HK$663.9 billion.
The analysts at CITIC Securities, led by Xu Yingbo, set a price target on Xiaomi to HK$36, corresponding to a 33x PE by 2022 and a market capitalization of HK$870 billion. The report maintained a "buy" rating on Xiaomi.
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These analysts believe that Xiaomi is the global company with the longest industry chain and most complex business among China's technology and Internet giants. It is based on the cell phone x AIoT and will enjoy the next-generation technology dividend of AI+IoT.
The capital market's perception of Xiaomi continues to evolve, with its share price rising 144% since the beginning of 2020, reflecting the capital market's perception that its smartphone business has increased its market share to the top three globally, as well as its ASP improvement and the evolution of its cell phone products to the high-end, the report said.
Looking to the next 3-5 years, Xiaomi's core competency and stock price driver is the AIoT business, expanding to more users with more popular products and SKUs, and exploring the possibility of subsequent Internet realizations, the analysts said.
The report expects AIoT to be the main driver of the next round of technology dividends, and the Xiaomi Group is likely to become one of the two key players in China's AIoT market, gaining a sustainable and stable market position and growth potential.
Xiaomi generates more than half of its revenue from overseas markets and is rapidly gaining ground in Europe, Southeast Asia and India. The company has maintained a high revenue growth rate, and CITIC Securities expects Xiaomi's 2020 revenue to exceed 240 billion yuan, with AIoT accounting for 28% of revenue.
As of the third quarter of 2020, the number of device connections on the Xiaomi AIoT platform has reached 290 million, up 35.8% year-over-year.
The Mi Home app has 43.1 million monthly active users, up 34.2% year-over-year in Q3.
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Excluding cell phones and laptops, more than 5.6 million users have five or more devices connected to the Xiaomi AIoT platform, accounting for 13% of Mi Home App users.
Xiaomi has the largest market share in China's smart home market and has become the world's leading smart home platform, noted CITIC Securities.
About 68% of Mi Home App users are non-Xiaomi cell phone users, and the cell phone x AIoT strategy is expected to drive users to each other and push the Xiaomi brand to the high-end, the report said.
AIoT also follows Xiaomi's cell phone channel expansion to overseas markets, with overseas revenue from Xiaomi AIoT growing 56.2% year-on-year in the third quarter to a new quarterly high.
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With over 2,200 products connected to the Xiaomi AIoT platform, Xiaomi has a comprehensive capability from hardware to software, and has a comprehensive footprint in the ecosystem.
Xiaomi has formed a number of popular products in smart speakers, TVs, air conditioners, bracelets, sweeping robots, TWS headphones and other fields. 12.8 million Xiaomi TVs will be shipped globally in 2019, and 3.1 million will be shipped in Q3 2020.
With AIoT gradually entering its explosive period, Xiaomi Group will be among the trillion-dollar market capitalization club, says CITIC Securities.
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