New Xiaomi figures ahead of IPO: Phone sales soar 88% and a RMB 7 bn loss in Q1

Xiaomi’s draft prospectus for the sale of China Depositary Receipts on the Shanghai stock index published by Chinese regulators today revealed a net loss of RMB 7 billion in the first quarter of 2018 against smartphone sales soaring 87.8%. On the same day, six new Chinese unicorn funds were launched by asset managers to help retail investors buy into Chinese tech IPOs, “the biggest such move orchestrated by the Chinese government since rescue funds were set up during the 2015 stock market crash” according to Reuters.

Xiaomi financials

The 621-page draft prospectus published by the China Securities Regulatory Commission just weeks ahead of the planned IPO reveals a first-quarter loss of a fraction over RMB 7 billion for Xiaomi on revenues of RMB 34.41 billion. This compares to an RMB 43.83 billion net loss for all of 2017 on revenues of RMB 114.62 billion and an RMB 553 million profit for 2016 on revenues of RMB 68.43 billion.

Xiaomi draft prospectus profit loss
Xiaomi draft prospectus profit and loss figures (unit RMB 1,000)

Xiaomi said it made a net profit of RMB 1.038 billion in Q1 2018 once one-off items are excluded. This measure also shows a net profit for the whole of 2017 of RMB 3.95 billion.

Revenue growth is thanks in part to overseas sales. Its recent push in India has seen it become the market leader for smartphones. Overall smartphone sales soared 87.8% in the first quarter to RMB 23.24 billion against a market shrinking by 2.9% in Q1, according to figures in the draft prospectus from IDC Worldwide, rather than Xiaomi’s own sales figures.

Xiaomi Global phone sales surge 88 percent
Figures show surge in Xiaomi smartphone shipments (highlighted).

Despite the rise, smartphone sales made a smaller proportion of revenues in Q1 2018 at 67.53% compared to 70.28% for 2017 as a whole and 80.4% for the year in 2015. The category of IoT and consumer devices (think of the dozens of product lines in Xiaomi stores and in the app) has grown to 22.37% of revenues in Q1, up from 20.46% for the year in 2017.

Xiaomi product categories
Evolution of Xiaomi as seen in the changing proportions of revenue its various divisions make up (unit RMB 1,000).

After initial hopes of a $100 billion valuation, Xiaomi has reined in expectations to the $60-70 region according to bankers, reports the Financial Times.

New funds for IPOs

The six new mutual funds aim to raise RMB 300 billion. Run by China Southern and China Merchants Fund among others, they will act as cornerstone investors in tech IPOs, according to Reuters. This means the funds will get a guaranteed allocation of shares or CDRs before other categories of investors get a chance to buy. “Thus, they are being promoted as a special treat for mom-and-pop investors, who now have an investment opportunity once reserved for institutions,” according to Reuters, which reported the funds could potentially lead to increased volatility as they drain liquidity from the markets.

CDRs allow foreign-listed Chinese firms to re-list in China, meaning many of the funds could be used by ordinary people to access many more Chinese firms restructuring their listings. Xiaomi is expected to be the first company to use the new CDR mechanism.

The funds are open for investment from 11 to 15 June for retail investors, then from 19 June are open to all types. “It’s an epoch-making gala for all investors,” Reuters quotes China Southern Fund Management saying in an online advertisement.