Xiaomi Corp delivered a set of strong financial results for the first half of this year with both revenue and adjusted profit recording double-digit growth from a year earlier. And the company is on track to boost its revenue from international markets with the launch of a new brand.
This is the first time for Xiaomi to release its results as a public company after its initial public offering in July. Revenue surged almost 70 percent to 45.24 billion yuan (US$6.58 billion) in the second quarter from a year earlier, compared with expectations of 39.18 billion yuan, according to analysts surveyed by Thomson Reuters. The company swung to a net profit of 14.63 billion yuan, from a loss of 7.03 billion yuan in the first quarter.
However, it’s worth mentioning that Xiaomi’s net profit surge was mainly due to changes in the fair value of its preferred shares, resulting in a one-time profit of 22.5 billion yuan, from a loss of 15 billion yuan a year earlier.
Such changes had nothing to do with the company’s operation. Its adjusted profit, taking out all one-time items, was 2.1 billion yuan, up from 1.7 billion yuan a year earlier.
Xiaomi’s international revenue grew 151.7 percent year-on-year to 16.4 billion yuan, which accounted for 36.3 percent of its total revenue.
According to Canalys, Xiaomi’s smartphones continued to experience rapid growth in India, where it ranked first in terms of market share by shipment in the second quarter. In Indonesia, the Chinese firm also recorded impressive growth and ranked number two in smartphone shipment during the period.
In Western Europe, it expanded into France and Italy in May. In the three months to June, its smartphone shipments to the region grew over 2,700 percent year-on-year.
Xiaomi ranked among the top five in smartphone shipments in 25 countries and regions during the period, according to Canalys.
But as it boosts its international exposure, Xiaomi is realizing that people are conscious of it being a Chinese brand. A new brand, therefore, should help the company to position itself as a new market player that offers a fresh look and feel to consumers.
On Wednesday Xiaomi launched a new brand in India, Pocophone F1, promoting it as “a powerful smartphone with the technologies that truly matter”. After the India debut, Poco will be launched in Jakarta, Hong Kong and Paris on Aug. 27.
Xiaomi’s latest brand is part of its overseas expansion plan, especially in mature markets such as France and Hong Kong, which have been dominated by Apple and Samsung for a long time.
The new Pocophone F1 is being marketed as a foreign version of the Mi 8, equipped with the same specifications such as Qualcomm’s Snapdragon 845 platform, dual camera and full screen. The price for the top-tier product is surprisingly low at around US$300 and the selling point centers on its camera performance and speed.
The launch of the new brand will add to the marketing costs in the current financial quarter, for sure. But such an investment is necessary for Xiaomi to present a new image that could attract consumers, particularly from the younger generation, in overseas markets.
However, management must work out a unique market position for Pocophone given that Xiaomi itself is already positioned in the mid-range to low-end market. Pocophone should be seen as something different from Xiaomi for market segmentation.
In fact, Xiaomi seeks to expand into the overseas smartphone market to boost the sales of its other smart appliances and devices, which can then improve its Internet of Things revenue.
In addition, bolstering the number of Xiaomi smartphone users will translate into a wider usage of its own MIUI operating system, which it can also monetize through its games and other download offerings.
Pocophone represents a more aggressive push by Xiaomi to take a greater market share in the global smartphone market, to compete not only with Samsung and Apple but also with Chinese peers such as Huawei, OnePlus and Oppo.
Xiaomi’s profit margin could face growing pressure in the coming quarters as a result of its expansion plans, but that’s the only way it can hope to sustain its high valuation.
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