I would like to summarize my impressions and the most important findings from Xiaomi's conference call ($1810 (-2,12%)) on the 2024 annual results.
Lu Weibing, President of Xiaomi, and Alain Lam, CFO, hosted the call.
Lu started with strategic and business updates. He emphasized that 2024 will be a milestone year for Xiaomi was. Under the human-car-home strategy it has entered a rapid growth path, with progress in cell phones, automobiles, IoT and other business areas. Xiaomi had initially completed the business cycle of development and achieved greater visibility and controllability of operations through management reforms.
Lu highlighted three main aspects: the core achievements of 2024, the changes in competence development over the past five years and the strategic outlook. He reported that Xiaomi Group 2024 will achieve high growth growth, with new historic highs in annual annual revenue (CNY 365.9 billion, +35% year-on-year) and net profit (adjusted CNY 27.2 billion, +41% year-on-year). He said that this marks the third growth path of Xiaomi only nine months after the launch of the Xiaomi SU7 has opened. For the first nine months 248,000 units and surprisingly, the monthly new orders continue to grow one year after the SU7 was launched.
The cell phone division has clearly outperformed the market. The shipments increased by more than 15% compared to the previous yearand Xiaomi was the fastest growing among the top 5 manufacturers, maintaining its global ranking has remained in the top 3 for 18 consecutive quarters. for 18 consecutive quarters. The global market share increased by 1 percentage point to 13,8% increased. In the area of premiumization there have been major breakthroughs, particularly in the 4,000 to 6,000 RMB price segment.
The IoT and AI business have also shown strong growth. The tablet sales increased by more than 70%, and the wearable division took second place worldwide with a market share of 15.2%. The business with large household appliances grew by more than 55% compared to the previous year. The IoT business continues to play the role of a profit stabilizer. The annual gross profit margin has increased significantly by 3.9 percentage points to 20,3% improved.
These successes are the result of continuous efforts to develop expertise in recent years. There has been a change in the business philosophy from "scale first" to the pursuit of long-term, sustainable, high-quality growth. In 2023, the Human Car Home strategy was specified and divided into six sub-categories, including the high-end strategy, the industrial leadership strategy, AI-OS and the new retail strategies. Under this objective, investments in research and development continuously increased.
The R&D investments amounted to 2024 CNY 24.1 billion and is expected to reach CNY 30 billion by 2025. These investments have created a solid product base, as shown by the positive feedback on the Xiaomi SU7 in terms of quality, safety, range and intelligence. The SU7 Ultra prototype even set a global speed record for affordable cars on the Nürburgring. In the field of high-end development a significant increase in market share in the 4,000 to 6,000 RMB price segment for cell phones from 5.6% in 2020 to 16.8% in 2024 has been recorded over the past five years. The recently launched high-end products Xiaomi 15 Ultra and Xiaomi SU7 Ultra have exceeded expectations.
With a retail price of CNY 529,900, the Xiaomi SU7 Ultra received over 10,000 orders within three days. In the future, the high-end development across all product categories.
In addition to the high-end strategy, the new retail strategy is being pursued. By the end of 2024, around 15,000 Xiaomi Home Stores and 200 car sales outlets have been have been established. The market share for cell phones in China doubled from 5.2% in 2020 to 10.3% in 2024. The new retail model has been successfully expanded from the 3C sector to the automotive sector. The goal for this year is to open a further 5,000 stores in China and to operate 20,000 Xiaomi Home Stores in the future. The company also plans to expand its international presence with 500 more and a total of 10,000 Xiaomi Home Stores abroad.
AI technology is already permeating all business areas. In the future, AI will be used to develop the underlying HyperOS with the aim of achieving an AI-OS evolution within two to three years. AI-OS evolution and comprehensively improve the user experience. In addition to high-end development, the optimization of the organization and management system is also being continuously promoted. Lu reiterated that the success of Xiaomi Automobile and other businesses has proven the strength and universality of the Xiaomi model and methodology, which continuously creates popular products that exceed users' expectations through precise user insights and high R&D investment.
Alain Lam then presented the financial performance for 2024, repeating the previously mentioned record figures for turnover (CNY 365.9 billion, +35% yoy) and emphasized that revenue had increased in every quarter of the year, both year-on-year and quarter-on-quarter. In the fourth quarter, sales exceeded the 100 billion RMB mark for the first time and reached 109 billion RMB year-on-year growth of 48.8%, the fastest growth since the third quarter of 2024. comprehensive gross profit margin for the year was 20,9% and showed a stable performance. The revenue of the segment Mobile Phones and AIoT amounted to CNY 333.2 billionan increase of 22.9% compared to the previous year, with the gross profit margin remaining unchanged year-on-year at 21.2%.
Looking at the details, the sales with smartphones in the year 2024 CNY 191.8 billion (+21.8% yoy) and accounted for 52.4% of total sales. In the fourth quarter, smartphone sales amounted to CNY 51.3 billion (+16% yoy). The global smartphone shipments amounted to 168.5 million units (+15.7% yoy). According to analyst data, Xiaomi occupied a market share of market share of 13.8% third place worldwide. In 56 markets worldwide, the annual smartphone market share was among the top 3.
The area of IoT and consumer products also showed an excellent performance with sales of CNY 104.1 billion (+30% yoy), exceeding the RMB 100 billion mark for the first time. The gross profit margin reached 20,3% a new all-time high (+3.9 percentage points yoy). The business with Smart Home Appliances grew by 47.4% compared to the previous year. The tablet sales increased by more than 73% compared to the previous year, putting Xiaomi in fifth place worldwide. Wearable devices maintained their high growth and remained the industry leader.
In the area of Internet Services the user base was further expanded. The global monthly active users (MAU) exceeded the 700 million mark in December 2024 (+9.5% yoy), with MAU in China reaching 173 million (+11.1% yoy). Revenue from the Internet Services business exceeded the CNY 9 billion mark for the first time in the fourth quarter of 2024, reaching CNY 9.3 billion. The annual revenue amounted to CNY 34.1 billion (+13.3% yoy), a new all-time high.
Sales of smart EVs amounted to 2024 CNY 32.8 billion and accounted for 9% of total sales. Revenue from sales of Smart EVs amounted to CNY 32.1 billion, and other related businesses contributed CNY 700 million, with a comprehensive gross profit margin of 18.5%. In 2024, a total of 136,854 Xiaomi SU7 were shipped with an average selling price of RMB 234,479. The Smart EV and other innovative businesses caused a loss of loss of RMB 6.2 billionwhich decreased by 7.1% compared to the previous year. For 2025, the focus is on increasing production capacity and launching the YU7 in the middle of the year, with the target of 350,000 new cars to be delivered.
In the subsequent Q&A part analysts asked various questions, which Mr. Lu and Mr. Lam answered in detail.
Andy Meng from Morgan Stanley praised the results and asked about the EV production capacity in view of the target of 350,000 units and the demand for the Ultra model, as well as the plans for overseas expansion. plans for overseas expansionespecially in the AI sector. Lu replied that the current delivery rate is about 20,000 units per month and they are and that they are working with suppliers to ensure supply. The foreign markets in the IoT sector offer four times the potential of the domestic market. The focus is on the expansion of Xiaomi Home Stores abroad, with the first European stores in Poland and further openings planned in Southeast Asia, Europe, Japan and Korea in the second quarter of the year. The growth in the foreign IoT business is slower than in China, but is showing progress.
Timothy Zhao from Goldman Sachs also congratulated and asked about the AI strategies and expectations and the R&D spending and investment areas in the AI sector and the expansion of the factories in Wuhan. Lu explained that we are still still two to three years away from real adaptation, but but is already seeing positive surprises in products with AI functions. AI is very important for Xiaomiand of the planned R&D investment of around CNY 30 billion, about a quarter will be spent on AI, although actual spending may be higher. Lam added that the CapEx for 2024 is over CNY 10 billion and is expected to be even higher in 2025, with the increase mainly due to AI investments.
Hiu King Wong from Citibank asked about the influence of national subsidies on growth in the fourth quarter and the first quarter and the cost cost outlook for this year. Lu explained that the national subsidies vary depending on the product category and hardly played a role for cell phones last year. The influence was greater for laptops and tablets. Overall, however, the subsidies would not be solely responsible for strong growth. For 2025, he expects an an increase in component prices with short-term price volatility, but falling prices in the medium term.
An analyst from CITI also offered his congratulations and asked about the gross profit margin in the automotive business and when this could become profitable, as well as the reasons for the strong growth in the Internet businessespecially in the advertising sector. Lam predicted that the gross profit margin in the automotive business for 2025 and beyond will be at least at the level of the first quarter. However, there is not yet a strict timetable for the profitability of the automotive business as investments in core technologies and production capacity remain strong. Growth in the Internet business is due to the user base and the optimization of the user structure through high-end devices. user structure through high-end devices. The advertising business is particularly strong abroad and has a high profit margin, which contributes to the increase in the overall gross profit margin. The average revenue per user both in Germany and abroad.
Yingbo Xu from CITIC inquired about the speed of the expansion expansion of the retail network in China and the status of the cars on display and the the potential of AI agents in the IoT sector and the use of Internet advantages for sales and network. Lu reiterated the target of 20,000 stores over 500 square meters and 400 more stores in China. in China. This expansion would bring advantages such as larger spaces and a higher-quality image. On the subject of AI agents he sees great potential for Xiaomi products in various scenarios and emphasizes the high level of investment in this area, including large voice models. The reputation of Super AI among users is very strong.
Zoe Xu from UBS asked about the medium and long-term plans for production capacity in the in the automotive sector in view of long delivery times and the launch of the YU7. Mr. Lu acknowledged that delivery delivery times are currently the biggest challenge and that intensive efforts are being made to increase capacity, with safety and quality being the top priorities.
Cherry Ma asked about the market prospects for cell phones this year, the market share and the strategies for Western Europewhere there has recently been a decline. Mr. Lu expects the cell phone market to grow by only growth of only 1% to 3% this year and aims to increase its own market share by 1%. There has been a decline in Western Europe due to a deliberate adjustment to focus on medium and focus on medium and high-priced products. products. Market share and the average sales price in Western Europe are expected to improve again in the future.
Conclusion:
The financial results for 2024 are impressive, with all-time highs in revenue and profit, driven by strong growth in all segments. The human car home strategy seems to be bearing fruit, in particular the successful launch of the Xiaomi SU7 has opened up a new growth path.
Xiaomi shows a clear focus on high-end products, technological innovation (especially AI) and the expansion of the retail network both in China and internationally. The high investments in research and development underline Xiaomi's long-term strategic approach of becoming a global technology leader.
