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Millet's "twin engine" earnings exceeded expectations. Several securities gave an increase rating.

via:凤凰网科技     time:2019/5/22 15:19:50     readed:124

ThismilletAfter the Group Q1 financial report was released, analysts from several securities institutions expressed their optimism about millet's AIOT business. Aung Li Securities, Everbright Securities and other institutions believe that millet IoT will continue to have sufficient growth momentum in the future on the basis of maintaining its first-mover advantage.

Guangfa Securities commented that with the continuous expansion of smart home product line, the future is expected to maintain high growth of millet through more intelligent application scenarios and seamless interaction of IoT products. Based on the current performance, several securities firms and investment banks gave suggestions to increase their holdings of millet group stocks, including Guangfa Securities, Lyon Securities, Bank of China International, Deutsche Bank, Goldman Sachs, Nomura Securities, Morgan Stanley, Everbright Securities and Daiwa Securities. As of May 21, more than 11 brokerage investment banks followed up, and more than 90% of millet stocks gave suggestions to increase their holdings.

Internet is becoming more and more popular

In this financial report, millet's Internet is becoming more and more popular. During the reporting period, millet's Internet revenue reached 4.3 billion yuan, an increase of 31.8% over the same period last year. Among them, in the context of the overall slowdown in the development of the advertising industry, the advertising business of millet still maintains a growth trend, with advertising revenue reaching RMB 2.3 billion yuan, an increase of 21.8% over the same period last year. Game revenue reached RMB 820 million yuan, an increase of 6.8% over the same period last year. During the reporting period, millet continued its efforts to diversify revenue from Internet services, except for Mainland China Intelligence.Mobile phoneInternet revenue outside advertising and games on the device side soared, up 167.3% year-on-year. IncludetelevisionIncome generated by Internet services, overseas Internet services, Commodity E-commerce and Internet financial services contributed 31.8% of total Internet revenue in the first quarter. It is noteworthy that millet MIUI monthly active users achieved rapid growth, from 190 million in March 2018 to 261 million in March 2019, of which the mainland China MIUI monthly active users achieved ring-to-ring growth. The monthly live users of smart TV and millet box also achieved sustained and rapid growth, reaching 20.7 million in March 2019, an increase of 55.1% over the same period last year.

With the continuous strengthening of millet's Internet services in major markets, its overseas Internet services have also achieved rapid growth. Following the launch of App Store, Video APP and Information Flow Services in several markets, Millet has continued to focus on Internet services in India, and has released three applications, namely Mi Music, Mi Video and Mi Pay.

According to CTR Media Intelligence, in 2019, the fluctuation of advertisers'confidence in the overall economic market led to the readjustment of the Chinese market. In the first quarter, the overall decline of the Chinese advertising market was 11.2%, while the advertising expenditure of Internet media in the first quarter fell 5.6%. Internet industry analysts believe that in the context of domestic consumption pressure, the Internet advertising business of millet has been able to maintain growth counter-cyclically, and millet is constantly strengthening international business mining and intelligent television Internet layout, ensuring the diversified development of millet Internet business, which is enough to prove the resilience of millet business model.

Under the bad situation of domestic advertising industry in the first quarter, some investment institutions were surprised by the performance of millet Internet business. Nomura Securities believes that the growth of other parts of millet Internet advertising exceeded expectations. Analysts predict that millet's advertising and game business will increase on the basis of the first quarter, and the growth rate of Internet services will reach at least 30% in the whole year.

AloT's strong lead "flywheel effect" is emerging

Analysts who have been studying millet for a long time have found that in 2019 Q1, some revenue of millet IoT and consumer goods reached RMB 12 billion yuan, an increase of 56.5% over the same period of last year. For the first time, Millet contributed more than half of its gross profit to Internet services. At this time, it is inappropriate to say that millet is a mobile phone company or a hardware company. So many analysts and financial media people call the first report card handed in by millet in 2019 "off-sheet financial report". Millet's growth is no longer entirely dependent on the smartphone business on which it started. It has successfully diversified its business. While its Internet has become more and more popular, it continues to be a leader in the AIoT track.

Reporters found that in the official pictures of millet Q1 earnings in 2019, AIoT business even placed in front of the mobile phone sector, and its importance can be seen. In the first quarter of this year, millet's IoT and consumer products can be said to have handed in a brilliant answer. Among them, the smart TV business continues to maintain a leading edge, with shipments ranking first in China's market share for two consecutive quarters. As of March 31, 2019, the global total shipment volume was 2.6 million units, up 99.8% year-on-year. And millet entered the television field in September 2013. In the television field, millet reproduced the rapid rise of millet in the popularization of smart phones in that year. It took more than five years to reach the top in China.

In 2018, the retail sales volume of Chinese color TV market was 47.74 million units, a slight increase of 0.5% compared with the same period last year, according to Ovid.com. But the retail sales volume of 149 billion yuan fell 8.6% year on year. Why does millet enter the field of household appliances that look "traditional"? Rei Jun, founder, chairman and CEO of Millet Group, once admitted that TV, as the largest screen and the most interactive appliance in the family, naturally became a hub product of AIoT. Millet TV should have the functions of controlling AIoT electrical appliances, displaying intelligent device notification, and far-field voice interaction. It is not only the AIOT intelligent control center at home, but also the AIoT message notification center. Here, "AIoT" has become the most frequently mentioned word by Lei Jun.

Since Xiaomi officially launched the dual-engine strategy of "mobile AIoT" at the beginning of this year, Xiaomi's AIoT business has continued to develop at a high speed. IoT platform continues to lead as of March 31, 2019. The number of IoT devices connected to Xiaomi IoT platform (excluding smartphones and laptops) reached 171 million, up 13.7 per cent from a month earlier and 70.0 per cent from a year earlier. The number of users with more than five millet devices is more than 2.6 million. In Lei Jun's view, the increase in the number of equipment access and the number of users of more than five IoT devices proves that the interconnection of Xiaomi IoT is becoming stronger and stronger, the users will buy one by one, and the whole millet ecosystem will be pulled up. Most importantly, millet AIoT forms a positive cycle.

Chen Hang, an economist at Southwest Securities, said that the most noteworthy data is that the active users of Mijia APP reached 26.1 million in March 2019, with more than half of the non-millet smartphone users. That is to say, more than 13 million people have bought millet's IoT equipment without using millet's mobile phone. With the gradual disappearance of smartphone dividends, manufacturers enter the stock game period, consumer-grade IoT in the explosive stage has become the core strategy of millet in the future. The increase in the number of devices accessed and the number of users with more than five IoT devices indicates that the "flywheel effect" of millet should be emerging.

The so-called "flywheel effect" is the core operation idea put forward by Amazon founder Bezos to interpret Amazon's growth logic. It is a closed-loop cycle that can start from any point but has no end point. The core is to promote the company's continuous growth centered on enhancing user experience. To this end, the world's Internet giants are divided into four echelons: a flywheel can be hundreds of billions of dollars giant, two flywheels can be 500 billion to 1 trillion dollars giant, and three flywheels can be trillions of dollars giant. The essence of Internet enterprise moat lies in the network effect, which can be compared to "flywheel".

Based on the development trend of the intelligent interconnection of all things, Xiaomi's "mobile phone AIoT" strategy is expanding rapidly around mobile phones, smart appliances, daily necessities, and so on, and continues to create very competitive IoT products. Bring more cutting-edge scientific and technological experience and more practical intelligent hardware products for consumers. Its launch bracelet, electric scooter andSweep the floorRobots and other intelligent hardware products are also widely welcomed by users, achieving a robust revenue growth. In 2019, Millet launched a variety of explosives such as Mijia smart door lock, Millet wireless charging treasure, photo printer, Millet wireless car charging, Millet Bluetooth headset Air and so on. amongRedmiBrands are also launching IoT smart products as well as big appliances, such as Redmi AirDots Real Wireless Bluetooth Headset.

Global consumer-grade IoT hardware sales increased from $306.3 billion in 2015 to $485.9 billion in 2017, according to Erie Consulting. With the increasing number of interconnected products in the ecosystem of the Internet of Things, the user experience has begun to improve dramatically, and the improvement of 5G, cloud computing and other infrastructure, the whole market will continue to multiply. It is expected to reach over $1.5 trillion in 2022, with huge market space.

In the view of Chen Hang, an economic analyst of Southwest Securities, as 5G enters the era of large-scale commercial interconnection, the pan-interconnection and pan-intelligent equipment of millet's unique AIOT ecosystem will be the key carrier of millet's upgrading and innovation. 2019 will be the first year of 5G business. After giving away the dividend of mobile internet, we are on the eve of the outbreak of AIOT era. The essence of AI is to empower Things. AIoT will be the dividend of the next era. The natural network effect of the Internet has the ability to block the track, the first advantage has a strong moat, this time millet has the first advantage. On May 17, three days before the release of the financial report, Xiaomi Group announced the establishment of Dalian Electricity Business Department. Wang Chuan, Senior Vice President of the Group, was appointed as President of Dalian Electricity Business Department and was responsible for other than television.Air conditioner,Refrigerator,Washing machineWaiting for the business development and team management of the electrical products category, report to the CEO Lei Jun. This is the fifth structural adjustment since Xiaomi’s listing in July last year. This round of adjustment also emphasizes Xiaomi's All in AIoT strategy and its strategic determination to make a contribution to the home appliance business.

Judging from the first report card delivered in 2019, Xiaomi, which turned on "mobile phone AIoT", has developed more steadily, and at the same time, it has continued its driving force of innovation and upward development. With the coming of the 5G era, the intelligent era of the Internet of everything will also usher in a golden period of development. Whether Xiaomi, who is the first to lay out the tuyere, can make good use of the first advantage is worthy of investors' expectation.

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