Share prices continued to fall and millet was repurchased at HK$450 million
On June 3, 11.13 million shares were repurchased, on June 4, 11.1 million shares were repurchased, on June 6, 21.865 million shares were repurchased, and on June 10, 5.247 million shares were repurchased... This is the second round of intensive stock repurchase of millet since this year. Four repurchases cost about 450 million Hong Kong dollars. By the end of June 12, millets share price had surged back to HK$9.54. It is not clear whether millet will carry out more repurchase operations.
It is noteworthy that the sharp decline in Millet stocks is not caused by major bad news. Just on May 20, millet released its first quarter of 2019 earnings, which were both higher than market expectations. During the reporting period, millet revenue was 43.75 billion yuan, an increase of 27.2% over the same period last year, and adjusted profit was 2.1 billion yuan, an increase of 22.4% over the same period last year.
Bright results did not stop the decline in millets share price. In May alone, millets share price fell by about 25%, evaporating about HK$300 billion from its peak value of HK$552.5 billion. Even compared with the HK$17 issue price on the day of the IPO, millets biggest drop was 47.6%.
The last time millet boosted its share price through repurchase was in January. At that time, the six-month ban period of millet was over, and 3 billion shares were thawed, reaching 19% of the total issuance. Relevant shareholders sell stocks to cash in, which brings downward pressure to millet stock price.
Business is good, stock prices are down, this contradiction makes millet into a dilemma. Industry analysis said that although millet expressed confidence in the current and long-term business prospects by share repurchase, whether it can really boost investor confidence depends on whether millet can improve the micro-profit status of mobile phones and the layout of AIoT business.
Small profits, mobile phones make millet more like a manufacturer
Some analysts believe that on June 5, the United States officially abolished the GSP treatment for Indian developing countries. The negative impact of this decision on Indian economic development may indirectly affect millet. According to IDCs latest data in May this year, millet has occupied 30.6% of the mobile phone market in India.
Reporters from the Beijing News have sought confirmation from millet, but millet said that it would not comment on the relevant statements in order to comply with the regulations of the Hong Kong Stock Exchange.
Objectively speaking, the global smartphone market hit the top and went down, which really added variables to millets future. According to a report released by IDC, a market research institute, global smartphone shipments in 2018 were 1.4 billion, down 4.1% from 2017. The agencys quarterly tracking report, released in June, predicts that global smartphone shipments will fall by another 1.9% in 2019.
In terms of millets revenue structure, smartphone revenue accounted for 61.72% of the total in the first quarter of 2019, down from 67.5% in the same period of 2018. But this is clearly far from Lei Junkous Internet company - millets Internet revenue accounts for less than 10%.
At the same time, millet has been pursuing a very low profit margin in hardware business. Lei Jun had promised that the comprehensive net profit margin of millet hardware will never exceed 5%. According to the 2018 financial report, the net after-tax interest rate of millet hardware is less than 1%. Hardware, which accounts for such a high proportion of revenue, cannot provide much profit. Investorsdoubts about millets long-term profitability are not unreasonable.
The sluggish market-to-net ratio of millet may explain more. Generally speaking, the valuation premium of Internet enterprises is higher than that of manufacturing enterprises, and the market-to-net ratio is relatively higher. At present, the market-to-net ratio of millet is 2.62, which is lower than the average level of Hong Kong stock and American stock Internet companies, and closer to the ordinary consumer goods manufacturing industry.
High-end mobile phones and AIoT breakthrough direction?
In January 2019, millet set up the Redmi brand by independence of its red rice mobile phone. Lei Jun said in his personal Wechat public reputation that Redmi brand will pursue the ultimate cost-effective, while the millet brand will focus on high-end sprint.
Corresponding to the high-end attempt is the increase of millet R&D investment. According to the financial report, millets expenditure in the first quarter of this year reached 1.7 billion yuan, an increase of 49.5% over the same period last year. However, from the perspective of R&D investment, it only accounts for 3.9% of millet revenue in the same period, which is a little lower than Apples 5.36% and Huaweis 14.1% (not only mobile phones). After enlarging the scale of the enterprise, the disparity in this proportion has caused the difference in order of magnitude. This may restrict the impact of millet on the high-end market in the future.
The international market, especially the Indian market, is a rare growth point for millet mobile phones. In the first quarter of 2019, the international market revenue of millet increased 34.7% year-on-year, 480 authorized millet stores overseas, up 93.5% year-on-year, of which 79 were in India.
However, to the international market, millet also has to face the old opponents of the chase and interception. Samsung, vivo and OPPO are closely behind millet in Indias leading market, according to a 2008 data report on the Indian mobile phone market released by counterpoint, a research institute.
AIoT (Artificial Intelligence Internet of Things) may be millets second curve outside the mobile business. According to the financial report, the income of millet IoT and consumer goods reached 12 billion yuan in the first quarter of 2019, an increase of 56.5% over the same period last year. Its volume and growth rate are much higher than those of Internet services. Thats why Millet is launching the Mobile + AIoT twin-engine strategy in 2019.
On June 11, Millets Smart Home Brand Mijia held a conference and released four millet bracelets and a variety of smart home appliances. Among them, the washing and drying machine Pro and the smoke stove kit belong to everybodys electrical products. The ecological boundary of millet AIoT is advancing to the household appliances industry.
As of March 2019, the number of devices connected to the millet IoT platform has reached 171 million, an increase of 70% over the same period of last year. It is situated on the largest consumer-grade IoT intelligent interconnection platform in the world.
Despite gradual departure from the historic low of HK$9, investors are more eager to get rid of their dependence on mobile phones and show stronger profitability in high-end models, international markets and AIOT ecology so as to give investors long-term confidence.
Zhao Ze, editor of Lu Yifu, journalist of Beijing News, proofread Xue Jingning
Source: New Beijing Daily Responsible Editor: Yao Liwei_NT6056