Interpretation: what is the value of millet to be worth?


In May 3, 2018, Xiaomi officially submitted the prospectus to the Hongkong stock exchange. The millet which was set up for 8 years has finally officially opened the road of listing.

The data revealed by the prospectus shows its growth: in 2015, Millet’s operating income reached 66 billion 811 million yuan, while in the legendary difficult 2016, millet still achieved a total income of 68 billion 434 million yuan. By 2017, the revenue of Xiaomi nearly doubled, reaching 114 billion 625 million yuan. At the same time, Millet’s profit increased year by year: millet lost 303 million yuan in 2015, net profit of 1 billion 890 million yuan in 2016, net profit adjusted to 5 billion 360 million yuan in 2017.

It is particularly worth mentioning that at the millet 6X conference before the submission of the prospectus, the chairman Lei Jun of the chairman of the millet has publicly promised that the comprehensive profit of the millet will never exceed 5%. This is regarded by some as a deliberate declaration before IPO. The information disclosed in the prospectus also confirms this: in 2017, the comprehensive profit rate of Millet (including smartphones, Internet services and smart hardware) was 4.7%.

Everything is an elaborate arrangement.

Disputability and typicality

There is no doubt that the IPO of millet will be destined to become a highly controversial IPO and a landmark IPO.

This is the first high-tech company listed on the stock exchange of Hongkong since the reform of “the same shares and different rights”.

In 2013, the Alibaba had hoped to be listed in the Hong Kong exchange with a partner system with different rights and spent a lot of effort to explain communication, but the Hongkong Securities Regulatory Commission was not moved, and the Alibaba was finally listed on the New York Stock Exchange. As of December 2017, the amount of funds raised through IPO by the Alibaba’s Hong Kong exchange had fallen behind the New York stock exchange, the Shanghai stock exchange and Nasdaq, and fell to fourth.

In December 15, 2017, the HKEx announced the biggest change in 20 years. It formally liberalized the “shares of shares”, allowing the company’s founders and major executives to have higher voting weights for the board and the shareholders. This helps to control the company’s development strategy and direction after the listing.

The prospectus shows that Lin Bin, founder, chairman and CEO Lei Jun and co founder and President of millet, is the beneficiary of “different rights in the same stock”.

The listing of millet is not only significant to the Hongkong stock market, but for domestic A shares, millet is also expected to be the first to be listed on the A shares through the CDR (China depositary certificate). According to the media, the CSRC is also studying the specific implementation of the “different rights of the same shares” by the high technology company of the CDR landings of A shares. Plan. The listing of millet will provide the first template for future technology companies to list on A shares in Hongkong and the mainland.

In this sense, many people want millet IPO to succeed, even its peers and rivals.

Nevertheless, the IPO of millet is still highly controversial. A few months before millet submitted its prospectus, there had been a lot of disagreement about the price and market value of millet listing: some people who looked down at the millet said Millet’s market value was about $50 billion because of low profit margins and in the hardware industry; at the same time, there was no lack of millet market value to break through 200 billion. Yuan’s “killing and killing” people, though obviously contrary to common sense.

To determine the reasonable value range of millet, we need to find out what kind of company it is, and use the corresponding revenue, profit and growth data to judge. With the submission of prospectus, all information is transparent.


In 2013, when millet entered the listed company’s United States group, it opened the financial data according to the regulations: the revenue in 2013 was about 26 billion 583 million yuan, the operating profit was about 486 million yuan, the total profit was about 524 million yuan, and the net profit was about 347 million yuan. According to these data, Millet’s consolidated gross profit margin was only 1.31%.

Taking the data in 2013 as a reference, the financial situation disclosed in the prospectus since 2015 has been “earthshaking”.

From the perspective of operating income, Xiaomi’s revenue in 2015 was 66 billion 800 million yuan, and in 2016 it was 68 billion 400 million yuan, and the growth was not outstanding. According to media reports, there was a problem in the supply chain of millet, which led to a weak supply of shipments and was once dumped out of the top five of domestic smartphone sales. By 2017, the sales of millet mobile phones returned to the top five in the world, and its revenue almost doubled to 116 billion 400 million yuan. In the first quarter of 2018, sales of millet mobile phones increased by 87.8% over the same period last year, ranking fourth in the global mobile phone sales. If we think that the supply chain of millet has been basically solved, if this rate of growth is sustained in 2018, it will be an important reference for the pricing of millet in the capital market.

Millet profit growth is also dramatic, in 2015 is a good year for the development of millet business, but the millet did not achieve profit, but a loss of about 303 million yuan. In 2016, when it was called “the year of problem”, it realized a net profit of 1 billion 890 million yuan. By 2017, the net profit of Xiaomi reached 5 billion 360 million yuan, with a combined profit margin of 4.7% and a gross profit margin of 13.2%. From 1.31% in 2013 to 13.2% in 2017, the gross profit margin of millet nearly doubled 13 times.

In this sense, whether you like the company or not, the question of “no money” can be stopped. According to the growth rate of net profit in the past three years, if we keep a little conservative, we can also predict that the net profit of millet in 2018 is more than 12 billion yuan. This should be a basic reference for market valuation of millet.

Hard Suits Inc or Internet Co?

With the judgment and prediction of profit growth, how much is its P / E ratio? By what type of company? Is it a traditional Hard Suits Inc, an intelligent Hard Suits Inc? Or a Internet Co?

It is “a Internet Co with mobile phones and loT intelligent hardware as its core”, the prospectus submitted by Xiaomi said.

It’s not new. Millet chairman Lei Jun has repeatedly stressed that the millet business is “Triathlon”: hardware, Internet services and new retail (loT as the core of the new retail and smart hardware).

This is also the three major plate to determine the market value of millet.

Interpretation: what is the value of millet to be worth?

Judging from the current business structure, millet has both the dual attributes of mobile phone manufacturers and Internet Co.

The brochures of the prospectus show that in the 2017 millet income composition, mobile phone core hardware business accounted for 70.3%, Internet services accounted for 8.6%, new retail (Internet of things and intelligent hardware) accounted for 20.5%.

The proportion of Internet services and new retail sales is increasing year by year. In 2015, the proportion of millet smartphone business revenue was still 80.4%. In two years, smart phones made over 10% of the Internet service and new retail services.

This makes millet more like a Internet Co. Internet services determine the difference between millet and other mobile phone companies. And the Internet revenue of Xiaomi mainly comes from the game intermodal and MIUI advertising.

Prospectus shows: the latest millet software interface – MIUI user monthly life reached 190 million. MIUI not only do intermodal, but also own its own game developer interface, including account system, payment system, in the millet game center, many games will also specifically mark the “millet version”.

This huge user volume has also earned MIUI considerable advertising revenue. Reuters reported earlier that MIUI’s advertising contributed nearly 1/3 revenue to the Internet business of Xiaomi.

The loT (Internet of things) business is now known as the new title of “new retail” by millet, which is inseparable from millet ecological chain enterprises.

It has made millet an e-commerce company – an e-commerce platform, “millet net” and an offline experience store that has been pushed by the millet since 2017 – “millet’s home”, which carries Millet’s smart hardware and Internet of things business – either online or under the line. In the millet network, from millet accessories to other smart digital products, and to non digital consumer brands, there are a total of hundreds of product categories, online retail stores millet home, the long-term sales of more than 400.

Millet official data show: millet (annual) Ping effect has reached 270 thousand yuan / square meters, second only to the apple store 400 thousand / a square meter, is a lot of other mobile phone stores. According to the gross profit of 8%, the existing gross profit of more than 180 millet households is enough to cover the operation cost.

Although all the mobile phone manufacturers will sell accessories in the official mall and the line, the advantage of millet is to invest more than a dozen millet ecological chain enterprises, and master the leadership of design and pricing. Relying on the “ecological chain mode”, millet does not need to produce hundreds of products by itself.

As of January 13, 2018, the number of millet stores nationwide exceeded 300 stores. Lei Jun, who opened the flagship store in Xiaomi, Shenzhen, said it was expected to open to 500 by the end of 2018, reaching 1000 in 2019, and truly forming a sales scale.

Of course, the “big head” of Xiaomi’s income is still on smartphones. The average selling price of millet mobile phones in the disclosed prospectus is worth the average price of 807.2 yuan in 2015, 879.9 yuan in 2016 and 881.3 yuan in 2017. The growth rate is very small. If it is a company that can only make money by selling mobile phones, this situation is unsustainable.

It is time to draw a conclusion that the capital market has a great probability to price a Internet Co according to its P / E ratio. A Internet Co usually has a P / E ratio of 40-60 times its expected profit. Amazon’s price earnings ratio was at one time more than 120 times – it is also a company that provides both retail services and hardware and provides Internet services at a low profit margin, of course, it’s crazy and unreliable if it is calculated according to Amazon’s price earnings ratio.

Other imagination

In addition, what is the imagination of millet?

One is the “internationalization” that millet often refers to – India and Southeast Asia are its main international positions, but also the expansion of the international market, making millet the top four of the global market share. In the fourth quarter of 2017, the market share of millet in India exceeded Samsung, reaching 23.9%, becoming the first brand in India.

In addition, millet is also actively expanding in Indonesia, Vietnam, Philippines, Thailand and Malaysia. It faces the same enemies from China – HUAWEI, OPPO and vivo are also there.

At least, from the data point of view, the internationalization of millet has been reflected in the changes in the composition of income. According to the prospectus, overseas income accounted for only 6.1% of total revenue in 2015. In 2016, it rose to 13.4%. In 2017, the proportion of overseas income has reached 28% – more than doubled every year. How much of the future income of millet comes from outside the mainland market? 40%? 50% or 60%? This is a matter of imagination.

The second is the property of millet as an investment company. “Ecological chain enterprises” is another equity investment organization controlled by millet and Lei Jun – an important standard for capital investment. At present, four companies, including Amy technology, have been listed in the ecological chain enterprises of millet investment.

Xiaomi also invested heavily in holding a number of listed companies, including the thunder and the United States. IT oranges data show that: now Shun invested 288 enterprises for capital investment, millet technology investment 161, plus more than 400 enterprises. These enterprises may bring considerable investment returns to millet in the future. And the impression of capital market on an investment company is not too bad. Let’s look at the Tencent.

So, how much is the value of millet to be worth?

Xiaomi is an international smart phone company. Xiaomi is an Internet software company. Xiaomi is also an electric supplier and a new retail companies. When a company is “everything”, it is easy to be regarded as a Bubbles Company.

However, millet in any of these business dimensions, there is growth data as a support, this is also a very interesting thing. The capital market has never refused a bubble, nor will it refuse to take the data out of the company when it comes to the concept.

According to the growth rate of net profit disclosed in the prospectus submitted by millet, it can be predicted that the net profit of millet will exceed 12 billion yuan in 2018. Referring to the 58 times P / E ratio of the Internet Co, which is also listed in Hong Kong shares, the valuation of millet is 696 billion yuan, which is about $110 billion according to the current exchange rate.

It may be too happy. With millet founder Lei Jun’s style of action, he is afraid to give a discount to this valuation. We will finally boldly estimate that the market value of millet IPO is between 800-1000 billion US dollars.

Of course, what I said may be wrong.

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