China smartphone maker Xiaomi beats profit view, sees more global expansion

SHANGHAI (Reuters) – the Chinese smartphone maker Xiaomi Corp said on Tuesday its fourth-quarter net profit more than tripled to an amount of 1.85 billion yuan (us$275.59 million), on stronger revenue.

FILE PHOTO: People walk past a Xiaomi shop in Shenyang, Liaoning province, China June 12, 2018. REUTERS/Stringer

That is above the 1.7 billion yuan average estimate of 10 analysts, according to Refinitiv data.

The turnover for the year rose 27 percent to 44.4 billion yuan, lower than the 47.4 billion yuan average estimate of 13 analysts, according to Refinitiv data.

The results show Xiaomi is weathering fairly well a slowing Chinese smartphone market, the largest, by increasing the focus on markets such as India and Europe.

For the entire 2018 calendar year, Xiaomi brought in the income of 174.9 billion yuan and a net profit of 8.6 billion yuan.

This is the third set of financial results for the company since its initial public OFFERING in Hong Kong. Xiaomi shares have rallied almost 30 percent since their 2019 lows in January, though they remain far below their July asking price

To compensate for the slowing home market, the company has aggressively expanded in Europe. After wide roll-out in the continent in the beginning of 2018, the company now ranks as the region’s fourth-largest phone supplier.

Speaking on a call with reporters, Xiaomi CFO Shou Zi Chew said that the sale of outside of China made up 40 percent of the revenue of the company in the fourth quarter of 2018, adding that the global expansion would be a priority for 2019.

“We will continue to explore the global markets and the repetition of the success in India in other important markets, such as Indonesia and Western Europe,” he said. “We will also be expanding to more new international markets in 2019.”

Xiaomi has also redesigned its smartphone line-up, which paves the way to sell more expensive devices that can increase the profit margins. In China, the average selling price of the phones of the company increased by 17 percent, while overseas they rose by 10 percent, according to the company’s earnings report.

In February, after the launch of Xiaomi’s new flagship Mi 9 phone, founder Lei Jun said the device would be the company’s latest handset priced at under 3,000 yuan (us$446.99).

The sales of smartphones made 65.1 percent of Xiaomi’s total sales in the fourth quarter. Money of other hardware made 25.1 percent while the internet services to 9.1 percent.

The last segment is crucial for the Xiaomi of the pitch of the investors in the run-up to the IPO. The company touted the so-called “triathlon business model”, where consumers who purchase smartphones are going about the use of apps and services that generate revenue through ads or micro-payments.

Xiaomi also stressed it would increase research and development, and plans to invest more than 10 billion yuan in the artificial intelligence in the next five years.

(This story corrects to 10 million yuan to 10 billion (14)

Reporting by Josh Horwitz; Editing by Muralikumar Anantharaman and Kirsten Donovan

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