Xiaomi beats profit estimates after holiday quarter sales gain

[BEIJING] Xiaomi posted a quarterly profit that beat analysts' estimates after the Chinese smartphone giant defied component shortages to boost sales during the busy holiday season.

Adjusted net income jumped 40 per cent to 4.47 billion yuan (S$954 million) in the last 3 months of 2021, the company said in a filing on Tuesday (Mar 22). Analysts estimated 4.2 billion yuan on average, according to data compiled by Bloomberg. Sales increased 21 per cent to 85.6 billion yuan, beating the average prediction of 81.5 billion yuan.

The world's No 3 smartphone maker managed to grow its worldwide smartphone shipments by 3.9 per cent in the December quarter, helped by models with upgraded camera features and software. Rivals from Apple to Oppo lost ground as global shipments fell 3.2 per cent in the period, according to International Data.

Xiaomi faced prolonged component shortages and fluctuating producer prices in the second half of 2021. Russia's invasion of Ukraine hindered the company's overseas business, although the impact will be "manageable" for Xiaomi, Citigroup analysts Andre Lin and Arthur Lai said in a note. Xiaomi's smartphone shipments to Russia could fall by 3 million units in 2022 as result of a depreciated ruble, logistics disruptions and financial stress among customers in the country, they said.

The Beijing-based company in late December updated its marquee phone product line featuring the latest Qualcomm chips, Sony Group Corp. camera censors and a tailored Android operating system. The most expensive model was priced at around 5,000 yuan, roughly the same as the iPhone 13 mini series from Apple. Xiaomi is also considering using India as a manufacturing hub to widen its footprint.

"Expansion of its premium-smartphone lineup can elevate sales mix and win more high-end market share," Steven Tseng, an analyst at Bloomberg Intelligence, said in a memo ahead of the earnings report. Easing component shortages and the construction of next-generation mobile networks in emerging markets will also fuel growth, Tseng said.

"A growing user base and higher sales of premium phones could bolster Xiaomi's Internet services, which is key to long-term margin growth," according to Tseng.

Xiaomi's billionaire co-founder Lei Jun is leading a US$10 billion electric vehicle project in hopes of turning the consumer electronics brand into a key player in China's EV market, where overseas brands including Tesla and BMW are already making inroads.

The Chinese company hired car engineers, invested in auto-driving startups and is building a factory in Beijing after Lei pledged to kick off mass production by 2024. BLOOMBERG