Xiaomi Expands Overseas, Profit Rises 30% amid Global Pandemic in 1H 2020
COVID-19 and China
Is keeping growing the best way to set back risks? Image credit: Xiaomi

Xiaomi's (01810:HK) Internet service segment is seeing growth at 29% year-on-year after previous heavy investment in it. With its TVs selling fast – and ranking first in China – the related TV Internet service and e-commerce revenue is enjoying further growth.
► The company's overseas market kept growing in the second quarter of 2020 despite the global pandemic. The European market, which grew at 116% year-over-year, and the Indian market are contributing the most.
► The smartphone segments saw a slight decline, yet the global market share of the company is stable at around 10%. 

The Chinese electronics giant Xiaomi (01810:HK) released its first year and second quarter consolidated financial results on August 26. Growing by 7.9% year-over-year, its revenue reached over CNY 103 billion. The operating profit went up by 30% year-over-year to CNY 7.74 billion. Compared with the first quarter's 36% profit decline, Xiaomi's second-quarter results turned the tide with stunning growth of Internet services and the overseas market.

In the first quarter of 2020, the cost related to Internet services went up by 82%, which dragged the company's profit during that period down by over 35%. In the second quarter, the Internet service segment, which includes advertising, gaming and other value-added services, presented the highest annual growth rate at 29%, accounting for 11% of the total revenue. Notably, the Internet service revenue outside of advertising and gaming, including those generated from the Youpin e-commerce platform, fintech business, TV internet services and overseas internet services, increased by 39.5% yearover-year and accounted for 39.0% of our total internet services revenue.  

Smartphones, as the strategic core of Xiaomi's business brought the second-quarter revenue slightly down by 1.2% year-over-year with CNY 31.6 billion. As the global smartphone market is declining as well, Xiaomi's downslope in smartphone revenue is understandable. According to Canalys, in the second quarter of 2020, the company ranked fourth globally in terms of smartphone shipments with the market share standing at 10.1%.

Investors may be concerned about Xiaomi's overseas performance as it takes up nearly half of the total revenue. In the second quarter of 2020, the revenue generated from its overseas market (mainly the European and the Indian market) increased by 10% year-over-year to CNY 24 billion. The growth is largely driven by the rapidly expanding European market. Present in the European market for almost three years, Xiaomi has captured a 12.4% market share. Per EqualOcean analysis, Xiaomi has a growth space that could see it double its current market share in that region in the following one to two years.

Editor: Luke Sheehan

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