Xiaomi DR’s, listed on Thai SET, my investor choice.

As a diversification measure one stock I now like is HongSang listed Xiaomi (Xiaomi 1810.HK, last price 16.520).  Post hitting 20 HK$, it has nicely corrected since and on this correction, I now view it with a buy opinion.

The good news is, one can buy/invest in the Xiaomi DR’s,  right on the Thai SET, under the symbol of XIAOMI80 (7.60 Baht, this is a conversion ratio of 10 to 1), not offered as an NVDR which is not  relevant.  Realize also XIAOMI does not pay a dividend due to fast growth and continuously buying back its own shares, for years already (see below).   It also trades on the US OTC mkt under symbol XIACF ($2.15).

This stock hit 33 HK$ just prior to Covit-19 breakout and ever since languished, even while the company has made very solid progress since.  XIAOMI is an impressive near 20-year-old company with some 10,000 smart stores worldwide (plan to increase to 20,000 by 2026) selling select high quality & innovative new products, by far not just phones!  I checked out some of their products of late and am impressed.  Example are a high-end super dust vacuum cleaner at 8,900 Baht here, vs. Dyson’s selling at over 29,000 Baht “on sale”, while doing not much more -as I can tell.  Or, a hand-held power air pressure gauge not much bigger than a cigarette pack, or a hand-held mini air-blower to cool oneself down, I saw many holding these at the recent attended Ms. Universe-Thailand event. Or a mini-expresso portable coffee machine. The list goes on and next time you are near one of their stores I highly recommend you check out all their products.  

Innovation-creative new products at high quality is what this company offers, worldwide.  I would say, cheaper, more innovative -and better quality.  Besides smart home appliances and great phones (top 3 mkt share), it has recently introduced a formidable EV car, the SU7 which due to its price, very attractiveness and long km. range will head-on compete with TESLA,  Xiaomi is priced at less then 30,000 US$.  It plans to sell at least 100,000 this year, a big increase from its initial target of 76,000.  It’s EV car surpasses Tesla across metrics like driving range (700km) vs. 567 fro Tesla Model 3.  But realizes there is a present waiting list -due to strong demand.  Bloomberg estimates overall EV sales in China to growth 20% this year.

By Alan Lam VP and CFO, from its investor conference call given to institutional investors on May 23 2024, here is a summary from what I read:

"And for the Q1 of 2024 our IoT business we have enjoyed revenue and gross margin both improving revenues up 21%...our home appliance products for AC shipment has grown by 60.3%, for fridges growing by 52% for washing machines by 47%....tablets up 93% year over year….,expense ratio dropped by 0.7% despite higher material costs….R & D is up 24%, or up 100% year over year….with still a very strong 127 Bill RMB cash position on hand, even while continuing for years in repurchasing our shares on the open market so far this year RMB 2.5 Bill, exceeding that of the whole of year 2023.  By 2040 we will reach carbon neutrality”

At the end of June XIAOMI already delivered over 25,000 EV’s. While currently only available in China it plans to become one of the top 5 global automakers.  XIAOMI also has new flip phone coming which is a slap on the face of Samsung’s Z Flip 6., it will be called Mis Flip.  Many of these new consumer product devices, like AC’s, refrigerators, vacuum cleaners, washing machines, lamps etc..i.e. smart home devices will be accessible through WIFI controlled smart phones from anywhere. A big step forward, just imagine being able to start, stop and change temperature of, as example, your AC directly from your phone….like one can be on holidays and yet start one’s AC dehumidifier everyday remotely for a couple of hours…or get it started just 20 minutes before getting home much better than a timer.

Its EV car supports over 1000 smart home devices allowing Xiaomi drivers to control their home appliances, directly from their car.

What differentiates’ this company as well, which I like, is that they not focus on the US, i.e. their phones are not sold there. They decided who needs all the troubles there and instead focus more on ex-USA i.e. EU and emerging markets (EM), ha, where 85% of the world population resides. The company is aggressively expanding into these EM markets while also executing is premiumization strategy both in China and abroad.  Called “Vallue for Money” strategy.  All this will give it an edge in the GenAi revolution, as it will be fully integrated into portal devices, hence a key beneficiary of Gen AI’s significant growth. In Spain for example, it is the leading smart phone company with a 28% market share and the 3rd biggest in SE Asia with a mkt share of 16.5% (up from 15%), in China it commands a 14% market share and in Latin American 15.3% -up 2% from a year ago.

The US tariffs should not affect Xiaomi as it has very limited presence there and does not sell its phones or EV cars there.  However Huawei is serious competition as they as well boast IoT ecosystems. On the other hand, Apple is leaving the car biz which is a positive. There is potentially an effect if US sanctions restrict procuring of certain very high end chips (sub-5nm) for their phones, as phones do product some 50% of the companies’ total revenues in over 63 counties and 56 markets are in the top 3 and in 67 are ranked top 5.  Emerging markets has seen very good growth.  I believe only the highest end phones use these chips (sub-5nm).  Members always feel free to comment here.

Some 24,5% of the shares are held by insiders with over 362 institutions holding shares in Xiaomi, it surely is a big cap stock, at as of July a mkt. cap. of 58 Bill US$, or the world’s 365th highest valued company.  The company is followed by many dozen’s of global top analysts including Morgan Stanley and Goldman Sachs.  XIAOMI trailing p/e is shown at 21.8 (vs. near 34 for Apple and 100 for Tesla) and its Beta is 1.20 -so its historically just a bit more volatile then the overall China overall market there. Gross margins have continually improved from 4% in 2015 to currently 21%.  Operating margins improved 6% last year from negative, 8 years earlier,  this despite heavy investments in R & D which increased 7% of revenues last year, from 2% in year 2015.  Its next Q. net profit is expected to be released on August 18th.  

Hence along with GULF which I here chose some 10 days ago at 41, and now XIAOMI a DR listed on the SET (last traded at 7.60 Baht), are now my clear 2 big cap stock investor selections.  As always feel free to comment.

Best Regards,