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Xiaomi: There's Potential, But How Much?

Apr. 01, 2018 2:36 PM ETXiaomi Corporation (XIACF)SSNLF2 Comments
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B&B Market


  • The product portfolio mixed with a low-cost focus of the company enables a strong competitive advantage.
  • Management has plans for global expansion over the next few years, but is this warranted?
  • With a healthy top and bottom line, Xiaomi has a strong financial position to evolve and compete.
  • Eyeing an IPO, does this company provide enough potential for investors to keep it on their radar?

In previous articles, we have discussed our positive outlook on the Chinese economy. Economic indicators are strong and this will translate into increased opportunity for businesses. This can already be seen from 2017 data showing that 12,000 business were started per day in China. The people of China are experiencing both an economic, and a technological revolution. One of the most prolific companies is Xiaomi (XI) ("Sha-oh-me"). With a strong foothold in the Chinese and Indian market, a solid top and bottom-line, and an innovative product portfolio, management has the company well positioned for a global expansion. However, the question is not: 'Is the company ready?', but rather: 'Is there international demand for the company's products?'.


Xiaomi (XI), founded in 2010, is one of the world's largest smartphone designers/developers. Xiaomi saw extremely fast growth (over $11 billion in revenues within 4 years). The main reason for this was because of their focus on creating the leading low-cost smartphone. This quickly expanded into other tech segments including laptops, smart-devices, and internet services. This move however, was in response to the increasing smartphone competition from opposing low-cost producers (Oppo and Vivo).

Source: Atlas

As a result, 2016 became a lackluster period for the company. Xiaomi, originally the frontrunner in the Chinese market, had fallen to 5th place. Management blamed the exponential growth, with CEO Lei Jung stating:

“In the first few years, we pushed ahead too fast. We created a miracle, but also drew on some long-term growth...So we have to slow down, further improve in some areas, and ensure sustainable growth for a long-term future.”

The company has pushed hard to recover. With international initiatives and increased focus on their low-cost strategy, it appears to be paying off. The company has managed to do what few can do: bounce back.

This article was written by

B&B Market profile picture
B&B Market is a young investor who is passionate about Chinese stocks and the companies behind them. Although I am early on in my professional career, I am not new to the markets.  I have put in enough years to have quite a few trading regrets.  These regrets are what led me to love the Chinese economy.  I aim to learn more and more everyday as I write, and am looking for conversations with other investors.  Coverage consists of stocks that have been determined as undervalued, hot-topics, or upcoming IPOs.  I write as a form of due diligence, meaning that this is a part of my research process.  As a result, I have a personal incentive for well-researched coverage.For more in-depth coverage, including valuations with buy/sell targets, newsletters, and more, check out my Marketplace Service "Corporate China".Feel free to message/comment any companies you would like to see covered, or improvements you would like to see.  Thanks for reading!

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