Xiaomi will go to Hong Kong this week to submit an IPO prospectus. We have predicted eight highlights.

In theory, if Lei Jun has all the shares with super voting rights, at least 9.1% of the special shares can guarantee the voting rights to exceed 51%, and firmly grasp the company's control.

Text|Chen Yi Source|iFeng Technology (ID:ifeng_tech)

There are indications that Xiaomi will soon be listed.

Recently, Xiaomi, founder and chairman of Xiaomi, has repeatedly zoomed in. First, at the Xiaomi 6X conference of the alma mater Wuhan University, the annual comprehensive after-tax net profit rate of the overall hardware business (including mobile phones and IOTs and consumer products) was less than 5%. Subsequently, he issued a full letter to announce a new round of company executive adjustments, appointed CFO Zhou to be the company's senior vice president, taking over finance, investment, HR and other businesses.

According to the reliable news obtained by Phoenix Net Technology, Xiaomi will apply for an IPO in Hong Kong this week, and will be listed in June-July, becoming the first company to adopt the same "different shares." Although we have not waited for Xiaomi’s prospectus, we may wish to focus on it first.

After all, even if you are a "super technology unicorn", you can always run it.

Aspect 1: Lei Jun said that the net profit margin of Xiaomi hardware never exceeds 5%, will it be a face?

This may be the most concerned issue in the entire industry recently. After all, Xiaomi is not just a mobile phone. Lei Jun said that the upper limit of the net profit margin of this hardware is too wide, and the industries affected are too much. According to Lei Jun’s own words, the Xiaomi ecological chain has penetrated more than 100 industries.

First of all, let us first understand, what is the "comprehensive net profit margin"?

Previously, there have been media analysis. If you take a single millet phone such as Xiaomi MIX2S and multiply it by 5%, this mobile phone with a price of 3299 yuan can earn 164.95, but this is not a comprehensive net profit margin.

The consolidated after-tax net profit is a general concept. The operating income is deducted from various expenses, including R&D, sales, advertising, etc., divided by the operating profit.

Sun Yanxi, dean of the First Mobile Phone Research Institute, said that the average comprehensive net profit margin of domestic manufacturers is 10%, and the 5% thrown by Lei Jun is not high. Moreover, according to the pre-IPO financing promotion materials circulating in the industry, the net profit margin of Xiaomi's 2016 hardware business is only 2.8%.

Of course, the so-called "financing promotion materials" are not from Xiaomi officials, but some of them may come from the information of early investors selling old stocks. Therefore, if you think that these figures are roughly credible, there is still a margin between 2.8% and 5%.

So, what is the real data, you have to look at the prospectus. Therefore, by the time you look through the prospectus submitted by Xiaomi, you will know if the number will be 5%, which will be one of the biggest highlights of the prospectus.

Aspect 2: Xiaomi does not make money in the end?

From the first day of Xiaomi’s birth, Lei Jun has always said that Xiaomi’s mobile phone hardly makes money.

The wonderful thing is that this "almost", in the end, how much profit is "almost no money"? And Rebs recently announced that the hardware integrated net profit margin does not exceed 5%, apparently putting pressure on the profit situation. According to 5% speculation, Xiaomi's hardware earning ability is basically a measurable data. Therefore, everyone should be more concerned about Xiaomi's Internet income and investment income.

There is one point that needs attention. Prospectus usually has hundreds of pages, and there may be a lot of different data calibers with the word "net profit", such as "unaudited net profit", "operating profit", "adjusted net profit", etc. . Moreover, the accounting standards of the Hong Kong Stock Exchange and domestic A-shares and US stocks are slightly different, and it is easy to see the dizziness.

So which data is reliable? You can probably focus on two pieces of data, one is “operating profit” and the other is “adjusted net profit”.

This "adjusted" is very famous. Everyone must remember the huge loss of Mito IPO. In fact, there are not many Internet companies listed in Hong Kong, and the accounting standards are different from those in the United States. In the past, Mito had suffered the dumb loss of “huge losses”. Give everyone a detailed explanation.

Internet technology companies usually issue a lot of preferred stocks to investors in the previous financing. If the valuation is from tens of millions of dollars to tens of billions of dollars at the beginning, the value of these preferred stocks is also multiplied by many times. Ying also turned N times. However, these shareholders have not withdrawn, so the increase in their investment value will be considered as the company's liabilities to these shareholders in the financial statements. I don't know if Xiaomi will encounter similar situations this time.

Looking at whether an Internet company is profitable, you cannot simply look at net profit, but also depends on operating profit and adjusted net profit. These two figures exclude interference factors such as financial accounting.

Aspect 3: How many shares does Lei Jun occupy in Xiaomi?

According to previous media reports, Lei Jun’s share in Xiaomi was as high as 77%. But before the prospectus is released, this figure can only be seen. How many stocks does Lei Jun have in Xiaomi? I believe this is what we all want to know. After all, this may be related to the ownership of China's rich title this year.

In addition, Xiaomi is expected to become the first listed company in Hong Kong with the same rights. The same shares have different rights, that is to say, part of the shares held by management have more voting rights than ordinary shares. To put it simply, according to the new policy of the Hong Kong Stock Exchange, Lei Jun may have a group of stocks with super voting rights. Compared with common stocks, the "right to talk" has at least 1 share of 2 shares and a maximum of 1 share of 10 shares. In theory, if Lei Jun has all the shares with super voting rights, at least 9.1% of the special shares can guarantee the voting rights to exceed 51%, and firmly grasp the company's control.

In addition, employees who previously reported that Xiaomi's work number is less than 1000 will achieve different levels of financial returns after the company's listing. In the latest personnel adjustment, Xiaoguang’s two co-founders Zhou Guangping and Huang Jiangji resigned from their management positions for personal reasons. Usually there is no company position, and the restrictions on stock realization after listing will be much less.

If the prospectus discloses the shareholding ratio of Xiaomi executives, according to a reasonable valuation range, what will the value of these executives become after the listing of Xiaomi? This is also a question that everyone cares about.

Aspect 4: Is Xiaomi really an internet company like I said?

Xiaomi throws a 5% figure on the eve of the listing. In fact, it is more like setting a future goal for Xiaomi, setting a ceiling for hardware net profit margin, telling everyone: "We are Internet companies, we are not relying on hardware to profit from traditional hardware. Manufacturer."

Judging from the so-called “referral” data currently circulating, Xiaomi’s revenue is 21% from the Internet service business, with a gross margin of over 40%.

So, how do you decide if a company is an Internet company? There are probably several aspects.

First of all, there must be a large-scale Internet business. If the basic scale of the Internet business is not available, then there is no way to talk about it.

Second, the Internet business is the main source of profit. For example, the Internet property business such as Apple APP store and Apple Music earns more money than many Internet companies, but Apple's profit is still mainly from hardware profits, so Apple is still a hardware company.

Third, the business income of Internet attributes should present a rapid growth attribute. Internet companies are all going to be massive user bases. The higher the user's stickiness, the better. The longer the usage time, the better. The lower the customer cost, the better.

Therefore, Xiaomi is not an Internet company. Look at the three sets of data in the prospectus: How much is the income of Xiaomi Internet, how much is the profitability of Xiaomi Internet, the number of monthly users of Xiaomi Internet business, the duration of use and the cost of obtaining customers. .

However, from Xiaomi's business model, it is now known that Xiaomi's Internet business should not have the cost of obtaining customers. After all, it can be directly converted by mobile phone users.

Aspect 5: How big is the Xiaomi ecological chain?

Xiaomi started to lay out the ecological chain from 2013. The mobile phone is the core. The peripheral products include earphones, small speakers, mobile power, and other small household appliances such as air purifiers, rice cookers and water purifiers. There are also some things to play, such as sweeping robots, as well as some necessities such as toothbrushes and mattresses.

Some of these companies have even taken the lead in the world and are on the capital market. For example, Huami Technology, which is a Xiaomi bracelet, has been listed in the US last year.

How much does Xiaomi make in these products, and what is the profit margin? At the time of last year, there were more than 100 Xiaomi eco-chain companies. Now, how much does this number become? What is the relationship between these companies and Xiaomi?

There should be an answer in the Xiaomi prospectus.

Aspect 6: After Xiaomi’s Hong Kong stocks, will there be A shares?

If nothing unexpected, Xiaomi should be the first company listed after the implementation of the New Deal. At the same time, the CDR of domestic A shares is also news.

CDR is the English abbreviation of Chinese Depository Receipt, which refers to overseas listed companies escrowing some of the issued shares listed in the local custody bank, issued by depositary banks in China, listed on the domestic A-share market, and in RMB Transaction settlement, investment certificate for domestic investors to buy and sell.

The landing of A shares by Internet companies is a "difficult problem" because the A-share IPO issuance mechanism requires that the listed companies need to continue to make profits for three consecutive years, and there are restrictions on the company's shareholding structure. Therefore, "BAT" chose Hong Kong and the US capital market to be listed.

At the beginning of this year, CDR rumors were raging. A number of Chinese Internet listed companies have expressed their willingness to return to A, and Xiaomi has also been reported that Hong Kong + CDR will realize the simultaneous listing of Hong Kong stocks and A-shares. Legend has it that has been guessed as an annual suspense drama.

Now Xiaomi went to Hong Kong for listing, so that the rumors were first determined. Will the news of the CDR be heard in the near future? This can be seen in the Xiaomi Hong Kong prospectus.

Aspect 7: Will Xiaomi's valuation break 100 billion?

Can Lei Jun top the richest man in China, besides seeing how many Xiaomi shares he has, and how much the company's valuation is ultimately.

About Xiaomi's valuation, ranging from 50 billion US dollars, 80 billion US dollars to 100 billion US dollars. Which is accurate? This is going back to a question of how to look at the valuation model of Internet companies.

Different from the domestic capital market, we are used to looking at consumer companies and industrial types of companies. We have nothing to look at this year's net profit situation, and then calculate the net profit situation next year, multiplied by an industry average price-earnings ratio multiple.

But for Internet companies, this valuation model is hard. First of all, this Internet company may not be a positive net profit, and secondly it is a positive net profit. The company's revenue and gross profit growth rate of 100%, 200%, is not new, but this growth rate is familiar to us. Businesses are numbers that are impossible to complete.

The valuation of Internet companies is more dependent on the number of users, the cost of customers, and the growth rate of earnings, which is the growth of enterprises. Apple's market value is 840 billion US dollars, the price-earnings ratio is about 18 times; Tencent's market value is 372 billion yuan, the price-earnings ratio is about 43 times; Amazon's market value is 750 billion US dollars, the price-earnings ratio is about 320 times.

Xiaomi can afford a high valuation, depending on whether the data in the prospectus shows sufficient growth. Based on previous public reports, compared with the mobile phone business, the eco-chain products with greater profit contribution and imagination, the revenue of Internet services and the changes in the gross profit level over the years are more worthy of attention.

Aspect 8: What is the overseas market of Xiaomi?

Xiaomi has been tossing overseas in the past two years. According to the latest news, India has already won 31% of such exaggerated market share in the first place. In addition, Xiaomi himself promoted it to perform well in Indonesia, Eastern Europe and other places, and now it has entered the Western European market at the beginning.

Then, in the end, the overseas market accounts for more plates of millet? Can Xiaomi really rely on overseas markets to maintain growth? After all, China's domestic market is already a zero-sum competition market. The high valuation of Xiaomi must be supported by the long-term high growth rate, so it must be seen in overseas markets.

Xiaomi's recent big book special overseas market results, especially in the Indian market, in the prospectus, Xiaomi's overseas market changes in the past three years can be seen.

Of course, the above content is only a prediction. What is the real prospectus? We will pay close attention to it and interpret it as soon as the prospectus is published.