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Stock Pick of the Week with Momentum Securities: 31 March 2021 - Xioami Communication Company

31 March 2021 Momentum Securities

Momentum’s leading stockbroking division – Momentum Securities – will be bringing you their Stock Pick of the Week, each week on a Wednesday or Thursday. The stock pick motivation is available as written content and a downloadable video and audio clip.

This week’s pick: Xioami Communication Company
About: Xioami Communication Company is a Chinese, multi-national internet and electronic company specializing in mobile technology including smartphones and smart hardware. They are the world’s 3rd largest smart phone and handset manufacturer, behind Samsung and Apple.

Portfolio Manager for Momentum Securities, Chris Napier shares his insight on Xioami Communication Company.
Click here to download:
• the audio clip
• the video clip.

This week’s stock pick of the week is Xioami Communication Company, listed on the Hong Kong exchange under the ticker code 1810.

Whilst Xioami produces a wide range of electronic goods and merchandise, Xioami is currently the world’s 3rd largest smart phone and handset manufacturer, behind Samsung and Apple. Their global market share of the handset market is currently 10.2%,

Domestically their market share in China is around 15% and they also account for 28% of handset sales in India.

Xioami’s top of the range smartphones come in around 33% cheaper than the top of the range Samsung or Apple smart phones, giving them a pricing advantage in developing regions.

The company’s latest results showed a 36.7% increase in net profit for the fourth quarter of 2020. Total sales jumped 24% for the year and smart phone sales jumped 38%. 52% of sales were within China while offshore sales grew 27.6%.

Another interesting fact is Xioami recorded the most patent applications by a Chinese company in the last year, with the World Intellectual Property Organization. Placing them 5th in the world with 516 applications and one of only two electronics companies, in the top 5.

These patents vary from product design to functionality and all you need is a handful to become the newest innovation, to give you a competitive edge and that helps drive further market share gains.

Momentum Securities will be watching the Xiaomi Mega Launch closely on the 29th of March, for any new innovations that may set them apart from their competitors. As we potentially see the launch of the Mi 11 range of handsets. Talk has been for new liquid lens camera technology, as well as a tablet to take on Apples iPad’s dominance.

The only drawback for the company in the near term is the global shortage of Semi-conductors and hopefully this doesn’t affect their manufacturing capabilities in the near term.

Currently trading around HKD25 and well off the all-time highs of HKD35, it trades on a PE of 36. One should look to build a small position in 2 or 3 tranches over the coming weeks.

Quick Polls

QUESTION

Covid-19 may accelerate certain industry trends. What are we likely to see?

ANSWER

Adoption of contactless technologies and digital experiences will likely be accelerating emerging technologies further
The consumer will expect safety and precautionary measures, driving the need for enhanced surveillance policies and technologies, which may pose potential privacy concerns
Rising activism among consumers and employees could drive an increased focus on corporate purpose
Value chain disruption is likely to lead to an increase in creative partnerships, which may in turn cause organisations to further invest in developing the mindset and agility to collaborate across sectors in the ecosystem
Cost management will be a critical priority to ensure business continuity based on cash flow requirements, to manage lower margins and revenues during a downturn
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