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On May 12th, Chinese stock company Huami Technology (HMI) released financial data for the first quarter of 2020: revenue reached 1.088 billion yuan, up 36.1% over the same period; net profit was 19.2 million yuan, down 75% over the same period;The volume of goods was 7.6 million, a year-on-year increase of 35.7%.

Huami Technology, which increases revenue but does not increase profits, is it a lucky person heading up against the wind, or a pig that is about to fall?
(One)
On July 11, 2014, Huami Technology was officially established. Ten days later, the first generation of Xiaomi Bracelet was officially released.In the next three months, Xiaomi bracelet sales exceeded 1 million, and then reached the scale of 1 million units per month.
In 2018, Huami Technology, which produces bracelets for Xiaomi, landed on the New York Stock Exchange and became China’s first smart hardware company to land on the US capital market.Lei Jun praised the matter as “a huge victory of Xiaomi’s ecological chain model”.
I have to admit that Huami Technology has been living under the aura of Xiaomi.
Without Xiaomi, it is difficult to imagine a startup that can achieve such results in a short period of time.
According to the IPO prospectus that year, Xiaomi is not only one of the shareholders of Huami Technology, but also the most important customer and distribution channel of Huami Technology.From 2015 to 2017, Xiaomi’s sales accounted for 97.1%, 92.1% and 82.4% of Huami’s revenue.
In 2017, the total shipment of Xiaomi bracelets exceeded 40 million, and Huami Technology became the world’s largest wearable device manufacturer.
However, it is embarrassing that everyone only knows about Xiaomi, and little about Huami Technology.
To this end, Huami Technology began to try its own brand as early as 2015 and launched the Amazfit smart watch.In 2018, the proportion of private brand revenue in total revenue has increased to 33.1%.
In addition, in April of this year, Liu De, co-founder and senior vice president of Xiaomi, withdrew from the board of directors of Huami Technology. He was once the head of the Xiaomi ecological chain.Huang Wang, the founder and CEO of Huami Technology, changed its shareholding ratio from about 54.89% to 99.40%.
Although Xiaomi still holds 14.5% of the issued share capital and the position of the second-largest shareholder has not changed, the signal of Huami Technology’s “de-milling” has become stronger.
More importantly, October this year will be the day when the strategic cooperation agreement between Huami Technology and Xiaomi expires, and it also sets a countdown for “de-milling”.
So, is Huami Technology really plump enough to fly alone?
The answer may not be for the time being.
So far, Xiaomi Bracelet is still the biggest contributor to Huami Technology’s revenue.In June 2019, Xiaomi Bracelet 4 was released, setting a record of more than one million global shipments for eight days on sale, which helped Huami Technology’s revenue skyrocket.
Speaking with data, in the third quarter of the year, revenue reached 1.825 billion yuan, an increase of 73.3% year-on-year; shipments exceeded the 10 million mark for the first time, reaching 13.7 million units, and the year-on-year growth was also close to 70%.
In this regard, Huang Wang also said that in his plan, there will never be a possibility of “detaching from Xiaomi’s independent development”.But this does not mean that the single product of Xiaomi Bracelet is expected to be profitable.After all, the wind direction of the environment has changed.
(two)
According to the US Meticulous Research research report, the wearable device market will grow at a compound annual growth rate of 11.3% in the next five years, and will form a market size of US $ 62.8 billion in 2025.
Huami Technology occupies a leading position in the field of wearable devices with the Xiaomi bracelet.
In the first three quarters of 2019, total shipments of Huami Technology reached 27.6 million units, a year-on-year increase of 50.8%, exceeding the full-year 2018 shipments.In the first three quarters, revenue reached more than 3.7 billion yuan, a year-on-year increase of nearly 53%, which also exceeded revenue for the entire year of 2018.
The fourth quarter of 2019 also performed well, with revenue of 2.114 billion yuan, an increase of more than 72% year-on-year; net profit reached nearly 214 million yuan, an increase of 46% year-on-year; its shipments reached 14.7 million units and also achieved nearly 60%growth of.It is worth noting that the overseas shipments of Huami Technology accounted for more than 50% in 2019.
It can be said that the overall revenue of Huami Technology has achieved rapid growth in 2019 and has successfully transformed into a high-growth consumer goods company.It is undeniable that Huami Technology has achieved rapid vertical enterprise growth in the past two years.
However, during the same period, in view of the development of the global wearable device industry, the test papers delivered by Huami Technology are not optimistic.
In 2018, Xiaomi’s smart wearable devices accounted for 13.10% of the global wearable device market.However, in 2019, the market share decreased to 12.4%, a decline.
At the same time, Apple’s global wearable device market share rose from 27% to 31.7%; Huawei’s market share rose from 6.3% to 8.3%; Samsung’s market share also rose from 6.9% to 9.2%.
In addition, the actual growth rate of Huami Technology is also lower than the industry average.
During 2018-2019, the annual shipment growth of Xiaomi’s wearable devices was 78.80%, which was a satisfactory increase.However, the average annual growth rate of wearable device shipments in the same year was 89%, higher than the growth rate of Xiaomi.During the same period, Apple ’s annual wearable device shipments increased by 121.7%, Samsung ’s 153.3%, and Huawei ’s 148.8%.
It can be seen that compared with the main competitors in the same industry, the growth rate of Huami Technology is far behind.Although its own growth has been considerable, the scale of competition it faces in the future in the wearables sector is mixed.
(three)
I am afraid the problem still lies in the main product.
In September 2017, Apple released the Apple Watch Series 3, which left off Fitbit and Xiaomi, ranking first in the world in terms of shipments.
Compared with a single-function smart bracelet, a powerful smart watch is more popular in the market despite its high price.
Although Amazfit, a smart watch independent brand launched by Huami Technology, has entered 78 countries and regions and ranked in the top three in the local market in Russia, India, Indonesia and other countries, it is still somewhat dwarfed by the rise of Apple smart watches..
Huami Technology is facing not only Apple, but also Huawei and Samsung.In 2019, the growth rate of wearable devices of Apple, Huawei, and Samsung all exceeded three digits, and the sales growth rate of Huami Technology did not outperform the expansion rate of the market.
More subtlely, Xiaomi has also launched its own smart watch to seize this market cake.Although Huang Wang said that Xiaomi is not a competitor of Huami Technology at this stage, it will inevitably inevitably compete for market share in the future.
Moreover, the upside of the global smart watch market is not expanding as expected.
According to IDC Worldwide Quarterly Wearable Device Tracker, in 2018-2019, the market share of smart headphones in the wearable device market increased from 27% to 51%, and annual shipments increased by 255% year-on-year; at the same time, smart braceletsThe market share declined from 28% in 2018 to 21% in 2019, and the annual shipment rate increased by 37% year-on-year; while smart watches fell from 42% in 2018 to 28% in 2019, the annual shipment rate increasedtwenty three%.
It can be seen that smart headphones have shown a strong upward trend in the wearable device market, which is also evidenced by the sales performance of Apple Airpods.At the same time, smart bracelets and watches have shown a decline in market share.
A product’s decline in market share implies not only the expectation of the profitability of the product in the near future, but also the change in consumer product selection tendencies.
Investing heavily in R & D and promotion of a downward commodity category will undoubtedly be limited by the market size of the commodity itself.
Although Huami Technology has also launched sports headphones and treadmills, can it achieve the marketing miracle of Xiaomi bracelets by its own strength?There is also a question mark.
However, Huami Technology still has its own thinking about the smart wearable industry and is working hard to explore the future direction of development.
On December 30, 2019, Huang Wang said in the letter of all employees that Huami Technology has finally determined the company’s mission of “Technology Connects to Health” and regards health as the core value of the smart wearable industry.
“In the next ten years, we must unswervingly follow this path. With scientific and technological innovation, we will achieve a healthy mission. This is of great value not only to the company, but also to the entire country and the world.”
Switching from a relatively vertical smart wearable industry to a wider health track, Huami Technology is gradually getting out of Xiaomi’s shadow and trying to get out of its own way.
(four)
If there is no new crown epidemic, the black swan, Huami Technology’s road to transformation may be smoother.
Affected by the epidemic, Huami Technology Factory suspended production in January and February this year, affecting shipments.At the same time, as New Coronary Pneumonia continues to affect the economies of countries around the world, Huami Technology expects overseas market demand to continue to decline in the second quarter.
In addition, the first-quarter financial report also pointed out that corporate R & D expenses increased by 63.5% year-on-year in the first quarter, mainly because the company increased the number of R & D personnel in the first quarter and invested heavily in the medical field.Marketing expenses increased by 147.2% year-on-year, mainly for overseas market expansion.
These factors led to its growth rate and gross profit margin are lower than originally expected.
In addition, after the Chinese stock market continued to thunder and suffered a trust crisis, the US Securities Regulatory Commission Chairman Jay Clayton warned investors to carefully invest in Chinese stocks listed in the United States, and accused the Chinese stock companies of failing to fully express their investmentThe risks involved.
In the past, the US Securities and Exchange Commission often had difficulty in prosecuting resolutions on the listing, financial reporting, and auditing processes of non-U.S. Domestic companies in the United States, mainly due to its affiliated regulatory agency, the United States Listed Companies Accounting Committee (PCAOB).It is difficult to obtain evidence for important accounting papers of enterprises.On the other hand, the United States has recently been affected by the raging of new pneumonia, and the evidence collection work has become more difficult due to a series of measures such as travel bans and home orders.
Therefore, the US Securities Regulatory Commission encourages financial analysts, securities brokers and other industry practitioners to fully assess their risks when underwriting and recommending stocks.In the next 1-3 years, Chinese stocks may be subject to strong supervision in the United States, which will bring more uncertainty to the development of Chinese companies themselves.
The unfavorable factors of the general environment will also have a negative impact on individual stocks.This sentiment may already be reflected.
After Huami Technology reported in the first quarter, its stock price fell due to poor performance.As of last Thursday’s closing price of 10.54 US dollars, the lowest share price in the past six months, has fallen for five consecutive trading days, a cumulative decline of 21.93%.
However, the impact of the epidemic and the turmoil in the Chinese stock market are only a temporary test. What is more important is whether Huami Technology can withstand market pressure in the future and truly grow into a unicorn with high gold content after leaving Xiaomi.

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