Initiating Coverage on Xiaomi with No-Moat Rating and FVE of HKD 10 per Share
We initiate coverage on Xiaomi with a no-moat and stable moat trend rating and with a HKD 10 per share fair value estimate, implying a 2019 P/E ratio of just under 19 times. At current prices, we believe it looks overvalued. The company made its initial public offering in the Hong Kong market in early July 2018. We believe Xiaomi has no economic moat as potential moats in areas such as switching costs, network effect, and intangible assets are not developed enough yet. Xiaomi is primarily an And...XIAOMI CORPORATION is a China-based investment holding company principally engaged in the research, development and sales of smartphones, Internet of things (IoTs) and lifestyle products, the provision of Internet services, and investment business. The Company mainly conducts its businesses through four segments. The Smartphone segment is engaged in the sales of smartphones. The IoT and Lifestyle product segment is engaged in the sales of other in-house products, including smart televisions (TVs), laptops, artificial intelligence (AI) speakers and smart routers; ecosystem products, including IoT and other smart hardware products, as well as certain lifestyle products. The Internet service segment is engaged in the provision of advertising services and Internet value-added services. The Others segment is engaged in the provision of repair services for its hardware products. The Company distributes its products in domestic market and to overseas markets.
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