Chinese smartphone manufacturer, Xiaomi could trade at double the valuation that Apple could. This is according to Morgan Stanley research that attributed such performance to market share gains and further projected fast growth in the future.
The founder of Xiaomi Corp, Lei Jun, has been referred to as China’s Steve Jobs because he prefers convenient features and a simple design. His company is also being referred to as the Chinese Apple.
Morgan Stanley is one of the investments banks leading Xiaomi’s Hong Kong initial public offering (IPO). According to its research, the Chinese smartphone maker has a fair value of about $65 billion to $85 billion. This translates to about 27 times to 34 times adjusted earnings projections for 2019.
Going by data compiled by Bloomberg, this translates to almost double Apple’s valuation, which is reported to be 14.5 times projected 2019 adjusted earnings. Morgan Stanley research also pointed out that Xiaomi should make richer multiples than rival smart gadget manufacturers like Fitbit Inc and GoPro. It should also fetch higher than some of the Chinese internet companies like Baidu, or Alibaba Group Holding.
In another separate report, analysts from J.P Morgan predicted that as a result of a strong long-term cash flow strategy growth, the Chinese smartphone manufacturer would be worth as much as $92 billion.
Such analysis being prepared by a bank’s equity analysts as opposed to their investment bankers gives a hint as to how Xiaomi is preparing to market its journey’s growth. It is preparing to seek about $10 billion, 50% of which will come from its Hong Kong IPO and the other 50% from an offering in mainland China.
The company has been able to stand out in the highly competitive smartphone industry as a result of being able to produce lower-priced high-end smartphones. Out of the top smartphone companies, Xiaomi was the only one that was able to register gains in Q1 of this year. In the same period, it was able to push Apple out of fourth place in regards to shipment to the Chinese market.
In March, Xiaomi unveiled its Mi MIX 2S smartphone. This is set to rival Apple’s iPhone X at a significantly lower price. The Mi MIX 2S is going for $527 in China compared to a retail price of $1,355 for the iPhone X.
According to Goldman Sachs, Xiaomi integrates the internet user experience with hardware to offer an unrivaled experience.