Huami Sales Rise on Amazfit, Xiaomi Products; Shares Jump 11%
The Chinese smartwatch maker and sole partner of Xiaomi, one of the world's top smartphone developers, reported strong sales growth in the first quarter, jumping 11 percent in trading on Monday.
Huami Corp. (NYSE: HMI) reported that increased sales led the company to swing to a profit and a 77 percent revenue jump in the first quarter, sending its stock up 11 percent to $10.17 per American depositary share on Monday, the biggest gainer among the 150 Chinese ADSs tracked by CapitalWatch.
Huami, a Chinese maker of smartwatches and other gadgets, reported its net income jumped to $2.4 million in the first three months of this year in contrast to a loss of $723,000 for the same period last year. Earnings per share attributable to ordinary shareholders totaled 1 cent in the first quarter in contrast to a loss of 4 cents a year ago.
Revenue reached $93.4 million compared with $52.8 million last year.
The results were higher than Huami expected, the Beijing-based company said in a statement.
"We continue to experience an enthusiastic reception to our products in China and as we expand internationally, where our reputation for delivering great products with exceptional value is fueling demand," the chairman, founder, and chief executive officer of Huami, Wang Huang, said.
Despite the improved results, Credit Suisse said it was cutting its target price for Huami to $14.50 per share from $15.80, while rating the company's shares as "outperform."
Huami sells self-branded "Amazfit" products, and it has acted as the sole partner of Xiaomi Inc., which ended the first quarter as the world's fourth-largest smartphone company, according to a report by the International Data Corp. (IDC). Huami said its unit sales rose to 4.8 million in the first quarter compared with 3.2 million units sold a year ago. In a call with analysts today, Huang said sales of Xiaomi products accounted for 87 percent of its shipments.
"Our close relationship with Xiaomi provides us with a partner with established distribution channels and market knowledge that allows international expansion to be a key component of our continued growth strategy," Huang said.
Nevertheless, the chief financial officer of Huami, David Cui, said the company's self-branded products generally yielded a higher average selling price and gross margin, drove the growth in gross profit, and enhanced operating profit.
Increased spending across all operating sectors in the first quarter, including research and development, marketing, and administrative, resulted in a 73 percent jump in the company's operating expenses to $22 million. Huami said that expenses would have been steady if it weren't for share-based compensation for the management and development teams that the company retained while undergoing its initial public offering. The company debuted on the New York Stock Exchange in February, raising $110 million by selling 10 million shares.
For the second quarter, the company said it expected revenue to be in the range of $103.6 million and $107.6 million, representing an increase of between 32 and 37 percent from the same period of 2017.
"Our strong start to the year is representative of our leadership position in the industry, effective product development supported by the growing wearables market and our compelling opportunity for international expansion," Cui said.
Shares of Huami spiked 18 percent in early trading after the company released its quarterly earnings.
Stock closed at $10.17 per share, up 11 percent.
(Source: Thomson Reuters Eikon)