By Fiona Lau and Julie Zhu
HONGKONG (Reuters) – Chinese smartphone maker Xiaomi Inc has told bankers it would top its annual revenue target by as much as 18 percent, sources with knowledge of the matter said, marking a comeback from a sales slump in recent years that triggered a business overhaul.
Xiaomi, which has been hearing bank pitches for what could be the world’s biggest tech float next year, will rake in a net profit of at least $1 billion in 2017, banker projections based on the company’s revenue estimate of $17 billion to $18 billion show. Profits are estimated to reach about $2 billion in 2018.
The calculations also take into account data on operating costs provided by the company, said the sources with knowledge of the discussions. They spoke on condition of anonymity because the information was not public.
Bankers and analysts expect Xiaomi’s profits to continue growing sharply into 2019, which one source said would make a $100 billion IPO price tag look “reasonable”.
A spokeswoman for Xiaomi – that is likely to soon mandate its leading banks for an IPO – confirmed the company had topped the annual revenue goal, of about $15 billion, but declined to comment on IPO-related matters or its financials.
“We have never externally disclosed any expected net profit and growth data and we do not respond to irresponsible speculation and rumours,” she said.
Xiaomi was valued at $46 billion in a 2014 funding round, the world’s most valuable startup for a brief period. It sales stagnated over the next two years as the firm overextended itself launching in new markets while being hammered at home by rivals including Huawei Technologies [HWT.UL], Vivo and Oppo.
The maker of budget smartphones has since branched out into selling accessories and home appliances. In the third quarter of this year, Xiaomi overtook Apple <AAPL.O> to become China’s No.4 smartphone vendor, according to International Data Corp (IDC).
“This is a good time for them (Xiaomi) to list because right now they are on a roll,” said IDC’s senior research manager for client devices, Kiranjeer Kaur.
“If they get a good valuation, they will get it now,” Kaur said. She, however, cautioned that the company needed to focus on retaining customers.
“Xiaomi will need to make sure that users upgrade to higher-end Xiaomi from lower-end Xiaomi instead of ditching it for other brands,” she added.
($1 = 6.5850 Chinese yuan renminbi)
(Reporting by Fiona Lau and Julie Zhu; writing and additional reporting by Kane Wu and Sijia Jiang; Editing by Jennifer Hughes and Himani Sarkar)