December 21, 2017 / 11:15 PM / a year ago

Exclusive - IPO hopeful Xiaomi set to blow past 2017 revenue target

HONG KONG (Reuters) - Chinese smartphone maker Xiaomi has told bankers it would top its annual revenue target by as much as 18%, sources with knowledge of the matter said, marking a comeback from a sales slump in recent years that triggered a business overhaul.

FILE PHOTO: Men try out Xiaomi smartphones at the company's store in central Kiev, Ukraine May 17, 2017. REUTERS/Valentyn Ogirenko/File Photo

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 US$1bn in 2017, banker projections based on the company’s revenue estimate of US$17bn-$18bn show. Profits are estimated to reach about US$2bn 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 US$100bn 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 US$15bn, 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 US$46bn 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, 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 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.

Reporting by Fiona Lau and Julie Zhu; writing and additional reporting by Kane Wu and Sijia Jiang; Editing by Jennifer Hughes and Himani Sarkar

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