Ge Long Hui·2025-10-27 03:32Core Viewpoint - The company is expected to see significant growth in adjusted net profit and revenue in Q3 2025, driven by strong performance in its smartphone and automotive segments, despite some challenges in the Chinese market [1][2]. Group 1: Financial Performance - Q3 2025 revenue is projected to increase by 21.46% year-on-year to 112.36 billion yuan, with adjusted net profit expected to rise by 68.88% to 10.56 billion yuan, largely due to profitability in automotive and innovative businesses [1]. - Smartphone revenue is anticipated to decline by 3.49% year-on-year to 45.80 billion yuan, with a slight decrease in average selling price (ASP) to 1,065 yuan [1]. - IoT revenue is expected to grow by 5% year-on-year to 27.41 billion yuan, with an improved gross margin of 23.5% [2]. - Internet services revenue is projected to increase by 9% year-on-year to 9.23 billion yuan, maintaining a healthy gross margin of 75% [2]. - Automotive deliveries are forecasted to reach 109,000 units, generating revenue of 29.43 billion yuan, with the automotive business likely achieving its first quarterly profit of 707 million yuan [2]. Group 2: Market Dynamics - The global smartphone shipment is expected to maintain a top-three position, with a 1.8% year-on-year increase to 43.50 million units, although the Chinese market is projected to see a slight decline of 1.7% [1]. - The company is focusing on high-end models like the Xiaomi 17 series, which has shown strong initial sales performance [1]. - The automotive segment is anticipated to benefit from increased deliveries and the release of new models, contributing to sustained growth in both delivery volume and profitability [2]. Group 3: Profit Forecast and Valuation - Adjusted net profit forecasts for 2025 and 2026 have been revised down by 5.2% and 3.6% to 43.76 billion yuan and 64.02 billion yuan, respectively, due to rising storage costs [2]. - The current stock price corresponds to a price-to-earnings ratio of 25.0x for 2025 and 16.9x for 2026 based on adjusted net profit [2]. - The target price has been lowered by 15% to 59.5 HKD, reflecting a potential upside of 29.6% based on the sum-of-the-parts valuation method [2].