2024-03-21 16:00Investment Rating - The report maintains a "Buy" rating for Xiaomi Group with a target price of HKD 18.5 per share, indicating a potential upside of 27.6% from the recent closing price of HKD 14.5 [2][3]. Core Insights - Xiaomi Group's total revenue for the fiscal year 2023 slightly decreased by 3.2% year-on-year to HKD 271 billion, but the adjusted net profit surged by 126.3% to HKD 19.3 billion, significantly exceeding market expectations [1][2]. - The fourth quarter of 2023 saw a revenue increase of 10.9% year-on-year, reaching HKD 73.2 billion, with adjusted net profit soaring by 236.1% to HKD 4.9 billion, driven by strong performance in the smartphone segment [1][2]. - The upcoming launch of the Xiaomi SU7 electric vehicle on March 28 is a key focus, with expectations for its pricing and sales performance [1][2]. Financial Performance Summary - In 2023, Xiaomi's overall gross margin improved by 4.2 percentage points to a record high of 21.2%, with smartphone, IoT, and internet services gross margins rising to 14.6%, 16.3%, and 74.2% respectively [1][2]. - The company ended 2023 with cash reserves of HKD 136.3 billion, providing a solid foundation for future growth [1]. - Xiaomi's R&D expenditure increased by 19.2% year-on-year to HKD 19.1 billion, reflecting its commitment to core technology development [2][3]. Market Position and Strategy - Xiaomi's strategy has evolved into a comprehensive ecosystem encompassing people, vehicles, and homes, with the introduction of the new "Xiaomi Surge OS" and the unveiling of the SU7 electric vehicle [2]. - The report highlights that while the smartphone high-end strategy has stabilized, the impact of the SU7's market entry on net profit is expected to be limited in the next two years [2][3].