1Q24E preview: Expect strong earnings ahead; Raise TP to HK$23.77

Investment Rating - The report maintains a "BUY" rating for Xiaomi with a new target price (TP) of HK$23.77, reflecting a 24.5% upside from the current price of HK$19.10 [3][20]. Core Insights - Xiaomi is expected to report strong earnings for 1Q24, with estimated revenue and adjusted net profit growth of 26% and 67% year-over-year, respectively, driven by robust smartphone shipments and improved gross profit margins across all segments [1][15]. - The company is anticipated to continue gaining global smartphone market share, particularly in Latin America, EMEA, SEA, and EU markets, supported by multiple product launches in the second half of 2024 [1][18]. - The report highlights a positive outlook for Xiaomi's smart electric vehicle (EV) business and resilient performance in core segments, leading to an upward revision of FY24-26E earnings per share (EPS) by 11-21% [1][15]. Summary by Sections Earnings Summary - FY24E revenue is projected at RMB 335.7 billion, with a year-over-year growth of 23.9%. Adjusted net profit is expected to reach RMB 20.03 billion, reflecting a 3.9% increase in adjusted EPS to RMB 0.80 [2][16]. - The report indicates a gross margin of 20.5% for FY24E, with operating and adjusted net margins of 6.4% and 6.0%, respectively [2][17]. Smartphone Segment - Xiaomi's global smartphone shipments are estimated to increase by 14% year-over-year to 167 million units in FY24E, with a market share of 14% in 1Q24, up from 11% in 1Q23 [1][10]. - The average selling price (ASP) is expected to remain flat in 1Q24, with a gross profit margin projected to decline to 14.5% due to rising component costs [1][13]. AIoT and Internet Services - Revenue from AIoT and Internet services is expected to grow by 19% and 7% year-over-year in 1Q24, respectively, driven by strong sales in pads and home appliances [1][15]. - The gross profit margin for AIoT is projected to improve to 18.5%, while the Internet services margin is expected to remain stable at 75.0% [1][15]. Valuation - The new SOTP-based target price of HK$23.77 is derived from applying a 15x P/E multiple to the smartphone, AIoT, and Internet businesses, and a 0.75x P/S multiple for the EV business [18][19]. - The report emphasizes upcoming catalysts, including the ramp-up of EV product shipments and further smartphone market share gains [18][19].