Core Viewpoint - Xiaomi's 3Q revenue and adjusted net profit growth of 22% and 81% YoY, respectively, were slightly above expectations, driven by the fast-growing smart EV business, resilient internet segment, and improved operating efficiency, despite weaker smartphone sales [1][2] Financial Performance - 3Q25 revenue growth of 22% YoY was in line with expectations, supported by smart EV and internet services growth [2] - Smartphone revenue declined by 3% YoY due to flat shipments and a decrease in average selling price (ASP) [2] - Smart EV revenue surged by 198%, achieving operating income breakeven for the first time, attributed to strong EV deliveries and ASP increases [2] - IoT revenue increased by 6% YoY, driven by overseas markets, although this was partially offset by weaker sales in large home appliances in China [2] - Internet revenue grew by 11% YoY, supported by solid advertising growth [2] Outlook - Management is conservative regarding margin headwinds in the near term due to memory cost hikes and EV tax subsidies, but strategic objectives for smartphone and EV market share gains, new retail networks, and overseas expansion remain on track [3] - GPM pressure for smartphones is expected to persist into 4Q25 and 2026, despite securing supply agreements with memory suppliers [3] - For smart EVs, a decline in GPM is anticipated in 2026 due to competition and EV purchase tax subsidies [3] - IoT is expected to benefit from rapid overseas expansion and the development of Xiaomi's OS and local LLM as a foundation for an edge AI ecosystem [3] Strategic Positioning - Xiaomi's strong ecosystem and market expansion strategies are expected to help navigate headwinds, leading to a maintained BUY rating [4] - FY26-27E adjusted EPS has been trimmed by 9% each to reflect 3Q results, rising memory costs, and competition [4] - The new SOTP-based target price of HK$ 55.31 implies a 26.3x FY26E P/E ratio [4] - Upcoming catalysts include product launches, updates on memory pricing, and ramp-up of EV capacity [4]

Xiaomi Corp. (1810.HK) Conference Call Summary Company Overview - **Company**: Xiaomi Corp. (1810.HK) - **Market Cap**: HK$1.1 trillion / $144.0 billion - **Enterprise Value**: HK$921.6 billion / $118.6 billion - **Current Price**: HK$43.20 - **Target Price**: HK$56.50 (implying 30.8% upside) [1][5] Key Industry Insights - **Smartphone Market**: Expected to face near-term speed bumps but favorable risk-reward on a 12-month basis [1] - **AIoT (Artificial Intelligence of Things)**: Projected revenue growth of 6% in 3Q25 and 9% in 2026, with sequential growth accelerating [10][51] - **EV (Electric Vehicle)**: Anticipated first-time IFRS net profit of Rmb0.7 billion in 3Q25, driven by higher operating leverage [16] Financial Projections - **Revenue Forecasts**: - 2024: Rmb365.9 billion - 2025E: Rmb465.3 billion - 2026E: Rmb595.1 billion - 2027E: Rmb710.8 billion [5][13] - **EBITDA**: - 2024: Rmb30.8 billion - 2025E: Rmb55.3 billion - 2026E: Rmb62.6 billion - 2027E: Rmb79.4 billion [5][13] - **EPS (Earnings Per Share)**: - 2024: Rmb1.07 - 2025E: Rmb1.57 - 2026E: Rmb1.91 - 2027E: Rmb2.38 [5][13] Margin and Profitability - **Gross Profit Margin (GPM)**: Expected to decline to ~10% in 2026E due to rising memory costs, compared to ~11% in 2H25E [10][19] - **Net Profit Resilience**: Core net profit expected to remain flat year-over-year in 2026E, supported by increased contributions from AIoT and internet services [10][19] Competitive Landscape - **Market Position**: Xiaomi's comparative advantages expected to strengthen against peers due to larger scale and ecosystem [10][19] - **Smartphone Contribution**: Smartphone gross profit contribution is projected to decrease to 24% of total gross profit by 2026E [47] Challenges and Risks - **Memory Cost Pressure**: Anticipated challenges in mass model shipments due to rising memory costs, with a significant impact on pricing strategies [30][32] - **Inventory Management**: Longer inventory days observed, which may affect gross profit margins [21][26] Upcoming Events to Monitor - **Singles' Day GMV**: Key indicator of consumer demand and sales performance [17] - **3Q25 Results**: Scheduled for late November, expected to provide insights into revenue and profit growth [17] - **EV Manufacturing Capacity**: Progress on ramping up manufacturing capacity and new model launches [17][18] Summary of Key Metrics - **P/E Ratio**: 16.6 for 2024, increasing to 25.3 in 2025E [11] - **CROCI (Cash Return on Capital Invested)**: Expected to be 21.7% in 2024, declining to 29.8% by 2027E [11] - **Free Cash Flow Yield**: 7.2% in 2024, decreasing to 2.4% in 2026E [11] Conclusion - **Investment Outlook**: Despite short-term challenges, the long-term risk-reward profile for Xiaomi remains favorable, with a target price indicating significant upside potential [1][5]