Investment Rating - The report maintains a "BUY" rating for Xiaomi, with a new target price (TP) of HK$44.47, reflecting a potential upside of 36.1% from the current price of HK$32.68 [1][3][27]. Core Insights - Xiaomi's 4Q25 results exceeded expectations, with revenue growth of +7% YoY and adjusted net profit decline of -24% YoY, outperforming Bloomberg consensus estimates by 1% and 10% respectively. This was attributed to improved smartphone average selling price (ASP) and strong performance in the smart EV segment [1][9]. - The company is well-positioned for future growth, focusing on premiumization, IoT expansion overseas, and advancements in AI capabilities, with expectations for these investments to yield results in 2026-27 [1][9]. - Adjustments to FY26-27E net profit estimates have been made, reducing projections by 4-9% due to 4Q25 results and anticipated lower gross profit margins [1][9]. Financial Summary - Revenue projections for FY26E and FY27E are set at RMB 522.3 billion and RMB 613.1 billion, respectively, with YoY growth rates of 14.2% and 17.4% [2][31]. - Adjusted net profit for FY26E is estimated at RMB 35.6 billion, reflecting a decline of 9.1% YoY, while FY27E is projected to recover to RMB 44.0 billion, showing a growth of 23.6% [2][31]. - The report highlights a decrease in gross profit margin for FY26E to 21.0% and FY27E to 22.0%, down from previous estimates [24][31]. Segment Performance - The smartphone segment reported a revenue decline of -14% YoY in 4Q25, driven by a 12% drop in shipments, despite a 7% increase in ASP [9][22]. - The smart EV segment saw a remarkable revenue increase of 122% YoY, with 145,000 deliveries and an ASP rise of 6.6% YoY, contributing positively to overall performance [9][22]. - IoT and lifestyle products experienced a revenue drop of -20% YoY, attributed to diminishing subsidy impacts in China, although overseas markets showed stronger performance [9][22]. Valuation - The target price of HK$44.47 is derived using a sum-of-the-parts (SOTP) valuation method, reflecting different growth profiles across Xiaomi's business segments [27][28]. - The implied target multiples are set at 29.5x and 23.9x for FY26E and FY27E P/E, respectively, justified by Xiaomi's market share gains and strategic initiatives [27][28].

Investment Rating - The report assigns a "Buy" rating to Xiaomi Corp. with a 12-month target price of HK$53.50, indicating an upside potential of 38.0% from the current price of HK$38.76 [15][17]. Core Insights - Xiaomi is positioned as the world's 3 smartphone brand and a leading consumer AIoT/NEV platform, with a multi-year ecosystem expansion strategy under the "Human x Car x Home" framework, projecting revenue and EPS CAGRs of 24% and 28% respectively from 2024 to 2027 [13]. - The company plans to invest Rmb200 billion in R&D from 2026 to 2030, focusing on AI, assisted driving, and chipset development to enhance its competitive edge [7][14]. Summary by Sections Smartphone Segment - Xiaomi aims to increase the average selling price (ASP) of smartphones by raising prices for premium models and optimizing product structure, targeting a 1 percentage point annual market share increase in China [7][8]. - The company expects revenue growth in 2026 to be supported by government consumption subsidies and overseas expansion, while maintaining gross profit margin (GPM) at or above 2025 levels by reducing low-margin categories [8] AIoT Segment - The AIoT segment is seen as a profit stabilizer, with a revenue growth of approximately 20% year-over-year and a contribution of around 30% to overseas revenue by Q3 2025 [3][10]. - Xiaomi plans to expand its Mi Home store count to over 1,000 by 2026 and increase the contribution of large home appliances to its revenue [10]. Smart EV Segment - Xiaomi targets 550,000 unit deliveries for its smart EVs in 2026, up from over 410,000 in 2025, driven by increased manufacturing capacity and new model launches [9][11]. - The company focuses on the premium auto segment, which captures a significant profit pool, and plans to export EVs to Europe starting in 2027 [11][12]. R&D Investments - AI accounts for approximately 25% of Xiaomi's R&D budget, with plans to increase investments while leveraging AI for ecosystem empowerment and internal operations [14]. - Xiaomi has made significant progress in assisted driving technology and aims to release new features in 2026, alongside a commitment to self-developing chips for its smart EVs [14]. Share Buyback - In 2025, Xiaomi repurchased 150 million shares for a total consideration of HK$6.3 billion, indicating confidence in its stock value [14].

Core Viewpoint - Xiaomi is expected to report strong 2Q25 results with revenue and adjusted net profit growth of 32% and 66% YoY, respectively, driven by solid smartphone performance, strong EV demand, robust IoT growth, and stable gross profit margins across all segments [1] Group 1: Smartphone Performance - Xiaomi's global smartphone shipment for 2Q25 is reported at 42.4 million units, remaining flat YoY, while its market share stands at 15%, ranking No.3 globally [2] - In China, Xiaomi's smartphone shipment grew by 3% YoY, outperforming the overall market which declined by 4% YoY [2] - The average selling price (ASP) is expected to increase by 6% YoY in 2Q25 due to a higher mix of mid-to-low-end smartphone shipments [2] - Gross profit margin (GPM) for smartphones is estimated at 11.5%, impacted by BOM cost pressures and competition from Apple and Samsung [2] - Forecasted shipments for FY25-27E are 178 million, 190 million, and 200 million units, reflecting growth rates of 5%, 7%, and 5% YoY, respectively [2] Group 2: Smart EV Segment - The EV segment is expected to see strong demand with a backlog of orders and capacity ramp-up, estimating 81,000 shipments in 2Q25 with an ASP of RMB250,000, reflecting a 9% YoY increase [3] - For FY25E, the forecast for EV shipments is 396,000 units, exceeding the guidance of 350,000 units, supported by strong YU7 orders and rapid capacity growth [3] Group 3: IoT and Internet Services - IoT and Internet revenue is projected to grow by 36% and 10% YoY, reaching RMB36.4 billion and RMB9.1 billion in 2Q25E, driven by favorable China subsidies and seasonal demand [3] - The GPM for IoT and Internet is expected to slightly decline QoQ to 23% and 75% in 2Q25E, respectively, due to seasonality and product mix shifts [3]