Summary of Xiaomi Group's Q2 2025 Earnings Call Company Overview - **Company**: Xiaomi Group - **Date**: Q2 2025 Earnings Call Key Points Financial Performance - Adjusted net profit reached **CNY 10.8 billion**, a **75%** year-on-year increase, marking a record high for three consecutive quarters [2][3] - Total revenue for Q2 2025 was **CNY 116 billion**, up **30.5%** year-on-year, achieving a historical high for five consecutive quarters [3] - Gross margin improved to **22.5%**, an increase of **1.8 percentage points** year-on-year [3] Smartphone Business - Global smartphone market share reached **14.7%**, ranking third globally, with the highest activation volume in mainland China [2][4] - High-end strategy showed significant results, with market share in the **CNY 4,000-6,000** price range increasing by **4.5 and 6.5 percentage points**, respectively [6] - Smartphone sales in mainland China ranked first, with high-end smartphone sales accounting for **27.6%** of total sales, up **5.5 percentage points** year-on-year [11] AIoT Business - AIoT revenue reached **CNY 38.7 billion**, a **44.7%** year-on-year increase, with a gross margin of **22.5%** [2][11] - Smart home appliances revenue grew by **66.2%**, with air conditioner shipments exceeding **5.4 million units**, a growth of over **60%** [2][8] Automotive Business - Delivered **81,302** vehicles in Q2, with over **30,000** units delivered in July alone [9][14] - The first SUV U7 series saw over **240,000** orders within 18 hours of launch [9] - Automotive gross margin stood at **26.4%** [14] User Engagement and Internet Services - Global monthly active users reached **730 million**, a **8.2%** year-on-year increase, with **185 million** in mainland China, up **12.4%** [2][14] - Internet services revenue was **CNY 9 billion**, a **10.1%** increase year-on-year, with a gross margin of **75.4%** [14] Research and Development - R&D expenditure reached **CNY 7.8 billion**, a **41.2%** year-on-year increase, with **22,641** R&D personnel, accounting for **46.2%** of total employees [14][20] - Focus areas include chips, AI, operating systems, and technology across product lines [20] Market Strategy and Future Outlook - Xiaomi aims to continue its high-end strategy and expand its global market presence, particularly in Europe by **2027** [10][28] - The company plans to maintain a focus on product structure optimization and average selling price (ASP) enhancement rather than just volume growth [27] - The overall smartphone market is expected to remain stable, with Xiaomi confident in achieving its annual shipment target of **175-180 million** units [24][26] ESG Initiatives - Xiaomi has increased its use of green electricity and solar power, significantly reducing carbon emissions [15][16] Challenges and Risks - The smartphone business faced margin pressure due to rising costs of memory and battery materials, but long-term strategies are expected to stabilize margins [12][13][17] Conclusion - Xiaomi's strong performance in Q2 2025 reflects its successful high-end strategy, robust growth in AIoT and automotive sectors, and a commitment to R&D and sustainability initiatives. The company is well-positioned for future growth despite challenges in the smartphone market.

Core Viewpoint - Xiaomi's Xring O2 (玄戒O2) is expected to debut in Q2 of next year, with a preliminary estimate around September, focusing on multi-device integration and enhanced performance through its new architecture [1] Group 1: Product Development - The Xring O2 will utilize Arm's latest public architecture, promising at least a 15% improvement in IPC due to its larger scale [1] - Xiaomi's previous chip, the Xring O1, has set the stage for the development of the Xring O2, indicating a strategic focus on in-house chip design [1] Group 2: Market Strategy - Xiaomi is increasing its investment in the development of the Xring O2 chip and its own 5G baseband, aiming for comprehensive coverage across all devices [1] - The Xring O2 chip is not only intended for smartphones but is also being considered for automotive applications, with preparations for a four-in-one domain controller already underway [1]

Core Insights - Xiaomi Group reported a total revenue of RMB 92.5 billion for Q3 2024, marking a continuous growth for three consecutive quarters, with adjusted net profit at RMB 6.3 billion, maintaining a historical high [1] - The company’s cash reserves reached a new high of RMB 151.6 billion as of September 30, 2024, despite ongoing investments in automotive ventures [1] Group Performance - All business segments of Xiaomi achieved quality growth, including smartphones, tablets, wearables, TVs, and home appliances, with a global growth trend [6] - Xiaomi's high-end strategy has gained momentum, with significant increases in market share across various price segments for smartphones in China [7] Product Performance - In Q3 2024, Xiaomi's smartphone revenue reached RMB 47.5 billion, with a year-on-year growth of 13.9%, and global smartphone shipments increased to 43.1 million units [18] - The IoT and lifestyle products segment generated RMB 26.1 billion in revenue, a 26.3% year-on-year increase, with a record gross margin of 20.8% [9] - Xiaomi's wearable products saw over 50% year-on-year growth in shipments, with smartwatches and TWS earphones reaching new highs [12] Strategic Developments - Xiaomi's internet services revenue hit a record high of RMB 8.5 billion in Q3 2024, with a gross margin increase to 77.5% [13] - The launch of the Xiaomi SU7 Ultra prototype car marked a significant milestone in the company's automotive ambitions, achieving a notable lap time at the Nürburgring [13] Market Outlook - Analysts express optimism regarding Xiaomi's growth prospects from 2024 to 2026, highlighting the company's high-end strategy in smartphones and IoT as reshaping consumer perceptions [19] - The "human-vehicle-home ecosystem" is expanding, creating new growth opportunities and strengthening Xiaomi's competitive edge in the market [17][19]

Investment Rating - The report maintains a "Buy" rating for Xiaomi Group [3][5] Core Views - Xiaomi's smartphone shipments reached 42.4 million units in Q2 2025, showing a slight increase from 42.3 million units in the same period last year, maintaining a global market share of 15% [1] - The company achieved record sales during the 618 shopping festival, with total payments exceeding 35.5 billion yuan [1] - The launch of the YU7 luxury SUV has seen strong demand, with over 200,000 units reserved within 3 minutes of its announcement [2] Financial Projections - Revenue projections for 2025-2027 are 475.1 billion yuan, 618.9 billion yuan, and 743.9 billion yuan, representing year-on-year growth of 30%, 30%, and 20% respectively [3][4] - Adjusted net profit estimates for the same period are 40.8 billion yuan, 57.2 billion yuan, and 74.1 billion yuan [3][4] - The report anticipates a non-GAAP EPS of 1.6 yuan, 2.2 yuan, and 2.8 yuan for 2025, 2026, and 2027 respectively [4][12] Market Performance - Xiaomi's smartphone sales in China reached 10.4 million units in Q2 2025, with a market share increase to 15% [1] - The company has also seen significant growth in its IoT and consumer products segment, with a projected revenue of 132.1 billion yuan in 2025 [12] - The report highlights Xiaomi's strong performance in various markets, including Latin America and Africa, driven by product strength [1][2]

Group 1 - Xiaomi's automotive delivery volume exceeded 30,000 units in July 2025, showcasing its production capacity and operational efficiency [1] - The company has significantly improved its R&D, manufacturing, and offline channel capabilities, enhancing its competitive edge in the automotive and IoT sectors [1] - The monthly delivery volume of Xiaomi vehicles reached a new historical high, indicating strong production control and capacity ramp-up capabilities [1] Group 2 - In Q2 2025, Xiaomi's tablet shipments reached 3.051 million units, a year-on-year increase of 42.3%, capturing a market share of 7.8% [2] - Xiaomi's smartphone shipments in Q2 2025 were 42.4 million units, slightly up from 42.3 million units in the same period last year, with a 3% growth in the Chinese mainland market [2] - The company adjusted its earnings forecasts for 2025-2027, predicting earnings per share of 1.42, 1.99, and 2.53 yuan, reflecting the impact of its automotive business and multi-category product progress [2]

Investment Rating - The report maintains a "Buy" rating for the company [5] Core Views - The company's product delivery capability continues to improve, with monthly car deliveries exceeding 30,000 units in July 2025, indicating strong production capacity [1][9] - The earnings forecast for the company has been adjusted, predicting earnings per share of 1.42, 1.99, and 2.53 yuan for 2025-2027, respectively, based on the progress of the automotive business and multi-category products [2][10] - The target price is set at 63.20 HKD, based on a 29x PE valuation for comparable companies in 2026 [2][10] Financial Information Summary - Revenue (in million yuan) is projected to grow from 270,970 in 2023 to 728,851 in 2027, with a compound annual growth rate (CAGR) of approximately 23% [4] - Operating profit is expected to increase significantly from 20,009 million yuan in 2023 to 72,781 million yuan in 2027, reflecting a CAGR of around 26% [4] - Net profit attributable to the parent company is forecasted to rise from 17,475 million yuan in 2023 to 65,825 million yuan in 2027, with a CAGR of about 27% [4] - The gross margin is expected to improve from 21.7% in 2023 to 23.7% in 2027 [4] - The net profit margin is projected to increase from 6.4% in 2023 to 9.0% in 2027 [4] - The return on equity (ROE) is anticipated to rise from 10.6% in 2023 to 19.1% in 2027 [4]

Core Viewpoint - Xiaomi's founder and CEO Lei Jun is shifting his focus from mobile phones to the automotive sector, indicating a significant strategic pivot for the company as it faces a trust crisis and seeks to reaffirm its market position [2][3][4]. Group 1: Leadership and Marketing Strategy - Lei Jun has stated that half of his energy will be dedicated to the automotive business, while only one-third will be allocated to mobile phones, highlighting a major shift in priorities [2]. - The recent product launch event on May 22 marks Xiaomi's 15th anniversary and is the first major event following a significant trust crisis, necessitating Lei Jun's return to the public eye to restore confidence [3]. - Lei Jun's personal branding is deeply intertwined with Xiaomi, making it difficult for him to abandon his previous marketing strategies despite recent controversies [3][4]. Group 2: Recent Challenges and Responses - Following a serious incident involving the Xiaomi SU7, Lei Jun reduced his social media presence, reflecting a period of introspection and strategic recalibration for the company [5][6]. - Xiaomi acknowledged issues with the SU7's carbon fiber hood, leading to customer complaints and a public apology, which indicates the company's responsiveness to consumer feedback [7]. - The legal department of Xiaomi reported the resolution of a network smear campaign against the company, which may help mitigate some of the negative publicity [8][10]. Group 3: Product Launch and Future Plans - During the recent product launch, Xiaomi announced a significant R&D investment plan, committing to 200 billion yuan over the next five years, emphasizing its focus on innovation and self-research [12]. - The new model, Xiaomi YU7, is positioned as a mid-to-large SUV, targeting a larger market segment compared to the previous SU7, which faced a more competitive environment [15]. - The launch event showcased Xiaomi's advancements in self-developed technology, including the mass production of its 3nm mobile processor, positioning the company as a key player in the tech industry [10][12].

Core Viewpoint - Xiaomi is set to unveil its new products, including the Xiaomi YU7 car, at its 15th anniversary strategic product launch event scheduled for tomorrow evening at 7 PM [1] Group 1: Product Launch - The Xiaomi YU7 will feature a new "Gem Green" color inspired by Colombian emeralds, utilizing a dual-layer paint process to achieve a high-end texture [5] - The YU7's design combines the vibrant "Gem Green" color with a coupe SUV body style, creating a lively and dynamic appearance [7] - The vehicle will debut the new visual interaction system called "Xiaomi Hypervision," which will be the first mass-produced model to feature this technology [7][12] Group 2: Technology Features - The "Hypervision" display is a long projection area located between the windshield and the dashboard, differing from previous technologies used by other brands [9] - This display employs a technology similar to the PHUD imaging used in BMW concept cars, providing an immersive viewing experience with multiple projection devices [11] - The YU7 is expected to highlight various interior design elements, including a new steering wheel, a larger central entertainment screen, and diverse interior color options [12]

Investment Rating - The report maintains a "Buy" rating for Xiaomi Group [4][7][8] Core Insights - Xiaomi Group's 2024 and Q4 performance reached historical highs, with 2024 revenue of 365.9 billion RMB, a year-on-year increase of 35%, and adjusted net profit of 27.2 billion RMB, up 41% [7][8] - The company has raised its 2025 delivery target for electric vehicles to 350,000 units, up from 300,000, with a projected revenue of 32.8 billion RMB from this segment [7][8] - The smartphone segment continues to validate its high-end strategy, targeting 180 million units shipped in 2025, with a revenue of 191.8 billion RMB in 2024, a 22% increase [7][8] - The IoT segment saw a significant revenue increase, surpassing 100 billion RMB, with a target of 50% growth in 2025 [7][8] - The internet services segment achieved record revenue and gross margin, with a total revenue of 34.1 billion RMB in 2024, a 13.3% increase [7][8] - Xiaomi's retail strategy includes expanding its store count to 20,000 by 2025, with a focus on AI and core technologies [7][8] Financial Data and Profit Forecast - Revenue projections for Xiaomi Group are as follows: - 2023: 270.97 billion RMB - 2024: 365.91 billion RMB - 2025E: 469.36 billion RMB - 2026E: 572.04 billion RMB - 2027E: 684.43 billion RMB - Net profit projections are: - 2023: 19.27 billion RMB - 2024: 27.31 billion RMB - 2025E: 37.62 billion RMB - 2026E: 45.74 billion RMB - 2027E: 55.77 billion RMB [3][8]