19 November 2025 Xiaomi (1810 HK) Equity Research Report Key takeaways from analyst call. Smartphone: Xiaomi expects pressure on smartphone's profitability in the near term due to the rising memory cost; the company is prioritising ASP improvement over shipment growth, expecting the continuous premiumisation strategy to help alleviate cost pressure. By lowering our gross margin forecast for Xiaomi's 2026e smartphone from 11.8% to 10%, we factor in a 15% memory cost hike. Smart EV: Xiaomi expects to attain i ...

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]

Core Insights - NIO Inc. achieved a record delivery of 87,071 vehicles in Q3 2025, representing a 40.8% year-over-year increase, driven by the successful launch of the ONVO L90 model [1][8] - The company launched its flagship premium SUV, the All-New ES8, in September 2025, showcasing advanced smart EV technologies [3][8] - NIO's cumulative deliveries reached 872,785 units as of September 30, 2025, with year-to-date deliveries totaling 201,221 units, up from 149,281 units in the same period last year [2] Delivery Performance - In September 2025, NIO delivered 34,749 units, marking a monthly record and a 64.1% increase from the previous year [2] - The breakdown of September deliveries included 13,728 vehicles from the NIO brand, 15,246 from the ONVO brand, and 5,775 from the FIREFLY brand [2] Competitive Landscape - In Q3 2025, XPeng Inc. delivered 116,007 Smart EVs, a 149% year-over-year increase, while Li Auto reported 93,211 deliveries, down from 152,831 units in the same period last year [5][6] Financial Performance - NIO's stock has outperformed the Zacks Automotive-Foreign industry, with shares rising 76.6% year-to-date compared to the industry's growth of 3.8% [7] - The company's price/sales ratio indicates it may be overvalued, trading at a forward sales multiple of 0.89, higher than the industry's 0.45 [9] Earnings Estimates - The Zacks Consensus Estimate for NIO's loss per share for 2025 has narrowed by a penny, while the estimate for 2026 has widened by a penny in the past 30 days [10]

Core Insights - Nio Inc raised US$ 1.16 billion through an equity offering of 209,090,918 new Class A ordinary shares priced at US$ 5.57 per share [1][2] Financial Performance - Nio reported a 9% year-on-year increase in revenues to CNY 19.01 billion (US$ 2.67 billion) in Q2 2025, with vehicle deliveries rising by 26% to 72,056 units [4] - Adjusted losses per share narrowed to CNY 1.85, and vehicle deliveries for Q3 are projected to be between 87,000 and 91,000 units, reflecting a year-on-year increase of 41% to 47% [4] Use of Proceeds - The new capital will be allocated to research and development in smart EV technologies, development of new platforms and models, and expansion of global charging and battery-swapping networks [3] - Some proceeds will also be utilized to strengthen the company's balance sheet, which had CNY 27.2 billion (US$ 3.8 billion) in cash and cash equivalents at the end of Q2 [3]

Key Takeaways from Xiaomi Corp. Conference Company Overview - **Company**: Xiaomi Corp. (1810.HK) - **Event**: GS Asia Leaders Conference and GS Communacopia + Technology Conference - **Dates**: September 3-9, 2025 Industry Focus - **Core Industries**: Smart Electric Vehicles (EV), AIoT (Artificial Intelligence of Things), Smartphones Key Points Smart EV - **Production Capacity**: Target of 350,000 units for 2025, with a stable delivery volume of approximately 10,000 units per week expected in the near term [7] - **Model Pipeline**: Focus on a "hero product" strategy with plans to introduce one major new SKU annually and new variants of existing models [8] - **Market Positioning**: Targeting the mid-to-premium segment, which constitutes half of China's auto sales volume for vehicles priced above RMB 150,000 [8] - **Profitability Outlook**: Guidance to achieve profitability in the second half of 2025, with a long-term goal of becoming one of the top 5 global auto companies within 15-20 years [11] - **Growth Outlook**: Anticipated revenue growth of 25-30% year-over-year for 2025, with a focus on high-quality growth rather than just scale [11] AIoT - **Air Conditioners (AC)**: Targeting 10 million shipments for 2025, with a new factory in Wuhan expected to start production in the second half of 2025 [10] - **Overseas Expansion**: Plans to enter the European EV market by 2027, initially through exports [11] - **Smart Features**: 80% of Xiaomi's AC units are internet-connected, allowing for smart controls and OTA software upgrades [10] - **Market Contribution**: Currently, close to 80% of IoT sales are from China, but management expects international markets to surpass China in revenue over time [12] Smartphones - **Market Share**: Ranked between No. 1 to No. 4 globally (excluding the US), with a target of 200 million annual shipments over the next 3-5 years [14] - **Profit Margins**: Facing higher memory costs impacting gross profit margins, but expecting recovery in Q4 2025 with new product launches [14] - **Premiumization Strategy**: Despite a tough market, management anticipates an upward trend in average selling prices (ASP) [14] - **Chip Development**: Plans to develop in-house chips for smartphones and EVs, focusing on consumer-oriented applications [14] Capital Allocation - **Investment Plans**: Plans to invest RMB 30 billion in R&D and RMB 15 billion in capital expenditures for 2025 [14] - **Manufacturing Strategy**: The smartphone factory will serve more as an R&D lab, with no plans for additional factories [14] Investment Thesis - **Long-term Growth**: Xiaomi is positioned for multi-year ecosystem expansion with projected revenue and EPS CAGRs of 26% and 36% from 2024 to 2027 [16] - **Competitive Advantages**: Strong balance sheet, software-hardware integration capabilities, and cost advantages in the EV supply chain [16] Risks - **Market Competition**: Intense competition in the smartphone industry could hinder market share gains [17] - **Profit Margin Pressures**: Potential for higher gross profit margin pressures in both smartphone and EV segments [17] - **Execution Risks**: Risks associated with brand premiumization and execution in the EV business [17] Conclusion Xiaomi Corp. is strategically positioned for growth in the Smart EV and AIoT sectors, with a focus on premiumization in smartphones. The company aims for significant revenue growth while navigating competitive and operational challenges.

Core Viewpoint - Xiaomi's 2Q revenue and net profit growth of 31% and 75% year-on-year are in line with market expectations, with a gross profit margin (GPM) of 22.5%, reflecting strong performance in the EV segment despite challenges in the smartphone market [1][2] Group 1: Financial Performance - 2Q revenue and adjusted net profit growth were 31% and 75% year-on-year, respectively, with a GPM of 22.5%, an increase of 1.8 percentage points year-on-year [1][2] - The smartphone segment experienced a revenue decline of 2% year-on-year, with a weaker GPM of 11.5% [3] - Management revised FY25E shipment guidance to 175 million units, implying a 4% year-on-year increase [3] Group 2: Segment Performance - The EV segment showed a GPM improvement to 26.4% in 2Q, supported by scale benefits and SU7 Ultra deliveries, with a net loss narrowed to RMB 300 million [4] - The IoT segment maintained strong growth with a 45% year-on-year increase and a GPM of 22.5% [4] - Internet business sales climbed 10% year-on-year, with overseas sales accounting for a record-high 33% of total sales [5] Group 3: Strategic Outlook - Management remains positive on long-term strategies, including global share gains in smartphones, expansion in IoT with large home appliances, and entry into the European EV market by FY27E [1][4] - The company aims for a 1 percentage point share gain in the Chinese market each year and targets 200 million global shipments in the long term [3] - Focus on factory automation in robotics to improve efficiency in the near term [5]

Summary of Xiaomi's Q225 Preview and Key Insights Company Overview - **Company**: Xiaomi - **Industry**: Smartphone and Internet-of-Things (IoT) home-lifestyle company - **Mission**: To build high-quality products at reasonable prices, capping hardware net margin at 5% per year [14][15] Key Financial Metrics - **Q225 Smartphone Sell-Through**: 41 million units, up 0.5% YoY and 1.5% QoQ [2] - **Q225 Estimated Sell-In**: 42.4 million units, in line with sell-through due to lean channel inventory [2] - **Full Year Unit Growth Forecast**: 175 million units, slightly revised down from 176 million [2] - **Q225 Smartphone Gross Profit Margin (GPM)**: Expected to be flat QoQ at 11.6% [2] Regional Performance - **China**: Sell-through grew 8% YoY, driven by subsidies and the 618 shopping festival [2] - **Europe and Rest of World (RoW)**: Recorded declines of -1% and -4% YoY, respectively, due to competition from Samsung and market share gains in emerging markets [2] AIoT Business Insights - **Q225 AIoT Sales Forecast**: RMB 36.6 billion, up 37% YoY; 2025E forecast at RMB 140.6 billion, up 35% YoY [3] - **Margin Expectations**: Seasonal decline expected due to 618 promotions, with a forecasted 3.7 percentage points QoQ decline from Q125's peak [3] - **Challenges**: Receding subsidy impacts and intensified domestic competition may suppress margin upside [3] Electric Vehicle (EV) Segment - **Q225 EV Deliveries**: 82,000 units, up 8% QoQ [4] - **Average Selling Price (ASP)**: Expected to rise to RMB 240,000, with a margin increase of 0.7% [4] - **Future Capacity**: Second EV plant ramp-up is critical for 2H25/2026 shipment forecasts, with expectations of 398,000 and 720,000 units in 2025 and 2026, respectively [4] Valuation and Price Target - **Revised Price Target**: Lowered from HK$62.0 to HK$60.0, maintaining a Neutral rating [5] - **Earnings Forecast Adjustments**: Q225 and 2025 earnings forecasts reduced by 10.4% and 5.5%, respectively [5] - **Valuation Methodology**: Sum-of-the-parts (SOTP) approach, with smartphone, AIoT, and internet segments valued at 22.5x 2026E PE [5] Profitability and Financial Metrics - **Revenue Projections**: Expected revenues for 2025E at RMB 483.4 billion, growing to RMB 929.7 billion by 2029E [6] - **Net Earnings**: Projected net earnings for 2025E at RMB 42.0 billion, increasing to RMB 92.2 billion by 2029E [6] - **Debt Management**: Net cash position expected to improve significantly by 2029E [6] Risks and Opportunities - **Downside Risks**: Include raw material price hikes, competition in the premium smartphone market, and potential declines in IoT demand as subsidies fade [15] - **Upside Risks**: Faster-than-expected adoption of edge-AI smartphones, earlier monetization of IoT products, and higher EV shipments could drive growth [16] Market Position - **Market Capitalization**: Approximately HK$1,348 billion (US$172 billion) [7] - **Free Float**: 59% of shares [7] - **Average Daily Volume**: 151,813 shares [7] Conclusion Xiaomi is navigating a complex landscape with mixed performance across its segments. While the smartphone and AIoT businesses show growth potential, challenges from competition and market dynamics necessitate careful monitoring of margins and capacity expansions, particularly in the EV sector. The revised price target reflects a cautious outlook amid these developments.

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]

Summary of Key Points from the Conference Call Industry Overview - **Industry**: China's macroeconomic environment and trade relations - **Key Focus**: Trade cooperation, industrial profits, consumption trends, and government policies Core Insights and Arguments 1. **Trade Cooperation**: China is actively seeking to broaden cooperation with Europe and ASEAN amid ongoing trade uncertainties with the US, which has led to a 21% year-on-year decline in overall cell phone exports in April, with smartphone shipments to the US dropping by 70% year-on-year [2][3] 2. **US Tariff Impact**: The uncertainty surrounding US tariffs is prompting companies like Apple to consider shifting production to India by the end of 2026 to mitigate tariff impacts, although recent comments from President Trump suggest potential increases in tariffs on imported iPhones [3][4] 3. **Industrial Profit Recovery**: China's industrial profits increased by 1.4% year-on-year in the January-April period, with 60% of major industrial sectors reporting profit growth. Notably, equipment manufacturing and high-tech manufacturing saw profit increases of 11.2% and 9.0%, respectively [11][13] 4. **Consumption Initiatives**: Cities in China are piloting shortened work-weeks to boost consumption, with Shanghai implementing a new action plan to enhance household income and welfare, aiming to stimulate retail sales which have seen a decline of 0.3% year-on-year in the January-April period [14][15] 5. **Government Support for Livelihoods**: Fiscal expenditure on people's livelihoods, including healthcare and education, increased significantly in the January-April period, indicating a shift in government focus towards supporting consumption and improving living standards [17] Additional Important Insights 1. **Trade Relations with the EU**: China and the EU are set to meet in early June to discuss trade relations, coinciding with the 50th anniversary of their diplomatic ties, which may lead to improved trade and investment engagement [6] 2. **Belt and Road Initiative**: China plans to increase imports from central and eastern European countries and enhance projects under the Belt and Road Initiative, reflecting a strategic pivot towards diversifying trade partnerships [6] 3. **Consumer Goods Trade-in Programs**: The expansion of consumer goods trade-in programs has positively impacted profits in household electrical appliances, with profit increases of 15-17% in the January-April period [13] 4. **Challenges in Auto Manufacturing**: Despite overall profit recovery, the auto manufacturing sector faced a 5% year-on-year decline in profits, indicating ongoing price pressures due to heightened competition [13] 5. **Shanghai's Consumption Plan**: Shanghai's new consumption plan includes measures to support childcare and elderly care, which could lead to the introduction of childcare subsidies and improved social security systems [16] This summary encapsulates the key points discussed in the conference call, highlighting the current state of the Chinese economy, trade dynamics, and government initiatives aimed at boosting consumption and industrial growth.

Investment Rating - The report maintains a "Buy" rating for Xiaomi Corp. (1810.HK) with a target price raised to HK$65 from HK$62, indicating a 26% upside potential [1][18]. Core Insights - Xiaomi's 1Q25 results exceeded expectations, with revenue growing by 47% year-over-year (yoy) to Rmb111 billion, and adjusted net profit increasing by 65% yoy to Rmb10.7 billion [1]. - Key growth drivers included AIoT and electric vehicles (EV), with AIoT revenue growing by 59% yoy, significantly outperforming the market [2][34]. - The gross profit margin (GPM) for AIoT reached a record high of 25.2%, up 5.4 percentage points yoy, making it the largest gross profit contributor for Xiaomi [3][58]. Financial Performance - Revenue from smart EVs showed a gross profit margin expansion to 23.2%, attributed to strong pricing power and lower bill of materials (BOM) costs [4]. - Smartphone revenue grew by 9% yoy to Rmb50.6 billion, with a market share increase in China to 19%, marking Xiaomi's first position in the market after 10 years [28]. - Internet services revenue increased by 13% yoy to Rmb9.1 billion, driven by a 20% growth in advertising revenue [67]. Segment Analysis - AIoT and lifestyle products contributed significantly to revenue, with smart large home appliances seeing a revenue growth of 114% yoy [42]. - Tablet shipments grew by 56% yoy, with Xiaomi achieving the No.3 market share globally and in China [47]. - Wearables revenue increased by 56.5% yoy, with Xiaomi maintaining a leading position in the global market [58]. Future Outlook - The company anticipates continued growth in AIoT, projecting a 22% compound annual growth rate (CAGR) for overseas revenue from 2024 to 2027 [61]. - Upcoming events to watch include the 6.18 shopping festival and a new product release event, which are expected to drive further consumer interest and sales [19].