Investment Rating - The report maintains a "Buy" rating for Xiaomi Group (1810 HK) with a target price of 71.20 HKD [11][33]. Core Insights - The self-developed chips represent a significant milestone for Xiaomi and the Chinese semiconductor design industry, impacting business operations, financial metrics, and market dynamics [1]. - Xiaomi's self-research in chips is a crucial step for brand manufacturers to build an independent ecosystem, similar to Apple's established ecosystem [2][12]. - Self-developed chips are expected to help Xiaomi and other brands expand their market share in the high-end smartphone segment, where Xiaomi currently holds only 6% of the market for phones priced above 4000 RMB [3][14]. - The chip business will likely increase R&D expenses initially, which may suppress gross margins before improving them as production scales up [4][19]. - Xiaomi's self-developed chips could disrupt the third-party smartphone chip market, enhancing its bargaining power with suppliers [5][26]. - The company emphasizes a consumer-oriented strategy to minimize policy risks, focusing on legal compliance and brand competitiveness [6][28]. - Future chip developments may include 5G baseband and smart cockpit chips, indicating a strategic evolution from consumer to industrial applications [7][30]. Summary by Sections Chip Development Impact - Self-research in chips is essential for building a competitive ecosystem, akin to Apple's model [2][12]. - Xiaomi's market share in high-end smartphones is significantly lower than competitors, indicating room for growth through self-developed chips [3][14]. Financial Implications - R&D expenses have risen from 5.8 billion RMB in 2018 to an expected 24 billion RMB in 2024, with R&D as a percentage of revenue increasing from 3% to 7% [4][19]. - Initial gross margins may decline due to high fixed costs associated with chip design, but long-term improvements are anticipated as production scales [4][19]. Market Dynamics - Xiaomi's self-developed chips could lead to a contraction in the third-party chip market, enhancing its competitive position [5][26]. - The company is the largest smartphone chip purchaser globally, indicating significant market influence [5][26]. Strategic Focus - Xiaomi's commitment to a consumer-focused strategy aims to mitigate risks associated with geopolitical tensions and regulatory challenges [6][28]. - Future chip initiatives may target advanced applications, such as 5G and automotive technologies, reflecting a broader strategic vision [7][30].

Group 1: Macro Insights - The report discusses the potential impact of Trump's proposed 50% tariffs on the EU, suggesting that the likelihood of these tariffs being implemented is low due to the current vulnerabilities in the US political and financial markets [2][3][16] - Recent adjustments in LPR and deposit rates indicate a monetary easing trend, with LPR down by 10 basis points and deposit rates reduced by 5 to 25 basis points, which may support economic activity [2][3] - The US House of Representatives passed the "Beautiful Act," which is expected to increase fiscal expansion, potentially leading to higher long-term US Treasury yields and impacting global markets [3][16] Group 2: Sector Analysis - The report highlights the recovery potential in the Hong Kong real estate market, driven by factors such as potential RMB appreciation, policy easing, and continued inflow of talent from the mainland [18] - The insurance sector is experiencing a wave of equity stakes, with a focus on high dividend yield stocks, indicating a shift in investment strategy towards income-generating assets [19] - The report emphasizes the growth potential in the uranium market due to the revival of nuclear energy initiatives in the US, which may lead to increased demand and higher prices for uranium [14] Group 3: Company-Specific Insights - Horizon Robotics is highlighted as a leading supplier of advanced driver-assistance chips, with expectations for growth driven by partnerships with major automotive manufacturers [22] - Atour Group reported a revenue increase of 29.8% year-on-year in Q1 2025, indicating strong operational momentum despite challenges in the business travel market [23] - Xiaomi's recent product launch event showcased new self-developed chips, which are expected to enhance the company's competitive position in the smartphone market [28]