Xiaomi Corp. (1810.HK) Conference Call Summary Company Overview - **Company**: Xiaomi Corp. - **Ticker**: 1810.HK - **Market Cap**: HK$1.4 trillion / $173.7 billion - **Enterprise Value**: HK$1.1 trillion / $146.5 billion - **Rating**: Buy Key Financial Highlights - **2Q25 Revenue**: Grew by +30% year-over-year (yoy) to Rmb 365.9 billion, driven by: - AIoT revenue growth of +45% yoy, exceeding expectations - EV sales offsetting a decline in smartphone sales (-2% yoy) due to a -5% decline in average selling price (ASP) [1][2] - **Adjusted Net Profit**: Increased by +75% yoy, primarily due to: - Higher-than-expected profitability from EV and new initiatives, achieving a record-high gross profit margin (GPM) of 26.4% - Non-operating items contributing positively despite increased income taxes [1][2] Smartphone Segment Performance - **Smartphone Revenue**: Declined -2% yoy to Rmb 45.5 billion, with total shipments of 42.4 million (+0.6% yoy) - **Market Share**: Maintained No.3 global smartphone shipment ranking with a 14.7% market share in 2Q25 - **ASP**: Decreased -3% yoy to Rmb 1,074 due to changes in product mix [30][31] - **Regional Performance**: - China: Revenue grew +10% yoy, with a market share gain of +1.1pp to 15% - International: Market share gains in Europe, Africa, Southeast Asia, and Latin America, but losses in India and the Middle East [30][31] AIoT and Other Segments - **AIoT Revenue**: Grew +45% yoy to Rmb 38.7 billion, with GPM increasing +2.8pp to 22.5% - **Connected Devices**: Number of connected devices increased by +20% yoy to 989 million, with significant growth in users with multiple devices [50][53] - **Smart Large Home Appliances**: Revenue grew +66% yoy, with record shipments in air conditioning units, refrigerators, and washing machines [53] EV Segment Insights - **EV Sales**: Contributed positively to overall profitability, with expectations for manufacturing capacity ramp-up in the latter half of 2025 [1][17] - **Future Outlook**: Anticipated improvements in consumer demand and visibility on new capacity supply in 2026 [17] Market Performance and Valuation - **Share Price Performance**: +4% over the past 3 months, +54% year-to-date, attributed to downward revisions in smartphone revenue estimates and concerns over AIoT growth [2][3] - **Forecast Revisions**: Revenue forecasts for 2025E-2027E largely unchanged, but adjusted net profit forecasts lowered by 1-4% due to higher R&D investments and taxes [18] - **Target Price**: Adjusted to HK$65, with a 24% upside potential [18] Upcoming Catalysts - **Product Launches**: Anticipated release of the flagship Xiaomi 16 series and HyperOS 3.0 by the end of September 2025 - **EV Manufacturing Capacity**: Monitoring progress in ramp-up and new model filings [19] Conclusion - **Investment Thesis**: Despite short-term challenges, Xiaomi's long-term growth potential remains strong, particularly in AIoT and EV segments, presenting an attractive opportunity for investors to accumulate positions at current price levels [3][17]

Financial Data and Key Metrics Changes - Total revenue reached RMB 116 billion, up 30.5% year on year, marking the fifth consecutive quarter of record-breaking performance [4][22] - Adjusted net profit was RMB 10.8 billion, up 75% year on year, achieving a new record high for the third consecutive quarter [4][31] - Gross margin improved to 22.5%, an increase of 1.8 percentage points year on year [4][22] Business Line Data and Key Metrics Changes - Smartphone revenue was RMB 45.5 billion, accounting for 39.3% of total revenue, with global smartphone shipments reaching 42.4 million units, marking the eighth consecutive quarter of year-on-year shipment growth [23][22] - AIoT revenue reached RMB 38.7 billion, up 44.7% year on year, with a gross margin of 22.5%, up 2.8 percentage points year on year [24][25] - Revenue from smart large appliances grew 66.2% year on year, with air conditioning shipments exceeding 5.4 million units, up over 60% year on year [25][26] Market Data and Key Metrics Changes - In Mainland China, smartphone market share for devices priced between RMB 4,000 and 6,000 increased by 4.5 and 6.5 percentage points year on year, respectively [12] - Xiaomi ranked first in smartphone activations in Mainland China and maintained a strong presence in Southeast Asia, Europe, and Latin America [7][8] - Global MAUs for Internet services reached 731 million, up 8.2% year on year, with MAUs in Mainland China reaching 185 million, up 12.4% year on year [27] Company Strategy and Development Direction - The company aims to achieve steady annual increases in market share in China and is focused on premiumization and technological advancements [9][10] - Xiaomi plans to enter the European market by 2027 and is committed to enhancing its international market infrastructure [19][20] - The company emphasizes innovation driven by user needs and aims to transform the home appliance industry through intelligent transformation [15][16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the intense competition in the smartphone industry and the need for continuous investment in core technology and product innovation [8][9] - The company expects the smartphone market to remain flat globally, with a target of 175-180 million shipments for the year [81][82] - Management expressed confidence in the long-term growth of the large appliance business despite current market challenges [16][99] Other Important Information - Xiaomi's R&D expenses reached RMB 7.8 billion, up 41.2% year on year, with a record high number of R&D personnel [30] - The company was included in the Fortune 500 list for the seventh consecutive year, ranking 297th, an improvement of 100 places from the previous year [19] Q&A Session Summary Question: Performance of AIoT segment in Chinese and overseas markets - Management noted strong growth rates in both markets, with a focus on expanding offline retail channels to enhance efficiency [34][37] Question: Smartphone gross margin trends - Management indicated that rising costs for components are a concern, but premiumization efforts are expected to help improve margins in the long term [36][44] Question: AIoT gross margin pressure - Management attributed quarter-on-quarter pressure to seasonal factors and promotional activities, but year-on-year growth remains strong [46][55] Question: EV business gross margin and overseas development - Management expressed confidence in maintaining satisfactory gross margins through competitive product offerings and economies of scale [88][90] Question: Brand strength in overseas markets - Management highlighted high brand awareness in Europe and plans to enhance the reputation of Xiaomi EVs before entering the market [90][91]

Financial Data and Key Metrics Changes - Total revenue reached RMB 116 billion, up 30.5% year on year, marking the fifth consecutive quarter of record-breaking performance [6][24] - Adjusted net profit was RMB 10.8 billion, up 75% year on year, achieving a new record high for the third consecutive quarter [6][32] - Gross margin improved to 22.5%, an increase of 1.8 percentage points year on year [6][24] Business Line Data and Key Metrics Changes - Smartphone revenue was RMB 45.5 billion, accounting for 39.3% of total revenue, with global smartphone shipments reaching 42.4 million units, marking the eighth consecutive quarter of year-on-year shipment growth [25][24] - AIoT revenue reached RMB 38.7 billion, up 44.7% year on year, with a gross margin of 22.5%, up 2.8 percentage points year on year [26][24] - Smart large appliances revenue grew 66.2% year on year, with air conditioning shipments exceeding 5.4 million units, achieving over 60% year-on-year growth [27][15] Market Data and Key Metrics Changes - In Mainland China, smartphone market share for devices priced between RMB 4,000 and 6,000 increased by 4.5 and 6.5 percentage points year on year, reaching 24.7% and 15.4% respectively [13] - Xiaomi ranked first in smartphone activations in Mainland China and maintained strong positions in Southeast Asia, Europe, and Latin America [9][10] - Global MAUs for Internet services reached 731 million, up 8.2% year on year, with MAUs in Mainland China reaching 185 million, up 12.4% year on year [29] Company Strategy and Development Direction - The company aims to achieve steady annual increases in market share in China and is focused on premiumization and technological advancements [11][12] - Xiaomi plans to enter the European market by 2027 and is committed to enhancing its brand and product competitiveness [21][85] - The company emphasizes innovation driven by user needs and aims to transform the home appliance industry through intelligent transformation [16][17] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the intense competition in the smartphone industry and the need for continuous investment in core technology and product innovation [10][11] - The company expects the smartphone market to show little growth overall, with a target of 175-180 million shipments for the year [81] - Management expressed confidence in the long-term growth of the large appliance business despite current market challenges [17][98] Other Important Information - Xiaomi's R&D expenses reached RMB 7.8 billion, up 41.2% year on year, with a record high of 22,641 R&D personnel [31] - The company was included in the Fortune 500 list for the seventh consecutive year, ranking 297th, an improvement of 100 places from the previous year [21] - The company is committed to corporate social responsibility and has made significant contributions to disaster relief efforts [33] Q&A Session Summary Question: Performance of AIoT segment in China and overseas - Management noted strong growth in both markets, with a focus on expanding the new retail system to enhance AIoT business [36][38] Question: Long-term smartphone gross margin outlook - Management indicated that while there are short-term pressures on gross margin, premiumization and product structure adjustments are expected to support future growth [37][45] Question: AIoT gross margin pressure and R&D investment direction - Management explained that the pressure on AIoT gross margin was due to market conditions, and R&D investments are focused on core technologies and product lines [48][52] Question: EV business gross margin and overseas development - Management expressed confidence in maintaining satisfactory gross margins through competitive products and emphasized the importance of brand awareness for EVs in overseas markets [88][90] Question: Robotics opportunities and large appliances strategy - Management is optimistic about robotics opportunities and highlighted the rapid growth of air conditioning sales, with plans to enhance competitiveness further [94][98]

Investment Rating - The report assigns an "In-Line" rating for the Greater China Semiconductors industry, indicating expected performance in line with the broader market benchmark [6]. Core Insights - The report highlights a positive outlook for AI glasses, driven by successful product launches such as Ray-Ban Meta and the new Oakley Meta HSTN and Xiaomi AI glasses, which are expected to increase demand for semiconductors [2][3]. - Key beneficiaries in the semiconductor sector include OmniVision, Himax, MediaTek, and Universal Scientific Industries, which are positioned to gain from the growing AI glasses market [2][23]. Summary by Sections AI Glasses Market Developments - The report notes that the features of AI glasses, particularly AI LLM interaction, are likely to contribute to their success [2]. - The Oakley Meta HSTN is designed for sports use and features Qualcomm's AR1 SoC, a 12MP camera, and an improved battery life of eight hours compared to four hours for Ray-Ban Meta [3][13]. - Xiaomi's AI glasses, priced from Rmb1,999 (~US$277), utilize a dual-chip design for enhanced performance and have a battery life of 8.6 hours, supporting 2K video recording [4][12]. Semiconductor Supply Chain - Qualcomm remains a leader in the AI glasses market, with SoCs accounting for approximately 40% of the bill of materials (BoM), which could lead to more affordable AI glasses [5][20]. - The report anticipates an 80% compound annual growth rate (CAGR) in the SoC total addressable market (TAM) for AI glasses from 2024 to 2028 [33]. - The total addressable market for camera image sensors (CIS) in AI glasses is projected to grow to US$273 million by 2028 [27]. Stock Implications - The report maintains an "Overweight" rating on MediaTek due to its advanced designs for headset SoCs, while OmniVision and Himax are also expected to benefit from the AI glasses trend [23]. - System-in-package technology is anticipated to enhance semiconductor component density in smart glasses, potentially benefiting Universal Scientific Industries [23].

Core Viewpoint - Xiaomi's recent product launch of the YU7 SUV has generated nearly 300,000 orders within one hour, significantly surpassing market expectations, which is expected to enhance earnings consensus and support valuation multiple expansion for the company [1] Group 1: YU7 SUV - The YU7 SUV received over 289,000 confirmed orders in the first hour of its launch, exceeding market expectations against the in-line MSRP [1] - The initial order backlog may face challenges from scalping, and production capacity constraints are anticipated to limit sales growth over the next year, with a maximum delivery estimate of 1 million units by 2026 [1] - The order frenzy for the YU7 is expected to benefit Li Auto with its upcoming i-series BEV models and Xiaomi's supply chain, including its exclusive LIDAR supplier [1] Group 2: AI Glasses - Xiaomi's AI glasses, comparable to Meta-Rayban products but with superior specifications, are expected to succeed in the Chinese market due to limited competition within Xiaomi's ecosystem [1] - The single-color electrochromic version of the AI glasses sold out within half an hour of launch [1] Group 3: MIX Flip2 Smartphone - The MIX Flip2, Xiaomi's latest compact foldable flagship smartphone, features significant upgrades in design, performance, battery life, and imaging systems, with a starting price of RMB 5,999 [2] - The MIX Flip2 is anticipated to become a key player in the 2025 compact foldable smartphone market [2] Group 4: Valuation - Xiaomi is reiterated as a top BUY due to its strong EV growth, progress in smartphone and IoT products, and exposure to AI, AR glasses, and robotics [3] - The target price of HK$75.25 is based on a sum-of-the-parts (SOTP) valuation, combining a 21x 2026E P/E for traditional business and a 4x 2026E P/S for the EV business [3]

Summary of Xiaomi Conference Call Company Overview - **Company**: Xiaomi Corporation (1810 HK) - **Industry**: Technology Hardware & Equipment Key Points and Arguments 1. **Product Launch and Demand**: Xiaomi's YU7 SUV has seen exceptional demand, with pre-orders reaching 289,000 units within the first hour of launch, significantly outperforming the SU7's 88,000 units in 24 hours [11] 2. **Pricing Strategy**: The YU7 is priced competitively, with the standard model starting at Rmb253,500, which is Rmb10,000-30,000 below comparable Tesla models. Additionally, Xiaomi is offering free options valued up to Rmb66,000 [11] 3. **Market Positioning**: The battery-electric vehicle (BEV) SUV segment in China is viewed as an accessible market for the YU7, given the significant volume gap between Tesla's Model Y and its competitors [11] 4. **Product Features**: The YU7 boasts a range of 835 km for the standard model, surpassing the Tesla Model Y's 593 km. It also features a quick charge capability of 620 km in 15 minutes compared to Tesla's 275 km [11] 5. **Comfort and Technology Enhancements**: The YU7 includes upgraded comfort features such as zero-gravity front seats, an intelligent suspension system, and advanced smart interactions with the XiaoAi assistant [11] 6. **Financial Outlook**: Xiaomi maintains an Outperform rating with a 12-month target price of HK$69.32, reflecting a potential total shareholder return (TSR) of 21.8% [6][5] 7. **Revenue Projections**: Revenue is projected to grow from Rmb365.9 billion in 2024 to Rmb742.8 billion by 2027, with a compound annual growth rate (CAGR) of 35% [7] 8. **Profitability Metrics**: Adjusted profit is expected to increase from Rmb27.2 billion in 2024 to Rmb77.8 billion in 2027, with an adjusted EPS growth of 40.3% in 2025 [7] 9. **Market Capitalization**: As of June 26, 2025, Xiaomi's market capitalization is approximately USD 188.056 billion [6] Additional Important Information - **Competitive Landscape**: Xiaomi's investments in core EV technologies are highlighted as key drivers for its success in the automotive sector [11] - **Production and Delivery Timeline**: Initial deliveries of the YU7 are expected to start in August, with a potential wait time of 20 to 30 weeks due to production ramp-up [11] - **Stock Volatility**: The stock is categorized with a medium volatility index, indicating a moderate risk profile for investors [6] This summary encapsulates the critical insights from the Xiaomi conference call, focusing on product performance, market strategy, financial outlook, and competitive positioning.