Core Viewpoint - Xiaomi Group reported strong financial results for Q2 2025, with revenue of 115.96 billion RMB, a year-on-year increase of 30.5%, and adjusted net profit of 10.83 billion RMB, up 75.4% year-on-year, exceeding Bloomberg consensus expectations and setting historical highs [1] Group 1: Smartphone Performance - Xiaomi's smartphone revenue decreased by 2.1% year-on-year to 45.52 billion RMB, primarily due to a 2.7% decline in average selling price (ASP) to 1,073.2 RMB, partially offset by a 0.6% increase in shipment volume to 42.4 million units [1] - Despite an increase in high-end smartphone shipments in mainland China, the launch of the REDMIA5 series in April 2025 led to a decline in ASP in overseas markets, contributing to a 0.6 percentage point drop in smartphone gross margin to 11.5% [1] Group 2: IoT and Internet Services - IoT and lifestyle consumer products achieved revenue of 38.71 billion RMB in Q2, a year-on-year growth of 44.7%, setting a historical high, with a gross margin of 22.5%, up 2.8 percentage points year-on-year [2] - Internet services revenue reached 9.1 billion RMB, growing 10.1% year-on-year, with a gross margin of 75.4%, slightly down year-on-year but still a core profit contributor [2] - Global monthly active users increased to 731.2 million, up 8.2% year-on-year, supporting revenue growth in services [2] Group 3: Automotive Business - The company delivered 81,302 new vehicles in Q2, a historical high, with the Xiaomi YU7 series SUV achieving over 240,000 orders within 18 hours of launch, indicating strong market interest [2] - The vehicle models feature high-end configurations such as an 800V silicon carbide high-voltage platform and laser radar, with an ASP of 253,700 RMB, up 10.9% year-on-year, contributing to improved profitability [2] Group 4: Investment Outlook - The company's effective execution of its "high-end + full ecosystem + globalization" strategy led to another quarter of unexpected growth in Q2 2025, with short-term growth driven by YU7 vehicle deliveries and AIoT product launches [3] - Long-term growth potential is anticipated from the implementation of large model technology and the synergy of the "people, vehicle, home" ecosystem [3] - The company is assigned a target price of 62.3 HKD per share, indicating an upside potential of 18.6% from the recent closing price, maintaining a "buy" rating [3]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of 62.3 HKD, representing an upside potential of 18.6% from the recent closing price of 52.55 HKD [7]. Core Insights - The company achieved record-high revenue and adjusted net profit in Q2 2025, with revenue reaching 1159.6 billion RMB, a year-on-year increase of 30.5%, and adjusted net profit of 108.3 billion RMB, up 75.4% year-on-year, slightly exceeding Bloomberg consensus expectations [1]. - The growth is driven by three main factors: the high-end smartphone strategy and market share increase, the expanding scale effects of the AIoT ecosystem, and the strong performance of the smart electric vehicle business [1][4]. Summary by Sections Smartphone Performance - In Q2 2025, the company's smartphone revenue decreased by 2.1% to 455.2 billion RMB, primarily due to a 2.7% decline in average selling price (ASP) to 1073.2 RMB, partially offset by a 0.6% increase in shipment volume to 42.4 million units [2]. - Despite a 3.8% decline in smartphone shipments in mainland China, the company managed a 3.6% increase in its own shipments, outperforming peers [2]. IoT and Internet Services - Revenue from IoT and lifestyle products reached 387.1 billion RMB in Q2, marking a 44.7% year-on-year growth, with a gross margin of 22.5%, up 2.8 percentage points [3]. - Internet services revenue grew by 10.1% year-on-year to 91.0 billion RMB, maintaining a gross margin of 75.4% [3]. Automotive Business - The company delivered 81,302 vehicles in Q2, setting a new record, with the first SUV model, Xiaomi YU7, achieving over 240,000 orders within 18 hours of launch [3]. - The ASP for the new model reached 253,700 RMB, a 10.9% increase year-on-year, indicating a shift towards higher-end products and improved profitability [3]. Financial Projections - The company is projected to achieve total revenue of 483.4 billion RMB in FY 2025, with a year-on-year growth of 32.1% [5]. - Adjusted net profit is expected to reach 42.5 billion RMB in FY 2025, reflecting a significant year-on-year increase of 56.0% [5].