2025-10-28 03:06Xiaomi Corp 3Q25 Preview Summary Company Overview - Company: Xiaomi Corp (1810.HK) - Industry: Greater China Technology Hardware - Market Cap: US$150.321 billion - Price Target: HK$62.00 - Current Price: HK$45.80 Key Points Electric Vehicle (EV) Performance - Stronger-than-expected EV shipments: Xiaomi's EV shipments exceeded 40,000 units in September, leading to an increase in the full-year 2025 shipment forecast from 370,000 units to 385,000 units [3][10] - Break-even achievement: The company is expected to achieve EV break-even in 3Q25, marking the first time since the official EV launch in 2Q24 [3][27] Smartphone Business - Margin pressure: The smartphone segment is facing margin pressure due to rising memory costs, leading to a reduction in the 2026 smartphone margin estimate from 12.4% to 10.9% [4][10] - Long-term outlook: While the smartphone business can eventually pass through the cost pressures, near-term earnings will be impacted [4] AIoT Growth - Deceleration in growth: After achieving 59% YoY growth in 1Q25 and 45% in 2Q25, AIoT growth is expected to decelerate, prompting a 5% revenue forecast reduction for 2025 and an 8% reduction for 2026 [5][10] - Long-term potential: Despite the slowdown, Xiaomi's AIoT segment is believed to have robust long-term growth potential due to synergies from the combined offerings of smartphones, EVs, and AIoT [5] Earnings Estimates - Revisions for 2025-2027: - 2025 net income estimate raised by 1% due to better-than-expected EV shipments - 2026 net income estimate reduced by 6% due to smartphone margin pressure and AIoT slowdown - 2027 estimate trimmed by 3% reflecting a recovery in smartphone margins [6][14] Financial Metrics - Revenue Forecasts: - 2025: Rmb 467.7 billion - 2026: Rmb 592.0 billion - 2027: Rmb 677.6 billion [18] - Net Income: - 2025: Rmb 40.2 billion - 2026: Rmb 45.5 billion - 2027: Rmb 57.7 billion [18] Valuation Methodology - SOTP Valuation: The price target is derived from a sum-of-the-parts (SOTP) methodology, applying a cost of equity of 11% for smartphones and IoT, and 11.4% for Internet services [16][34] Risks and Opportunities - Opportunities: Successful EV launches could enhance brand equity and market share in high-end segments [29] - Risks: Rising geopolitical tensions and potential supply chain issues could negatively impact performance [28][38] Conclusion - Investment Thesis: Xiaomi is positioned for growth with its unique integration of smartphones, EVs, and AIoT, despite facing near-term challenges in margins and growth rates [30][29]