Xiaomi is the second baton in Long China relay

Regardless of whether Xiaomi has exceeded the buying expectations of the North Water Daddies, for foreign capital, this is the second relay for Long China to go long on Chinese technology after BABA. First, let's talk about the performance, what hasn't been seen outside the financial report:

• Ultra delivered 50,000 units this year, completed yesterday. After discussion, the issues are not significant, and the challenge target of X units is not impossible to achieve. Therefore, is there still room for further upward revision on the revised delivery target of 350,000 units?
• From the order perspective, relying solely on 300 stores and one car series, it reached 75,000 orders per month in March, with extremely high user loyalty. How much potential is there to explore in this sales system? This does not yet consider the mid-to-low-end product plans targeting the sinking market next year.
• The car ASP clearly has room for improvement, not just a matter of the proportion of ultra. Contrary to common sense, compared to other manufacturers where users focus on cost performance, Xiaomi users have stronger purchasing power and a higher willingness to pay. "Research shows that while the SU7 (non-ultra) is not the highest-priced brand, its owners' average household income ranks among the top, indicating that Xiaomi cars attract high-income young groups not only due to the intelligence and cost performance advantages of the products themselves but also closely related to the brand's playful attributes and sentimental value, such as the technological sense and geek culture that Xiaomi has long cultivated."
• The capex for 2024 is 10 billion, with a clear increase in 2025, and the increment is mainly related to AI, as well as "increasing from a cash flow perspective, larger than financial metrics." Moreover, Xiaomi's business, fully +AI, especially the mobile AI OS, has not yet officially started. As mentioned in the recent conference call by General Lu, the vast user base, rich terminal scenarios, and massive data are Xiaomi's natural advantages in AI.

Previously, the market criticized that Chinese technology lacks momentum for further growth, arguing that the valuation re-rate has ended, and now we need to look at performance. Most people do not believe that performance can enter a continuous upward revision channel. After BABA, everyone was still anxious about whether Tencent could continue, while Xiaomi successfully took the baton. If we only look at the past from the perspective of Chinese concept internet, it is impossible to fully enter a performance upward revision. The internet and consumer retail, even real estate recruitment, are closely related to macro-sensitive industries. Given that the current policy improvement expectations exceed the actual improvement speed, it is indeed difficult to expect a comprehensive reversal (such as tonight's Beike performance), but the performances of BABA and Xiaomi demonstrate the same point: under the stabilization of the basic business, a new explosive growth technology business can completely decouple from the macro environment. Even if the macro does not improve, as long as the basic business stabilizes, if the macro improves, the basic business taking off is an option that adds EPS buff, and overall, it still enters a continuous upward revision channel. Specifically:

• Alibaba, the report from Goldman Sachs yesterday dissecting capital expenditures and cloud business growth rates clarified things for foreigners. Last year, several North American CSPs accelerated by AI by just a few percentage points, and their stock prices could re-rate by dozens of percent, while Alibaba Cloud tells you it can double in three years. Although the basic GMV of e-commerce is difficult to reverse, the direction of internal reform is beginning to show results, and the recently concluded NDR once again confirmed that CMR will continue to benefit from the take rate increase driven by software service feesThe fundamentals are stable, and AI drives performance upgrades.
• Xiaomi, domestic smartphone market stabilizes but the high-end proportion and overseas revenue share are increasing, and the IOT internet, especially advertising, remains strong. The second curve, explosive growth in the automotive business, has a long-term TAM that can double overall revenue. The fundamentals are stable with margin improvement, and the automotive sector drives revenue upgrades, enhancing long-term profit potential.

Today I chatted with a big shot, who knows investors in NYC/SFC/London looking at global technology, and they almost completely missed this round of Chinese tech market. Why? Over the past three years, it is estimated that they have cut down on China analysts and PMs significantly, leaving no research resources available for coverage...

But more importantly, this time the theme of Chinese technology is completely different from the research direction of the internet era, and the research difficulty has significantly increased.

AI, autonomous driving, humanoid robots, computing power chips, everyone feels it, it's hard to keep up... Do you think foreigners will learn faster than Chinese? Therefore, this is indeed an opportunity for domestic capital (in the previous round of the internet, foreigners copied to China, to be honest, they understood it better than we did).

We started to be bullish on Chinese AI from December with ByteDance, and over the past few months, the feeling is very obvious. Domestic players, especially active capital big shots in A-shares, are the quickest to react. Foreign capital really has a speed ladder, from Hong Kong HF to Asia-Pacific HF to North America HF to LO, the speed of entry decreases sequentially, picking up one by one, and most are just starting...

(The latest and most crowded trade, going long on Chinese technology has not yet reached the top 3)

Therefore, the so-called Chinese M7/T10 is not without reason. From the perspective of continuous performance upgrades, it not only includes Alibaba and Tencent but also manufacturing companies like Xiaomi, SMIC, and BYD. Still, the past three years of macro gloom have led the world to underestimate China's still strong engineer dividend and "卷王" core; the 1-10 industrial stage is the most comfortable track for China.

When the macro truly accelerates, the second-tier internet manufacturers will also take over performance upgrades. In another 2-3 years, the massive capital expenditures and R&D investments that started today (Xiaomi 100 billion over 5 years) will bear fruit, nurturing a new industrial ecosystem, which is another story.

As General Lu mentioned in the earnings meeting, a truly AI OS phone will still need 2-3 years to perfect. The current R&D investment and capital expenditure are just the beginning; perhaps the automotive business is merely an extension of the brand + leveraging the mature domestic industrial chain's "low-hanging fruit"? More and better fruits will be slowly picked in the future.

(End)

The interpretations of Xiaomi's performance by major banks will be uploaded later, and you are also welcome to continue discussing whether tonight's GTC and GB300 are indeed ahead of schedule, etc. It seems that the US stock market is starting to realize the meaning of GTC... The pinned post has been discussed in advanceThis article is sourced from: Information Equality, original title: "Xiaomi is the second baton in Long China relay"

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