CICC: Maintains Xiaomi Corporation-W "Outperform Industry" rating with a target price of HKD 70
CICC maintains Xiaomi Corporation-W "outperforming the industry" rating, with a target price of HKD 70. It is expected that in the first quarter of 2025, revenue will increase by 44.85% year-on-year to CNY 109.37 billion, and adjusted net profit will increase by 53.03% year-on-year to CNY 9.933 billion. Xiaomi's smartphone shipments are steadily increasing, with mobile revenue expected to grow by 8.3% year-on-year to CNY 50.327 billion, and IoT revenue expected to grow by 52% year-on-year to CNY 30.968 billion
According to the Zhitong Finance APP, China International Capital Corporation (CICC) released a research report stating that considering the outstanding performance of Xiaomi Corporation-W (01810) in IoT and automotive businesses, it has raised the adjusted net profit forecast for 2025/2026 by 4.6%/3.8% to RMB 40.197 billion/RMB 54.743 billion, with the current stock price corresponding to a price-to-earnings ratio of 29.4 times/21.2 times for 2025/2026. It maintains an outperform rating for the industry, and taking into account the adjustment of profit forecasts and the downward shift in industry valuation, it keeps the target price unchanged at HKD 70 (SOTP valuation method), corresponding to a price-to-earnings ratio of 41.2 times/29.8 times for 2025/2026, which has an upside potential of 40.1% compared to the current stock price.
CICC's main points are as follows:
Forecasting a 53.03% year-on-year growth in adjusted net profit for Q1 2025
The firm expects Xiaomi Corporation's revenue in Q1 2025 to grow by 44.85% year-on-year to RMB 109.37 billion, with adjusted net profit expected to grow by 53.03% year-on-year to RMB 9.933 billion (including a loss of RMB 340 million from automotive and innovative businesses).
Stable increase in smartphone shipments for Q1 2025, with China market ranking rising to first place
According to Canalys, Xiaomi's global smartphone shipments in Q1 2025 are expected to grow by 3% year-on-year to 41.8 million units, with shipments in the Chinese market expected to grow by 40% year-on-year to 13.3 million units, ranking first in the Chinese market. The firm believes the main reason is the national subsidy policy driving demand for mid-range products. Considering the increase in the proportion of sales in China, the firm expects the average selling price (ASP) to increase by 5.2% year-on-year to RMB 1,204. Combining shipments and ASP, the firm expects smartphone revenue in Q1 2025 to grow by 8.3% year-on-year to RMB 50.327 billion. Considering the slowdown in storage price increases, the firm expects the smartphone gross margin in Q1 2025 to increase by 0.3 percentage points quarter-on-quarter to 12.3%.
National subsidy policy expected to drive sustained high revenue growth, gross margin may reach a new quarterly high
Considering the subsidy policies for home appliances and tablets driving sales of large home appliances and tablets, the firm expects IoT revenue in Q1 2025 to grow by 52% year-on-year to RMB 30.968 billion, with gross margin expected to increase by 3.68 percentage points year-on-year to 23.5%, mainly due to the increase in the proportion of high-margin products. In terms of internet business, as hardware shipments steadily increase, the firm expects internet service revenue in Q1 2025 to grow by 13% year-on-year to RMB 9.094 billion, with gross margin expected to increase by 2.26 percentage points year-on-year to 76.5%, maintaining a healthy level.
Automotive gross margin expected to continue to improve quarter-on-quarter, focus on SU7 Ultra sales and YU7 launch, edge AI opens up long-term growth space
The firm expects Xiaomi's SU7 delivery volume in Q1 2025 to reach 76,000 units, corresponding to revenue of RMB 18.18 billion; gross margin is expected to increase by 0.76 percentage points quarter-on-quarter to 21.2%. Looking ahead to 2025, as the SU7 Ultra begins sales and the YU7 is planned for official launch in June/July, the firm is optimistic about the company's automotive orders and delivery volume continuing to grow, expecting Xiaomi's automotive shipments to grow by 192% year-on-year to 400,000 units in 2025. Additionally, in mid to late January, the Pengpai OS 2 "Super Xiao Ai" was opened to official version users, and the firm is optimistic that Xiaomi will leverage its "people, car, home" full ecosystem closed-loop model to realize ecological value and entry position in the future of flourishing edge AI development through its platform + hardware + software ecosystem + users Risk Warning: Global macroeconomic factors affect the demand for smartphones and IoT products, and sales of smart vehicles are below expectations
