• Everyone knows Xiaomi mobile phones but this Chinese company (market cap: HK$360 billion, or S$62 billion) is about to launch its own electric vehicle in a few days' time (28 March).  That makes it the only company in the world with phone and EV products. Apple? It tried for many years but has just given up on its EV ambitions. • Mobile phones made up 58% of Xiaomi's 2023 revenue. IoT and lifestyle products contributed nearly 30%. They include tablets, large home appliances such as refridgerators and smart TVs, fitness trackers, and electric scooters. • Around 30 analysts cover Xiaomi, with an average price target of HK$18.35. CGS-CIMB analyst Ray Kwok seems more confident than many others -- his target price is much higher. He bases this on Xiaomi's EV development and continued global smartphone market share increases. Read more about his take below .... |
Excerpts from CGS-CIMB report
Analyst: Ray Kwok
| Xiaomi Corporation -- Solid core business outlook; EV to debut |
| ■ 4Q23 adjusted net profit jumped 236% yoy, slightly better than our expectation, due to strong smartphone GPM. ■ We expect higher smartphone, IoT, and Internet services revenue in FY24F due to market share gains, especially internationally. ■ Reiterate Add with a higher TP of HK$23.47, based on 22x FY25F P/E. |
| Investment thesis |
■ Xiaomi's omni-channel expansion into India, Europe, Latin America (LATAM), and Southeast Asia (SEA) will likely lead to increased market share in the global smartphone market in the next few years, in our view (FY24-26F).
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■ We believe Xiaomi's EV business is likely to succeed due to its strong R&D capabilities in advanced driver assistance systems (ADAS), intelligent cockpit, and EV battery, as well as its healthy balance sheet, which allows for sustained investment in smart features and battery technology.
■ Xiaomi continues to monetise its international Mi User Interface (MIUI) users. Overseas income in the Internet services segment increased from c.25% of Internet services revenue in 4Q22 to 29% in 4Q23.
■ We believe Xiaomi will be the world’s first company to operate both smartphone and EV businesses.
| Share price catalysts |
■ Strong delivery of its first EV model, the SU7, which could reduce operating losses in the EV business.
■ Strong premium phone sales in China could lead to higher smartphone ASP and GPM.
■ Stable Internet services income growth and GPM of 74% or more in FY24F.
| Risks |
■ Slower-than-expected global smartphone market recovery affecting its revenue and net profit growth.
■ Increased competition in China’s smartphone market affecting its smartphone GPM and ASP.
■ Wider-than-expected operational losses in its EV business in FY24F, which would reduce its overall profitability.
