China International Capital Corporation: Downgrades Xiaomi Corporation (W) target price to HKD 67, maintains "Outperform" rating
CITIC International lowered the target price for Xiaomi Corporation-W to HKD 67, maintaining an "Outperform" rating. Due to the decline in profit margins for the Internet of Things and smartphones, it has slightly adjusted the forecasts for the fiscal years 2025/2026/2027. It is expected that in the third quarter of 2025, revenue will increase by 22% year-on-year to HKD 112.7 billion, with net profit of HKD 9.7 billion, a year-on-year increase of 55%. Electric vehicle deliveries are expected to reach 108,800 units, with revenue of HKD 28.7 billion
According to the Zhitong Finance APP, Jianyin International has released a research report stating that it has slightly lowered the target price for Xiaomi Corporation-W (01810) by 2.9%, from HKD 69 to HKD 67, while maintaining an "outperform the market" rating. The bank has made minor adjustments to its forecasts for Xiaomi's fiscal years 2025/2026/2027, mainly due to a decrease in the gross margin of the Internet of Things (IoT) and smartphone profit margins.
The bank predicts that Xiaomi's performance in the third quarter of 2025 will be slightly below institutional expectations, with revenue expected to increase by 22% year-on-year to RMB 112.7 billion (the same below), a quarterly decrease of 3%, primarily due to growth in the electric vehicle (EV) business, partially offset by a decline in smartphone sales. Adjusted net profit is expected to be RMB 9.7 billion, a year-on-year increase of 55%, but a quarterly decrease of 10%. The rising prices of Xiaomi's components continue to pressure profit margins, especially the increase in the price of LPDDR4X smartphones. As a result, the gross margin for smartphones in the third quarter is expected to be under pressure, estimated at around 11%.
The growth of IoT is expected to slow significantly, mainly due to a high base from last year (resulting from government subsidies), with a reduction in subsidies this quarter. However, considering that Xiaomi is less affected by the price war, the gross margin is still expected to remain strong. The bank forecasts growth of 25% and 22% for this sector in fiscal years 2025/2026. For network services, growth is expected to be 9% and 6% in fiscal years 2025/2026. Xiaomi's electric vehicle deliveries in the third quarter are expected to reach 108,800 units, a quarterly increase of 34%, with the average selling price continuing to rise, benefiting from the growth contribution of the YU7. The bank expects electric vehicle revenue to be RMB 28.7 billion
