CICC: maintains "outperform" rating on XIAOMI-W (01810) with a target price of HK$32.

CICC released a research report saying to maintain the "outperform industry" rating for XIAOMI-W(01810), keep the profit forecast for 2024 unchanged, consider the growth potential of the automotive business, and raise the adjusted net profit for 2025 by 5.1% to 33.914 billion yuan, with a target price of 32 Hong Kong dollars. The company announced its 3Q24 performance: revenue of 92.507 billion yuan, a year-on-year increase of 30.5%, exceeding the bank's expectations by 2.1%; adjusted net profit of 6.252 billion yuan, a year-on-year increase of 4.4%, exceeding the bank's expectations by 3.1%, mainly due to better-than-expected revenue from Internet and IoT businesses, and higher-than-expected gross profit margins from Internet and automotive businesses. CICC's main points are as follows: In 3Q24, the shipment volume of smartphones stabilized and increased, with a bright performance in the high-end smartphone market share in China. In 3Q24, smartphone revenue increased by 13.9% year-on-year to 47.452 billion yuan. Xiaomi's global smartphone shipments in the third quarter increased by 3.1% year-on-year to 43.1 million units, with a market share of 13.8%, maintaining the third place globally. The market share in China increased by 1.2 percentage points year-on-year to 14.7%, with the shipment volume of high-end smartphones in China accounting for 20.1%, an increase of 7.9 percentage points year-on-year. The smartphone ASP in 3Q24 increased by 10.6% year-on-year to 1,102.2 yuan, mainly due to the increase in the proportion of high-end smartphones. Looking ahead to 4Q24, the company stated that Xiaomi 15 achieved a million units sold at a faster rate despite the increase in starting price. The growth of major appliances drove IoT gross profit margins to a new high, while Internet business remained stable. In 3Q24, the company's IoT revenue increased by 26.3% year-on-year to 26.102 billion yuan, with smart appliances/tablets/wearable revenue increasing by 54.9%/36.5%/40.2% respectively; the IoT gross profit margin increased by 2.9 percentage points year-on-year to 20.8%, mainly due to the increase in the proportion of high gross margin wearables and major appliances. In 3Q24, Internet business revenue increased by 9.1% year-on-year to 8.463 billion yuan, mainly due to an increase in advertising revenue; the gross profit margin increased by 3.0 percentage points year-on-year to 77.5%. The delivery volume of automobiles is pushing towards the annual target of 130,000 units, with a continuous increase in gross profit margins. In 3Q24, automotive business revenue was 9.697 billion yuan, with a delivery volume of 39,800 units. The company stated that the delivery of SU7 has exceeded 100,000 units, and will continue to strive towards the annual target of 130,000 units. The automotive gross profit margin in 3Q24 increased by 1.7 percentage points quarter-on-quarter to 17.1%, mainly due to the continuous increase in gross profit margins brought about by capacity scaling. In addition, on October 28, the company released the Xiaomi SU7 Ultra mass-produced version, and within 10 minutes of opening reservations, the number of orders exceeded 3,680 units. Considering the trend of increasing delivery volume and gross profit margin quarter-on-quarter, the bank believes that the automotive business will become another important support for the company, and is optimistic about the synergistic value brought by the "people-car-home full ecology" strategy.