Haitong: Maintains "outperform" rating for XIAOMI-W (01810) with a fair value range of HK$40.93-48.54

Haitong released a research report stating that it maintains a "outperform market" rating on XIAOMI-W(01810), with a forecast of 25E revenue for the automotive business at 98.2 billion renminbi. The report uses leading companies in the domestic new energy vehicle market as comparable companies, giving a valuation multiple of 2.5-3.0X for the automotive business segment. Taking into account Xiaomi Group's total external investment of 67.1 billion renminbi, the forecast for Xiaomi Group's total market value is in the range of 102.76-121.88 billion Hong Kong dollars, corresponding to a reasonable value range of 40.93-48.54 Hong Kong dollars per share. Haitong's main points are as follows: Double growth in revenue and profit, entering the "people-car-home full ecology". Since its establishment in 2010, Xiaomi Group's business covers multiple areas including smartphones, IoT and consumer products, internet services, smart cars, etc. In the past five years, Xiaomi's operating revenue has shown an overall growth trend, with all business sectors performing well in 2024Q1-3. The automotive business is creating new growth points, with overall revenue and gross profit increasing significantly. In August 2023, Xiaomi clearly stated its "new ten-year goal" as "New continuous investment in core technology, striving to become the leader of the new generation of global hardcore technology." The company's R&D expenses have increased significantly in the past three years. Smartphone business, rising in high-end strategy. In 2024Q1-3, Xiaomi's global smartphone shipments increased by 20.0% year-on-year, with market share rising to 14.2%, ranking steadily in the top three globally and constantly catching up with the top two. In the first three quarters of 2024 in mainland China, Xiaomi's high-end smartphone shipments accounted for 21.3% of the overall smartphone shipments, an increase of 3.9 percentage points year-on-year. In the third quarter of 2024, Xiaomi's market share of high-end smartphones in three price ranges in mainland China increased year-on-year, demonstrating significant results in the high-end strategy. IoT and consumer products business, high margin growth. In 2024Q1-3, Xiaomi's IoT and consumer product business revenue increased by 22.4% year-on-year, with a gross margin of 20.1%, reaching a historical high and increasing by 3 percentage points year-on-year. In 2024Q1-3, Xiaomi's air conditioners, refrigerators, and washing machines saw shipments increase by 47.8%, 28.2%, and 40.7% respectively, while shipments of tablets, wearable wristband devices, and TWS headphones increased by 81.2%, 26.5%, and 58.2% year-on-year. Xiaomi has leveraged its self-developed technology to create innovative products, upgrading user experience in terms of delivery services, stylish appearance, and more. Internet business, advertising business drives margin increase. In 2024Q1-3, Xiaomi's internet business revenue increased by 11.7% year-on-year, with a gross margin of 76.6%, an increase of 2.7 percentage points year-on-year, mainly due to the increase in advertising business revenue and gross margin. Xiaomi's user base steadily grew, reaching historical highs in both global and China's monthly active users. Smart car business, Xiaomi SU7 has become a hit. In the past five years, Xiaomi's automotive sales have significantly increased its share in total car sales. In 2024M1-11, Xiaomi's automotive sales reached 11.26 million units, accounting for 40.3% of total car sales, an increase of 8.9 percentage points from the end of 2023. The Xiaomi SU7 series of smart electric cars, with unique family design features, 2.78-second zero-to-100 acceleration (Max model), 700km (standard model) long range, and a good interconnection ecosystem with smartphones, smart devices, and cars, has received a good response in the new energy car field, consistently ranking first in sales among new energy compact cars for five consecutive months.