CICC: Maintains Outperform rating on XIAOMI-W(01810) but lowers target price to 59.5 Hong Kong dollars.

CICC released a research report, stating that due to the cost pressure brought by the rise in storage prices, it lowered the adjusted net profit for 2025/2026 of XIAOMI-W (01810) by 5.2%/3.6% to 43.757 billion yuan/64.016 billion yuan. The current stock price corresponds to a price-earnings ratio of 25.0 times/16.9 times for adjusted net profit in 2025/2026. It maintains an outperform industry rating, adjusts the target price by 15.0% to 59.5 Hong Kong dollars (SOTP valuation method), corresponding to a price-earnings ratio of 35.3 times/24.1 times for adjusted net profit in 2025/2026, with 29.6% upside potential. CICC's main points are as follows: Forecasted 3Q25 adjusted net profit year-on-year growth of 68.88% The bank expects 3Q25 revenue to increase by 21.46% to 112.357 billion yuan, with adjusted net profit increasing by 68.88% to 10.557 billion yuan (expected profit from the automotive and innovative businesses). 3Q25 smartphone shipments maintain top three globally, Xiaomi 17 sales shining to drive high-end strategy steadily According to IDC, 3Q25 Xiaomi's global smartphone shipments increased by 1.8% year-on-year to 43 million units, with the Chinese market slightly decreasing by 1.7% year-on-year to 10 million units, mainly due to the decline in "national subsidies." The bank predicts that the overseas market share may increase, causing ASP to decrease slightly to 1,065 yuan. Overall, 3Q25 smartphone revenue is expected to decrease by 3.49% year-on-year to 45.795 billion yuan. Considering the rise in storage prices, the bank expects smartphone gross margin to decrease by 0.4ppt to 11.1% in 3Q25. In addition, at the end of September, the Xiaomi 17 series was released, with the company stating that first sales performance far exceeded expectations, and the bank expects the ProMax and Pro high-end models to perform well. IoT revenue stable with increase, gross margin improving month-on-month The bank expects 3Q25 IoT revenue to increase by 5% year-on-year to 27.407 billion yuan, with a gross margin increasing by 2.7ppt year-on-year/1.0ppt month-on-month to 23.5%, mainly due to the increase in the proportion of high-gross-margin major appliances, etc. In terms of internet business, the bank predicts 3Q25 internet service revenue to increase by 9.0% year-on-year to 9.225 billion yuan; with a gross margin of 75.0%, overall remaining at a healthy level. Continued increase in car deliveries, expecting the car business to turn profitable for the first time in a single quarter The bank expects 3Q25 car deliveries to be 109,000 units, corresponding to revenue of 29.43 billion yuan; considering the increase in ASP with the delivery of the YU 7. Due to the decrease in the proportion of SU 7 Ultra, the gross margin is expected to slightly decrease by 1.4ppt month-on-month to 25.0%. The bank expects that with the increase in car deliveries, the car business will turn profitable for the first time, with a single-quarter profit of 7.07 billion yuan. Looking towards 2026, the bank is optimistic about the continued growth in car deliveries and the accelerated release of profits with the release of additional models. In addition, the bank is optimistic about the long-term value of Xiaomi's "people, cars, and home" ecological model. Risk warning: Macroeconomic factors affecting demand for smartphones and IoT products, smart car sales lower than expected.