CMBC International: Lower target price of XIAOMI-W (01810) to 61.3 Hong Kong dollars, expecting adjusted net profit to increase by 60% year-on-year in the third quarter.

CMB International released a research report stating that it expects XIAOMI-W (01810) to achieve a year-on-year increase of 60% in adjusted net profit in the third quarter to 10.01 billion yuan, which is in line with market expectations. Despite the rise in Bill of Material (BOM) costs for smartphones, the bank expects the company's gross profit margin in the third quarter to be 22.9%, higher than the market forecast of 22.5%. The bank reiterated its "buy" rating on the company, with a target price lowered from 62.96 Hong Kong dollars to 61.3 Hong Kong dollars. The bank maintains a positive outlook on Xiaomi's prospects for the fourth quarter. In terms of smartphones, it believes that the Xiaomi 17 Pro and Pro-max will bring higher sales for the company; Xiaomi's electric car deliveries are strong, profitability is improving, and there is potential for capacity expansion; Internet business is steadily growing, with a gross profit margin expected to reach 75%. Overall, the bank slightly lowered its adjusted net profit forecast for the fiscal years 2025 to 2027 by 3 to 4%, to reflect a softness in the smartphone business, the electric car business achieving breakeven in the third quarter, and rising BOM costs.