Daiwa: Small rice YU7 expected to become an important catalyst, stock price may break through HK$100.

Morgan Stanley issued a report, raising the target price of Xiaomi Group to 62 Hong Kong dollars, giving it a "buy" rating. It is expected that the launch of the new car "YU7" could become an important catalyst this year, along with AIoT and smartphone business serving as dual growth engines. It is expected that by 2030, Xiaomi's stock price may exceed 100 Hong Kong dollars. Morgan Stanley predicts that Xiaomi's total revenue could exceed 1 trillion yuan by 2030, with net profit of over 100 billion yuan. If this is achieved, the market value could reach 2.5 trillion yuan, comparable to major competitors such as BYD, Tesla, and Apple. The SU7 Ultra is seen as a milestone for the business, with potential for growth in product structure, average selling price, and profit margin. The intrinsic value forecast for the electric vehicle business is adjusted from 204 billion yuan to 497 billion yuan, with sales volume forecasts for the next two years increased to 370,000 vehicles and 750,000 vehicles respectively; average selling prices for the next two years are adjusted to 250,000 yuan and 255,000 yuan. There is belief that the SUV YU7 to be launched can replicate this success. In an optimistic scenario, Xiaomi's electric vehicle sales are estimated to rapidly reach 1 million units annually in 2026-27, expanding to over 2 million units in 2028-29. The valuation for the electric vehicle business will be revaluated at 3.5 to 4 times the 2026 market sales rate, and the price-earnings multiples for the smartphone+AIoT+Internet business in 2026 will be reassessed to 25 to 30 times, potentially reaching a market value of 1.7 trillion to 2 trillion yuan, with a corresponding stock price of 70-85 Hong Kong dollars in the optimistic scenario. In a pessimistic scenario, Xiaomi's electric vehicle sales this year may fall below expectations, with the new model potentially reaching 1 million units annually in 2027-28, but investors may lack confidence in achieving 2 million units annually by 2030. The valuation of the electric vehicle business will be maintained at 1 to 1.5 times the 2026 market sales rate. If the brand image does not significantly improve, the price-earnings multiples for smartphone+AIoT+Internet business could be lowered to 10 to 15 times, potentially leading to a market value of 625 billion to 950 billion yuan, with an implied stock price of 25 to 40 Hong Kong dollars in the pessimistic scenario, with 30 Hong Kong dollars as a base-case scenario.