HSBC Research lowers Xiaomi's target price to 75.9 yuan and revises earnings forecast downwards

HSBC Global Research published a report indicating that Xiaomi Corporation-W (01810.HK) is expected to achieve a net profit of RMB 10.83 billion (the same below) for the second quarter of 2025, representing a year-on-year growth of 75%, exceeding the market expectation of RMB 9.1 billion. The electric vehicle business performed well, with the average selling price per vehicle increasing from RMB 238,300 in the first quarter of 2025 to RMB 253,700, and the gross margin rising from 23.2% in the first quarter to 26.4%, mainly benefiting from the product structure optimization brought about by the delivery launch of the SU7 Ultra model. On the other hand, the average selling price of smartphones decreased from RMB 1,211 to RMB 1,073, and the gross margin fell from 12.4% to 11.5%, primarily due to the increase in the proportion of overseas sales and rising costs of storage chips. The Internet of Things (IoT) business revenue grew by 45% year-on-year to RMB 38.7 billion, but affected by the 618 promotion, the gross margin decreased from 25.2% in the first quarter to 22.5%.

Considering the impact of supply chain constraints on the expansion of the electric vehicle business, as well as the limitations on smartphone shipments due to the traditional off-season in the third quarter of 2025 and the reduction in new model launches, the bank has lowered its net profit forecasts for 2025 to 2027 by 5% to 6%. The target price has been adjusted from HKD 80.4 to HKD 75.9, maintaining a "Buy" rating