Under the banner of "Big Banks," Xiaomi's target price has been lowered to 50 yuan due to concerns over declining gross margins in smartphones and electric vehicles

Citi's research report indicates that Xiaomi (01810.HK) achieved an adjusted net profit in the third quarter that exceeded both the bank's and market expectations, primarily due to non-operating income meeting expectations, along with better-than-expected gross margins in the Internet of Things, Internet services, and electric vehicles. However, operating expenses were higher than expected. Notably, the third quarter saw electric vehicles and other new businesses recording an operating profit of 700 million RMB (compared to a loss of 300 million RMB in the previous quarter), which met the bank's expectations.

Management emphasized that Xiaomi has secured memory supply for 2026; with memory price increases, they will prioritize ensuring average selling prices and market share. Additionally, management expects annual electric vehicle deliveries to exceed 350,000 units, but the vehicle purchase tax subsidy policy will impact next year's electric vehicle gross margins.

The bank's latest expectations for smartphone shipments in 2025 and 2026 are 170 million and 160 million units, respectively, with gross margins of 11.3% and 8.9%; during the same period, electric vehicle deliveries are maintained at 400,000 and 700,000 units, with gross margins of 25.2% and 22.2%. The target price has been lowered to HKD 50, maintaining a "Buy" rating, with a long-term positive outlook on the Internet of Things and electric vehicle businesses, but memory price increases may put short-term pressure on the stock price