UBS lowers Xiaomi's target price to 46 yuan with a "Neutral" rating, quarterly results roughly in line with expectations

The UBS research report indicates that Xiaomi Corporation (01810.HK) had a revenue of RMB 113.121 billion in the third quarter, representing a year-on-year growth of 22.3% and a quarter-on-quarter decline of 2.4%, which is in line with the bank's and market expectations. The non-International Financial Reporting Standards (non-IFRS) net profit was RMB 11.3 billion, growing 80.9% year-on-year and 4.4% quarter-on-quarter, exceeding the bank's and market expectations by 8.7% and 9.7%, respectively.

During the quarter, electric vehicles, AI, and other new businesses achieved a profit of approximately RMB 700 million at the operating profit level for the first time, higher than the bank's expectation of RMB 573 million. Overall performance was generally in line with the bank's expectations; benefiting from financial expenses and fair value gains, net profit exceeded expectations.

The bank has lowered its earnings per share forecasts for 2026 and 2027 by 13% and 5%, respectively, to reflect the pressure on smartphone gross margins due to rising memory prices and a more conservative shipment forecast due to price increases. Additionally, the gross margins for electric vehicles for the same periods in the next two years have been revised down from 24.6% and 23.5% to 22.6% and 23.5%, respectively, to account for the additional costs associated with replacing purchase tax subsidies. The target price has been reduced from HKD 53.5 to HKD 46, maintaining a "Neutral" rating