The article "After the Performance" summarizes the latest ratings, target prices, and views from major institutions following Xiaomi's quarterly results

Xiaomi Corporation-W (01810.HK) opened down 1.91% today, and the decline expanded thereafter, hitting a low of HKD 38.22 during the session, down 6.3% at one point, and the latest price is HKD 39.02, down 4.3%, with a transaction volume of HKD 9.3 billion. Several brokerages lowered their target prices after the earnings announcement, with Xiaomi's stock price at one point declining over 6%. Citi indicated that Xiaomi's third-quarter performance met expectations, with total revenue and adjusted net profit growing 22.3% and 80.8% year-on-year, respectively. Smartphone revenue fell 3% year-on-year, mainly due to weak shipments in China and India; AIoT business revenue growth slowed to 5.6% year-on-year due to reduced national subsidies. However, electric vehicle business revenue reached RMB 29 billion, accounting for 26% of the group's revenue, benefiting from increased delivery volumes and average selling prices. Xiaomi's electric vehicle business turned profitable last quarter, with adjusted EBIT recording RMB 700 million. The firm expects the weakness in Xiaomi's smartphone and AIoT segments to continue into the fourth quarter, but electric vehicle deliveries should exceed 350,000 units in November. Due to uncertainties in smartphones and AIoT, they decided to lower Xiaomi's adjusted net profit forecast for this year by 4% but cut next year's adjusted net profit forecast by 6%, with the target price reduced from HKD 69 to HKD 60. Goldman Sachs expects significant pressure on the gross margin of Xiaomi's mobile phone business, lowering its net profit forecasts for 2026 and 2027 by 4% to 5%.

Xiaomi Corporation announced its third-quarter results for this year after the market closed yesterday (18th), with revenue of RMB 113.121 billion, a year-on-year increase of 22.3%, exceeding the median forecast of RMB 112.417 billion from 16 brokerages. Gross profit increased 37.4% year-on-year to RMB 25.936 billion. Net profit was RMB 12.271 billion, a year-on-year increase of 129.3%, higher than the range of RMB 8.939 billion to RMB 10.941 billion predicted by 9 brokerages; earnings per share were 47 cents. According to non-International Financial Reporting Standards (non-IFRS), the adjusted net profit for the third quarter increased 80.9% year-on-year to RMB 11.311 billion, setting a record high and outperforming the range of RMB 9.51 billion to RMB 10.557 billion predicted by 15 brokerages, with a median of RMB 10.065 billion. During the quarter, Xiaomi's automotive business recorded quarterly profits for the first time, with profits of approximately RMB 700 million.

In the smartphone business segment, third-quarter revenue was RMB 46 billion, a year-on-year decrease of 3.1%, mainly due to a decline in the average selling price of smartphones; shipments were 43.3 million units, a year-on-year increase of 0.5%. Xiaomi President Lu Weibing revealed that Xiaomi's automotive division is expected to complete its annual delivery target of 350,000 units this week. Last quarter, the company delivered 108,800 new vehicles, a year-on-year increase of 33.8%, with over 260,000 units delivered in the first three quarters.

【Rising smartphone costs pressure gross margins】 Daiwa pointed out that the rising costs of memory chips will transmit pressure to the gross margin of smartphones under Xiaomi. Xiaomi's smartphone business gross margin for the third quarter was 11.1% (compared to 11.3% in the second quarter), which has dragged down the gross margin of smartphones. To mitigate the impact, Xiaomi will prioritize enhancing the average selling price through product premiumization rather than pursuing shipment volume. The firm expects the smartphone gross margin to drop to 10% in the fourth quarter and in 2026, and has lowered its 2026 smartphone shipment forecast to 169 million units. In terms of electric vehicles, Xiaomi's delivery volume has further increased, and it is expected that the gross margin for electric vehicles will reach 25% in 2026, influenced by changes in model mix and subsidies. Progress in production capacity remains one of the potential catalysts for the stock price. The firm has lowered Xiaomi's adjusted net profit forecasts for 2025 to 2027 by 2.2%, 11.2%, and 10.6%, respectively, and has reduced the target price from 68 yuan to 55 yuan, equivalent to a forecasted price-to-earnings ratio of 30 times for 2026. The firm expects Xiaomi's adjusted earnings per share for 2025 to 2027 to be 1.561 yuan, 1.649 yuan, and 2.212 yuan, respectively, representing year-on-year increases of 45.3%, 5.6%, and 34.1%.

Bank of America Securities stated that Xiaomi's third-quarter performance was mixed, with decent gross margins but high operating expenses. Due to rising research and development and sales expenses, the actual operating profit after deducting sales management and R&D expenses was 6.7 billion yuan, which was 25% lower than the firm's expectations, down 25% quarter-on-quarter, but up 29% year-on-year. Jefferies noted that Xiaomi's third-quarter revenue and gross margin performance exceeded expectations, but earnings before interest and taxes (EBIT) fell significantly short of expectations, primarily due to a 41% increase in expenses, including a 52% rise in R&D expenses and a 32% increase in sales and management expenses due to the opening of 500 new retail stores and new product launches. The firm believes that the growth rate of R&D spending will remain high as the company continues to invest in AI, autonomous driving (ADAS), chip, and software development. However, considering the pressure on gross margins and the potential slowdown in smartphone shipment growth, it is expected that Xiaomi will strengthen expense control in 2026, especially in non-R&D areas such as store expansion.

JP Morgan indicated that Xiaomi's stock price has significantly underperformed the Hang Seng Tech Index over the past six months, mainly due to slowing core profit growth and a shift in market sentiment towards new energy vehicles, despite the company's strong execution. From the content of the third-quarter earnings conference call in 2025, the weakness in core profits may further deteriorate in the coming quarters due to weak smartphone demand, slowing AIoT growth, and cost pressures from rising commodity prices (especially memory chips). Therefore, it is expected that core profits will decline by 15% year-on-year in the first half of 2026. The execution of the new energy vehicle business remains robust, with stable monthly deliveries exceeding 40,000 units and achieving profitability in the third quarter. However, as the production license for the second new energy vehicle factory has not yet been secured, market expectations are likely to remain under pressure for the time being. The firm has lowered Xiaomi's target price from 50 yuan to 45 yuan JP Morgan believes that the timing for bottom-fishing Xiaomi is not yet ripe, and it is necessary to wait for the market to further lower its profit expectations for core businesses. Although the bank is not worried about the long-term outlook for new energy vehicle shipments, given the company's strong execution and healthy market demand, the slowdown in core profits is far exceeding expectations and is further dragged down by the gross profit pressure from rising raw material prices. Historically, during periods when earnings per share are revised downwards, Xiaomi's stock price often bottoms out when the price-to-earnings ratio falls to between 10 to 15 times or the price-to-book ratio is below 2 times. In comparison, the current valuation is still at a price-to-earnings ratio of 20 times and about a price-to-book ratio of 3 times, indicating that there has not yet been a clear entry point in the short term. The bank expects Xiaomi's adjusted earnings per share for 2025, 2026, and 2027 to be RMB 1.57, 1.56, and 2.06 respectively, representing year-on-year increases of 46.7%, a decrease of 0.6%, and an increase of 32.1%.

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This report lists 10 brokerages that have given investment ratings and target prices (in HKD) for Xiaomi (01810.HK):

Brokerage│Investment Rating│Target Price

Nomura│Neutral│61 HKD

Citi│Highly Confident to Outperform│69->60 HKD

Daiwa│Buy│68->55 HKD

UOB Kay Hian│Buy│65.2 HKD->54.6 HKD

Goldman Sachs│Buy│56.5->53.5 HKD

Bank of America Securities│Buy│57->52 HKD

Citi│Buy│65->50 HKD

Jefferies│Buy│56.18->49.21 HKD

UBS│Neutral│53.5->46 HKD

JP Morgan│Neutral│50->45 HKD

Brokerage│Viewpoint

Nomura│Gross profit in the third quarter slightly exceeded market expectations, mainly due to contributions from the Internet of Things and Internet businesses.

Citi│Electric vehicles still have rich profits, while smartphones and AIoT performance remains weak into the fourth quarter.

Daiwa│Earnings may be further cut due to rising memory costs putting pressure on smartphone gross margins.

UOB Kay Hian│Last quarter's performance met expectations, but challenges are also emerging.

Goldman Sachs│Maintains revenue forecasts for 2025 to 2027 largely unchanged, but net profit for 2026 and 2027 is expected to decline by 4%-5%, mainly due to increased pressure on smartphone gross margins.

Bank of America Securities│Mixed performance, but the electric vehicle business has long-term growth potential.

Citi│Due to rising memory prices, stock prices may continue to be under pressure in the near term, while new electric vehicle versions may become positive catalysts.

Jefferies│Third-quarter revenue and earnings met expectations, but EBIT significantly fell short of expectations.

UBS│Rising memory costs are putting pressure on smartphone gross margins.

JP Morgan│Concerns about core profits and achieving electric vehicle deliveries