JP Morgan lowers Xiaomi's target price to 45 yuan with a "Neutral" rating, as the market has not yet reached the bottom for core business earnings estimates

JP Morgan's research report pointed out that over the past six months, Xiaomi Corporation-W (01810.HK) has significantly lagged behind the Hang Seng Tech Index due to a slowdown in its core profit growth. Despite Xiaomi's continued strong execution, market sentiment surrounding electric vehicles has turned pessimistic. Xiaomi released its third-quarter financial report after the market closed yesterday (18th), indicating that due to weak smartphone demand, a slowdown in AIoT growth, and increased cost pressures from rising raw material prices (especially memory), the weakness in core profits may worsen in the coming quarters.

As a result, JP Morgan expects Xiaomi's core profits to decrease by 15% year-on-year in the first half of 2026, and considering that capacity constraints are the main obstacle to further increasing electric vehicle shipments, market expectations may remain suppressed until Xiaomi obtains the license for its second electric vehicle factory.

JP Morgan stated that its cautious stance on Xiaomi has been largely validated, with the price-to-earnings ratio being adjusted down from 30 to 35 times to the high double digits, while the growth rate of core profits has retreated from the highs seen in the first half of this year. Nevertheless, JP Morgan believes that the consensus earnings forecast for Xiaomi's core business has not yet bottomed out, which may put some short-term pressure on the stock.

JP Morgan has lowered its earnings per share estimates for Xiaomi for the fiscal years 2026 and 2027 by 9% and 2%, respectively, and has reduced the target price from HKD 50 to HKD 45; maintaining a "Neutral" rating to reflect a cautious outlook on Xiaomi's core business and the market's pessimistic sentiment towards electric vehicles