In "The Big Banks," China International Capital Corporation slightly lowered Xiaomi's target price to 71.14 yuan, as the automotive business turned from loss to profit, alleviating pressure on traditional businesses

Bank of China International published a report stating that Xiaomi (01810.HK) third-quarter revenue and gross margin were in line with the bank's and market expectations, with adjusted net profit reaching RMB 11.3 billion, exceeding expectations, mainly due to the smart electric vehicle business achieving breakeven, investment disposal gains, and other income. For traditional businesses, given the pressure from rising storage chip prices and intensified IoT competition, it is expected that Xiaomi will strategically shift from prioritizing sales volume growth to focusing more on profit preservation. Meanwhile, the high-end strategy and AI initiatives such as Xiaomi MiMo/Miloco/HyperOS3 will help counteract industry headwinds.

The report indicated that in the third quarter, Xiaomi's smart electric vehicle and new business segment revenue grew 36.4% quarter-on-quarter to RMB 29 billion, surpassing the 33.8% sales growth, mainly driven by the increased share of the YU7 SUV model, which pushed the overall average price up quarter-on-quarter. Despite enhanced scale effects, the gross margin in the third quarter slightly declined by 0.9 percentage points to 25.5% due to the high initial costs of the YU7 model and the decreased contribution from the SU7 Ultra. However, thanks to continuous improvements in operational efficiency, the segment turned profitable, with quarterly operating profit reaching RMB 700 million, and profit per vehicle exceeding RMB 6,000.

Based on recent capacity upgrades, the bank has slightly adjusted Xiaomi's sales forecasts for 2025 and 2026 to 412,000 units and 710,000 units, respectively. However, considering the subsequent increase in new capacity and the diversification of the product line, it believes there is potential for upward revision of the current forecast values. The earnings per share forecasts for 2026 and 2027 have been slightly lowered by 2%/1% to reflect the marginal impact of storage prices, but the "Buy" rating is maintained, with the target price slightly reduced from HKD 71.9 to HKD 71.14, believing that most negative factors have already been reflected in the stock price adjustment in the short term