Macquarie lowers Xiaomi's target price to 54.2 yuan, third-quarter operating profit misses expectations

Macquarie published a research report indicating that Xiaomi (01810.HK) reported operating profits in the third quarter that fell short of expectations, primarily due to increased R&D expenses and costs associated with opening new stores. During the period, the proportion of revenue from the Internet of Things and electric vehicles increased, driving the group's gross profit margin up by 2.6 percentage points year-on-year to 22.9%. Economies of scale and improvements in product mix led to an increase in the average selling price of Xiaomi's vehicles, with the gross profit margin for the electric vehicle business reaching 25.5%.

Looking ahead to the fourth quarter, the firm forecasts a 14% quarter-on-quarter increase in Xiaomi's revenue, driven by growth in the electric vehicle and smartphone businesses. It also predicts that revenue will grow by 27% year-on-year in 2026, with electric vehicle sales expected to nearly double. The average selling price of smartphones is expected to rise by 7% next year, offsetting the anticipated 5% decline in sales volume, resulting in a 2% revenue growth for that business.

Macquarie has raised its forecast for Xiaomi's net profit this year under non-International Financial Reporting Standards by 12%, while lowering its forecasts for 2026 and 2027 by 15% and 2%, respectively. The target price has been reduced from HKD 56.7 to HKD 54.2, with a rating of "Outperform."