Analysis of Xiaomi Group's 2025 Interim Report: Growth, Risks, and Value Reassessment!

1. Overall Performance: Structural Changes Behind High Growth

In the first half of 2025, $XIAOMI-W(01810.HK) delivered impressive results: total revenue increased by 38.2% year-on-year, net profit grew by 146.3%, and adjusted net profit also achieved a 69.8% increase.

In the second quarter alone, revenue reached 115.9 billion yuan, up 30.5% year-on-year, while net profit surged by 134.2%.

Key Highlights:

Smartphone shipments grew for the eighth consecutive quarter, with a global market share of 14.7%, firmly ranking in the top three;

IoT and lifestyle consumer products revenue increased by 44.7% year-on-year, with smart home appliances growing by over 60%;

Electric vehicle deliveries reached 81,302 units, with revenue up 233.9% year-on-year, becoming the second-largest revenue source.

Such growth rates are rare among mature hardware companies.

However, as Peter Lynch said: "Fast-growing companies are not always good investments; the key is to assess the quality and sustainability of growth."

Is Xiaomi's growth reliant on subsidies, price wars, or short-term demand spikes?

We need to dig deeper.

2. Business Segment Analysis: Dual Engines Driving Growth, but Uneven Momentum

2.1 Smartphones × AIoT: Solid Foundation but Margin Pressure

Smartphone revenue declined slightly by 2.1% year-on-year, with ASP (average selling price) dropping 2.7%, mainly due to a shift toward lower-priced models.

Although shipments grew marginally by 0.6%, gross margin fell from 12.1% to 11.5%, indicating intense market competition, especially overseas.

IoT was a bright spot, with air conditioners, refrigerators, and washing machines seeing significant shipment growth, and gross margin rising to 22.5%. The ecosystem now has 989 million connected devices, showing stronger user engagement.

Smartphones remain the cash cow but face growth challenges; IoT is growing fast but requires ongoing investment.

Unlike Apple's high-margin hardware + ecosystem services model, Xiaomi's hardware margins are generally lower.

2.2 Smart EVs: High Growth, High Losses, Still in the 'Burning Phase'

EV revenue reached 21.3 billion yuan, up 233.9% year-on-year, but operating losses stood at 300 million yuan.

Despite a 197.7% increase in deliveries and ASP rising to 254,000 yuan per vehicle, capacity ramp-up and R&D costs remain high.

Tesla also faced prolonged losses early on, but what differentiates Xiaomi?

Is it affordability? Smart features? Ecosystem synergy? Or the 'Lei Jun effect'?

Currently, the Xiaomi SU7/YU7 series has strong orders, but production capacity and brand premium remain challenges.

3. Financial Health: Strong Cash Reserves but Rising Debt

Cash reserves stand at 235.9 billion yuan, ensuring liquidity;

Total borrowings reached 28.9 billion yuan, up from end-2024;

Operating cash flow net inflow was 28 billion yuan, while investment cash flow net outflow was 60.1 billion yuan, mainly for term deposits and long-term investments.

As Warren Buffett said: "Cash flow is the oxygen of a business."

Xiaomi's cash flow is healthy, but massive investments in EVs and AI R&D (Q2 R&D spending: 7.8 billion yuan, up 41.2% year-on-year) pose challenges.

4. Risks: Hidden Challenges

India risks: 4.79 billion INR frozen due to unresolved tax disputes;

Currency fluctuations: 31.6% of revenue is overseas, and appreciation could erode profits;

EV losses: If profitability isn't achieved soon, it may drag down overall performance;

Intensifying competition: Price wars in smartphones and feature battles in EVs make margin expansion difficult.

5. Valuation: Growth Stock or Value Stock?

Xiaomi's valuation is not excessively high—lower than many tech firms but above traditional hardware companies. Its valuation logic is shifting from "hardware" to "ecosystem."

Peter Lynch categorized companies into six types; Xiaomi resembles a mix of 'fast grower' and 'turnaround':

Smartphones/IoT form the growth base; EVs are a transformational bet; internet services provide high-margin support.

If EVs reach breakeven, valuation could be re-rated; prolonged losses may become a drag.

6. Conclusion: Cautious Optimism, Await Clearer Signals

Xiaomi has demonstrated strong execution and resilience under its 'Human-Car-Home Ecosystem' strategy, but EV investments and market competition remain uncertainties.

As Benjamin Graham said: "The essence of investment is preservation of capital, then return."

For Xiaomi, focus on:

When will EVs turn profitable? Can smartphone margins stabilize? How will India risks resolve? Can cash flow sustain investments?

If you believe Xiaomi can replicate its smartphone/IoT success in EVs, now may be a time to invest;

If you prioritize short-term profits and certainty, wait for clearer signals.

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