Xiaomi Group Valuation Report: Preface and Outline

Date: October 30, 2025 Analyst: Huang Jiao Target Price (2026E): 72.00 HKD Current Price (10/30): 44.40 HKD Upside: +62% Rating: Strong Buy Valuation Model (SOTP): "Powerful Bull" Edition (Base Business + Option Pricing) Valuation Range (HKD): 1.46T ~ 2.23T

Preface: Seeking Value Amid the Noise—Why This Report?

Since Xiaomi Group's grand 15th-anniversary new product launch event on September 25, 2025 (featuring the Xiaomi 17 series, Xuanjie O1 chip, etc.), the capital market's reaction has starkly contrasted with the enthusiastic response. Xiaomi Group's (1810.HK) stock price has not surged as expected but instead retreated from a high near HKD 60, approaching HKD 44 at one point—a drop of over 25%.

This is an extreme case of "cognitive dissonance." On one hand, the product side is "flooded with good news": the Xiaomi 17's premiumization is confirmed successful, the Xuanjie O1 chip achieves a technological breakthrough, and the automotive segment (Q3) is about to reach a historic profitability inflection point. On the other hand, the capital market is "voting with its feet": the continuous decline in stock price seems to mock the fundamentals mercilessly.

Market pessimism appears to be spreading. PR crises (carbon-cover controversy, Chengdu incident), safety concerns over "hidden door handles," skepticism about the chip strategy (why "abandon" Xuanjie for flagships), fears of macroeconomic downturns and geopolitical risks… Negative narratives are rampant, as if to drag this tech giant—which has just proven its premiumization capability and is about to hit an automotive profitability inflection—back to its "low-end hardware manufacturer" origins.

This report is born under such circumstances.

We believe there exists a vast "cognitive gap" between the current market price (~HKD 1.17T) and Xiaomi Group's true intrinsic value, caused by "noise" and "misunderstanding." Mr. Market seems to be completely ignoring the profound qualitative changes in Xiaomi's fundamentals due to short-term "emotional fluctuations" and "risk aversion." The market is using an "old world" (Cyclical Hardware Mfgr.) valuation model to misprice a "new species" (AIoT Eco-Platform).

This report's goal: Apply rigorous SOTP (Sum-of-the-Parts) valuation, combined with the latest financial data, industry benchmarks, and stress tests, for a thorough, bottom-up revaluation of Xiaomi Group. We aim to cut through the market fog and quantify the true value of the "Human-Car-Home Full Ecosystem."

We will dissect every business segment of Xiaomi, identifying its real "profit drivers" and "strategic value."

We will quantify the "certain" base business and the "soon-to-be-realized" options, building a clear two-tier pricing system.

We will prove the current stock price of HKD 1.17T (44.4 HKD) is an "iron floor of value" already overpriced by all "bear" risks.

This report's mission: Clearly articulate where the market (bears) is fundamentally wrong, where Xiaomi (bulls) holds its core advantages, and what the key catalysts are to bridge the "cognitive gap" between the two. We aim to provide rational long-term investors with a solid basis for making correct decisions amid market "mispricing."

Our mission is to "separate signal from noise." The "Chengdu drunk-driving fire" is noise; "Q3 automotive profitability" is signal. "Door handle 舆论" is noise; "200K backlog orders" is signal.

Our mission is to "provide an anchor of rationality." When the market panics and sells due to "emotion," this report will offer a solid "value floor" (HKD 1.46T) based on SOTP.

This report's vision: Transcend short-term stock volatility and showcase Xiaomi's long-term potential as a globally unique tech ecosystem platform that deeply integrates three trillion-dollar arenas—"personal computing," "smart home," and "smart car"—empowered by "AI." We aim to prove that Xiaomi's journey is not toward the stars but is the starry sea itself.

Apple has "people" but lacks the physical closed loop of "car" and "home."

Tesla has "car" but lacks the data ecosystem of "people" and "home."

Huawei has the "people-car-home" layout, but its globalization is severely hindered.

Xiaomi is currently the only global player with the potential to achieve "OS unification," "data unification," "experience unification," and "globalization" across the three physical scenarios of "people, car, home." This is the true starting point of its trillion-dollar journey.

We firmly believe that value may be delayed but never absent. We hope this in-depth report provides you with a calm, objective, data-based value judgment amid the market noise.

Report Outline

Chapter 1: Executive Summary & Core Investment Thesis

1.1. Investment Rating & Core Data

1.2. Core Investment Thesis: The "Three Mistakes" the Market Is Making

1.3. "Cognitive Gap": The "Risk Floor" of 1.17T vs. the "Consensus Floor" of 1.46T

1.4. Valuation Summary: SOTP Model—"Base Business" & "Option Value"

1.5. Key Catalysts

Chapter 2: SOTP Valuation Framework—Why Must Xiaomi Be Split?

2.1. The "Old Xiaomi" Valuation Trap: Why the Market Has Long Undervalued It

2.2. The "New Xiaomi" Qualitative Shift: The Financial Meaning of "Human-Car-Home Full Ecosystem"

2.3. SOTP (Sum-of-the-Parts): The Only Rational Valuation Metric

2.4. Our Model: Two-Tier Pricing of (Base Business) + (Auto Option)

Chapter 3: SOTP Deep Dive (1): The "Certain" Base Business (The Base)

*(Valuation: 1.12T ~ 1.82T RMB)*

3.1. Smartphone Business (400-600B): The "Premiumization" Premium of Ecosystem Entry

3.1.1. Financial Portrait: The Strategic Value Beyond 11.5% Gross Margin

3.1.2. Stress Test (Bear): Why "Memory Price Hikes" Are No Longer a Threat

3.1.3. Valuation Logic: P/S 2.0x-3.0x (Why Higher Than Samsung)

3.2. Internet Business (270-450B): The "High Certainty" Cash Cow

3.2.1. Financial Portrait: The "Cash Cornerstone" of 75.4% Gross Margin

3.2.2. Stress Test (Bear): The Monetization Path of Chinese Consumers' "Payment Habits"

3.2.3. Valuation Logic: P/E 15x-25x (Benchmarked Against Platform Giants)

3.3. Major Appliances & IoT (225-375B): The "High Growth" Second Profit Engine

3.3.1. Financial Portrait: The "Davis Double Play" of 113% Growth & 25.2% Gross Margin

3.3.2. Stress Test (Bear): Why Benchmark Against Haier/Gree? (Growth, Margin, Ecosystem)

3.3.3. Valuation Logic: P/S 1.5x-2.5x ("Growth Stock" vs. "Value Stock")

3.4. Automotive (2025) Base Business (224-392B): The "Proven" Disruption

3.4.1. Financial Portrait (Revised): The "Institutional Consensus" of 400K Units & 280K ASP

3.4.2. Core Advantage: S&M ≈ 0 (Lei Jun IP) & CAC ≈ 0 (Ecosystem Traffic)

3.4.3. Valuation Logic: P/S 2.0x-3.5x (Benchmarked Against Li Auto, Efficiency Premium)

Chapter 4: SOTP Deep Dive (2): The "Soon-to-Be-Realized" Option (The Option)

*(Valuation: 218.5B RMB)*

4.1. YU9 "Kunlun" Option (137B): Entering the "EREV" & "500K+" Market

4.1.1. Market Gap: The "Unmet Demand" Beyond M9/L9

4.1.2. Risk Assessment: Execution Risks of the EREV Tech Path

4.2. Phase 2 Factory Option (81.5B): From "Supply Bottleneck" to "Demand Release"

4.2.1. Logic: The "Pent-Up Demand" Proven by Used-Car Premiums

4.2.2. Risk: The Short-Term Impact of "Production Ramp Hell" on Q4/Q1 Margins

4.3. Brand Option (Unpriced): The Brand Elasticity from "Premium Custom" to "Luxury"

4.4. Chip Option (Unpriced): The "Empowerment" & "Pricing Power" Value of Xuanjie O1

Chapter 5: Bear Stress Test: Why Is the Market Stuck at 1.17T?

*(Our Summary & Response to All "Bear" Arguments)*

5.1. The Ghost of History: Why Was the 2022 Valuation Only 350B? (Response: Risks Cleared)

5.2. The Curse of Heavy Assets: Why Are Factories Not "Liabilities"? (Response: Efficiency Moat)

5.3. The Black Hole: Why "Abandon" Xuanjie O1? (Response: Strategic Pricing Power)

5.4. The PR Storm: Why No Order Collapse? (Response: Data Refutation)

5.5. The Fatal Flaw: How to Quantify "Hidden Door Handle" Risks?

5.5.1. "Osborne Effect" Test (Response: 200K Backlog Unshaken)

5.5.2. "Angry Owners" Test (Response: Controllable "Customer Retention Cost" of 3.5B)

5.6. The Macro Shadow: Is AI "Mediocre"? (Response: AI Already Monetized in HyperOS & ADAS)

Chapter 6: Core Risk Analysis (Institutions' "Wait")

6.1. Risk 1: Unprecedented "Three-Front War" Execution Risk

6.2. Risk 2: Fatal "Lei Jun Dependence" (Key Man Risk)

6.3. Risk 3: Uncontrollable Geopolitical Risk

6.4. Risk 4: Upcoming Q3 Earnings Validation Risk

Chapter 7: Conclusion & Investment Strategy

7.1. Valuation Summary: Three Scenarios (Pessimistic/Neutral/Optimistic)

7.2. Key Catalysts: November 18 (Q3 Earnings) & YU9 "Kunlun" Launch

7.3. Investment Advice: Buy When the "Cognitive Gap" Is Widest