HSBC Research maintains a "Buy" rating on Xiaomi, with management reiterating the full-year gross margin target of 8% for smartphones this year

HSBC Global Research published a report stating that at the recent Global Investment Summit, the management of Xiaomi Group (01810.HK) reiterated its goal of achieving an annual gross margin of 8% for its smartphone business by 2026 and revealed that it has strategic memory inventory prepared. However, management acknowledged that achieving this goal will be challenging due to the expectation that DRAM and NAND prices will continue to rise until the fourth quarter of 2026.

In terms of artificial intelligence (AI) strategy, management positions AI investment as a hardware enabler rather than a revenue driver. The company has an internal team of about 75 researchers working on physical AI pathways and embedding proprietary vertical models within the smart home ecosystem. Management believes that a complete AI smartphone experience will still be difficult to achieve by 2026, but Xiaomi has a closed-loop system with proprietary hardware, operating systems, models, and first-party data, which will create lasting structural advantages.

HSBC Research maintains a "Buy" rating on Xiaomi, with a target price unchanged at HKD 53.4