Dehydrated Research Report | Is Xiaomi Expensive?
Core Viewpoints
This report focuses on addressing the following core issues:
What are the core growth advantages of Xiaomi Group?
What are the advantages of Xiaomi Group in AI deployment? How does Xiaomi Group leverage AI to empower hardware products?
What is the market space estimation for Xiaomi Group's smartphones?
How to view the future sales of Xiaomi Group's vehicles?
How is the valuation?
Xiaomi Group: AI-empowered development of the entire ecosystem of people, vehicles, and homes, committed to becoming a new generation of hard-core technology leader
Xiaomi Group is a consumer electronics and smart manufacturing company centered on smartphones and IoT platforms. Based on the concept of "everything interconnected," Xiaomi Group continues to launch multiple AIoT products and will expand into the new energy vehicle sector in 2024. Currently, Xiaomi Group is actively laying out its AI strategy, with its large language model breaking through with lightweight and local deployment, achieving interconnection between devices and scenarios through cloud integration, empowering the "people, vehicles, and homes" ecosystem strategy. By the end of 2024, Xiaomi Group's large language model has achieved cloud-edge-end integration, with parameter sizes ranging from a minimum of 0.3B to a maximum of 30B. We believe that Xiaomi Group has a rich layout in consumer hardware, and as it enters more consumer goods industries and invests in AI, it may have a greater chance of triggering rigid AI consumer application scenarios compared to its peers. We are optimistic about the future development of Xiaomi Group's AI-related business.
Mobile Business: Solidifying the foundation and continuously deepening the high-end strategy
As the foundation of Xiaomi Group, the mobile business has seen overall performance recover alongside market recovery. We believe that the global smartphone market shipment volume has now basically entered a stable development phase, with Xiaomi Group ranking among the top three in global market share in 2023. From a market perspective, China's share of global smartphone shipments is limited, and Xiaomi Group's smartphone sales growth will rely more on expanding overseas markets. Additionally, as Xiaomi Group currently leads in smartphone shipment volume, future growth may rely more on increasing the proportion of high-end products to drive smartphone ASP and profit growth. In Q3 2024, Xiaomi Group's single-quarter smartphone revenue was approximately 47.5 billion yuan, a year-on-year increase of 14%, marking the fourth consecutive quarter of positive year-on-year growth in single-quarter smartphone revenue since Q4 2023. At the same time, in terms of high-end strategy, as Xiaomi Group's high-end methodology gradually iterates, the enhancement of high-end product capabilities and the accumulation of user perception have led to positive changes in the competitive landscape of high-end smartphones. We expect that by 2026, Xiaomi Group's smartphone revenue will be approximately 207.8 billion yuan.
IoT and Consumer Products Business: Greater online competitive advantage, with home appliance exports expected to further boost performance in 2025
Xiaomi Group has a wide product layout covering wearables, tablets/PCs, large home appliances, and various small appliances. Xiaomi Group has a relative advantage in smartphone peripheral products, having achieved global leadership in shipments in wearables and tablets. However, in the traditional home appliance market, Xiaomi Group's share still lags behind leading companies, primarily ranking high in online sales share We believe that Xiaomi Group's current products mainly rely on online sales in the domestic market, and future expansion of market share in the domestic market will depend more on offline channels. Moreover, since offline channels are relatively more high-end than online, if Xiaomi Group successfully expands in offline channels, it can further optimize product profitability. In addition, to expand growth space, Xiaomi Group is planning to actively layout overseas markets, with some products expected to be sold in the Southeast Asian market by 2025. We estimate that in 2026, the company's AIoT revenue will be approximately 116.2 billion yuan.
Automotive Business: The SU 7 series is expected to deliver over 130,000 units in 2024, optimistic about Xiaomi Group's subsequent growth in the automotive sector
The penetration rate of new energy vehicles in the automotive market is increasing year by year, which is the future development trend of the automotive market, and the recognition of Chinese brands is improving. We believe that current new energy vehicle products are becoming homogenized, and product definition and customer appeal may become important factors determining the final landscape. Xiaomi Group has launched its first new energy vehicle, the SU 7, in 2024, and its second new energy vehicle, the YU 7, is expected to be launched in 2025. With the enrichment of Xiaomi Group's automotive product line, Xiaomi Group is expected to better cover more consumer groups, driving growth in automotive sales. In the third quarter of 2024, Xiaomi Group's smart electric vehicle revenue was approximately 9.5 billion yuan, with a gross margin of about 17%, surpassing some peers. In 2024, Xiaomi Group is expected to deliver over 135,000 vehicles, with a target of delivering 300,000 vehicles in 2025. We estimate that in 2026, Xiaomi Group's automotive revenue will be approximately 177.4 billion yuan.
Internet Business: User scale continues to expand, driving overall revenue growth
Xiaomi Group's internet revenue mainly relies on advertising, gaming, and other income. As the main source of profit for Xiaomi Group, the internet benefits from the increase in global monthly active users, with business revenue maintaining stable growth from 2022 to the first three quarters of 2024. We believe that with the improvement of Xiaomi Group's hardware products, coupled with the increase in high-end smartphone shipments, Xiaomi Group's internet performance is expected to further grow. In the third quarter of 2024, Xiaomi Group's internet business revenue reached 8.5 billion yuan, setting a new historical high. Among Xiaomi Group's internet revenue, advertising is the main source, with the proportion of advertising revenue consistently maintaining above 60% since 2021. Currently, the company is continuously promoting its globalization strategy, expanding commercial partnerships while enhancing its content self-distribution and monetization capabilities. From 2021 to the first three quarters of 2024, the proportion of Xiaomi Group's internet revenue from overseas markets has been continuously increasing. We estimate that in 2026, Xiaomi Group's internet revenue will be approximately 39.4 billion yuan.
Profit Forecast and Investment Rating
We (Guohai) expect the company's revenue for 2024-2026 to be 354.1/461.5/543.6 billion yuan, with adjusted net profits of 24.2/43.0/52.4 billion yuan, corresponding to P/E ratios of 46.9x/26.4x/21.6x. The average P/E ratio of comparable companies in the industry for 2024-2026 is 26.2x/22.1x/19.0x We believe that Xiaomi Group, as a global leading smartphone manufacturer, has strong brand influence and can enjoy a certain valuation premium. The company is actively promoting its all-ecosystem strategy for people, vehicles, and homes. We are optimistic about the company's future overseas expansion and high-end development. This is our initial coverage, and we give it an "Overweight" rating.
We (Tianfeng) are optimistic about Xiaomi's future, driven by brand upgrades and accelerated overseas expansion, which is expected to continue increasing its smartphone market share. With the main smartphone business driving growth, AIOT and internet revenues are expected to accelerate. The automotive business is likely to continue the hot sales trend of the SU7 and accelerate its overseas expansion on a global path. We expect Xiaomi's total revenue from 2024 to 2026 to be 353.4 billion, 439.2 billion, and 512.4 billion yuan, respectively, with electric vehicle and innovative business revenues of 29 billion, 72.3 billion, and 111.6 billion yuan, and adjusted net profit attributable to the parent company of 26.1 billion, 30.7 billion, and 36.1 billion yuan.
Referring to the average 28X PE of smartphone manufacturers such as Apple and Transsion in 2025, and considering the uniqueness of Xiaomi's "triathlon" business model and the value discovery potential of its entire business ecosystem in the AI era, we give Xiaomi's core business a valuation of 27X PE, corresponding to a market value of 828.9 billion yuan in 2025. Additionally, the average PS of competitors in the automotive business is 4.2X in 2025. Considering the level of 1-1.5X PS for domestic new forces, we give Xiaomi's automotive business a 3X PS valuation, corresponding to a market value of 216.9 billion yuan, totaling 1,045.8 billion yuan, corresponding to a stock price of 41.7 yuan.
Risk Warning
Risks of slow recovery in overseas markets affected by macroeconomic conditions; risks of fluctuations in international trade; risks of intensified industry competition; risks of automotive sales falling short of expectations; risks of technology application effects not meeting expectations; risks of user attrition; risks of potential valuation corrections; risks of discrepancies between statistical estimates and actual conditions.
(Guohai + Tianfeng)
$XIAOMI-W(01810.HK)
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