Rate Of ReturnIs Xiaomi worth 1 trillion? — Xiaomi valuation calculation
In 2025, $XIAOMI-W(01810.HK) wrote an epic comeback story in the capital markets. Its stock price soared from a low of HK$8 in 2022 to a peak of HK$58.7, with its market cap surpassing HK$1.4 trillion, a rise of over 570%, making it the new darling of Hong Kong's tech stocks in the "trillion club." The Xiaomi that was once snubbed by the capital markets has now become a hot favorite. I've held Xiaomi for 5 years, and now I can finally hold my head high. Recently, many friends have been asking me whether it's still a good time to buy Xiaomi. Here, I'll do a simple valuation calculation to see if Xiaomi is really worth HK$1 trillion!
First, even when Xiaomi's stock price hadn't risen yet, I often heard the argument that Apple's P/E ratio was only around 30, while Xiaomi's was even higher, implying Xiaomi was overvalued. Some influencers with tens of thousands of followers also echoed this view. My advice? Unfollow these influencers ASAP—they can't even do basic math. As we all know, Xiaomi's business is divided into four segments: smartphones, IoT, internet services, and electric vehicles. The first three can be considered traditional businesses, which are steadily profitable, while the EV segment is currently loss-making. Take 2023 as an example: EV revenue was zero, but related expenses totaled HK$6.6 billion. So, when valuing Xiaomi, we must add back this HK$6.6 billion to get the true valuation of its traditional businesses.
1. Valuation of Traditional Businesses
Let's cut to the chase. For Q4 2024, we're using CICC's forecasted data. Xiaomi's traditional businesses generated revenue of HK$330.3 billion, with adjusted net profit (adding back EV losses) of HK$32.1 billion. The table below also shows that Xiaomi's traditional businesses grew over 20% in 2024. The launch of the Xiaomi SU7 has positively stimulated its traditional businesses, and its performance in home appliances is also improving. So, a 15%-20% growth rate next year is still achievable.
Assuming a 15% growth in both revenue and net profit for traditional businesses in 2025, and applying P/E multiples of 15-30x, the corresponding market cap for traditional businesses is shown in the table below. Given Xiaomi's ~20% growth rate in traditional businesses, a PEG of 1 suggests a 20x P/E is relatively reasonable, so the red figures are more realistic.
2. Valuation of EV Business
There are two ways to value the EV business: price-to-sales (P/S) ratio or estimating future net profit and applying a P/E ratio. The latter is harder, so we'll use P/S here, as Xiaomi's car sales targets make revenue easier to estimate.
First, let's look at the P/S ratios of major EV players. Most are around 1.5x, while Tesla, with its AI narrative, commands a much higher multiple. Li Auto and BYD, being pure EV plays, have limited upside. Xiaomi, with its humanoid robots, has more AI-driven potential, so I think it deserves a slightly higher valuation.
Using P/S multiples of 1.5-3x, the valuation is as follows:
3. Xiaomi's Total Valuation
I believe a 20x P/E for traditional businesses and 2-3x P/S for EVs are reasonable. By 2026, when the EV business stabilizes, we can switch to P/E. Using 20x P/E for traditional businesses and 2-3x P/S for EVs, Xiaomi's valuation for the next 3 years is shown below.
Of course, this assumes everything goes as planned, with no major surprises. So far, the news has been positive for both traditional and EV businesses. Xiaomi's current market cap is HK$1.36 trillion, exceeding my 2026 estimate of 20x P/E + 2x P/S. This is partly because my estimates are conservative, especially for EVs, and partly due to market sentiment and more optimistic forecasts. Either way, post-hype, Xiaomi's stock will be driven by fundamentals. Starting from Q4 2024, Xiaomi's quarterly revenue will likely surpass HK$100 billion, entering the "HK$100 billion quarterly revenue club." The day Xiaomi's annual net profit hits HK$100 billion, its stock price will be in triple digits. Patience is key—what can't be done in a year might be possible in 10!
Disclaimer: This is my personal view, not investment advice! Original content is hard work—your likes and follows are the best support!
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