Broker Name: CGS International
Date of Report: May 28, 2025

Xiaomi Corp: IoT and EV Synergies Drive Future Growth

Xiaomi: High Conviction Add Recommendation

CGS International maintains a high conviction “Add” rating for Xiaomi Corporation, emphasizing the company’s robust IoT business and promising EV prospects. The report anticipates strong IoT growth momentum in FY25F, fueled by innovative home appliance launches and successful overseas expansion. Xiaomi’s EV business is expected to turn profitable in the second half of 2025, driven by increased production capacity and new model launches, targeting 350,000 units delivered with an ASP of Rmb251k. The target price is raised to HK\$77.0, based on a 35x FY26F P/E ratio.

Record High Net Profit in 1Q25 Fueled by IoT Business

Xiaomi’s adjusted net profit for 1Q25 reached a record high of Rmb10.7 billion, a 65% year-over-year increase. This figure includes Rmb500 million in net losses from the EV business but still surpasses estimates by approximately 10%. This growth was propelled by strong revenues from the Internet of Things & lifestyle product (IoT) segment, characterized by robust Gross Profit Margins (GPM), and reduced losses in the electric vehicle (EV) sector. 1Q25 revenue surged 47% year-over-year to Rmb111 billion, accompanied by a strong GPM (+2.2% pt QoQ to 22.8%), attributed to:

High demand for IoT products, particularly large home appliances and wearables.
Increased premium phone sales in China.
Robust EV deliveries during the quarter.

Smartphone and IoT Business Analysis

Xiaomi’s smartphone outputs increased by 3% year-over-year in 1Q25, reaching 40.6 million units, with an improved ASP (+6% year-over-year) due to its market leadership in China, especially in the premium segment (Rmb4,000 and above). Xiaomi is expected to ship 180 million units of smartphones in 2025F, with a 7% higher ASP, supported by increased market share in China’s premium segment and continued overseas expansion, particularly in Africa and LATAM.

IoT revenue rose 59% year-over-year to Rmb9.3 billion (32% of total revenue) with a GPM of 25.2%, driven by strong demand for high-margin large home appliances, government subsidies, and increased overseas contributions. IoT is expected to sustain strong growth in FY25F, with a 17% year-over-year revenue increase, driven by continuous launches of new innovative home appliances and stronger overseas expansion with more Mi Home stores opening.

Electric Vehicle (EV) Business Analysis

Xiaomi’s EV business is expected to achieve profitability by 4Q25F. 1Q25 EV sales revenue grew 12% quarter-over-quarter to Rmb18.6 billion, driven by robust 76,000 unit deliveries (+9% QoQ) following the successful launch of its supercar SU7 Ultra. The Vehicle Profit Margin (VPM) expanded to 23.2% in 1Q25 (from 20.4% in 4Q24), narrowing the unit’s adjusted net loss to Rmb500 million (compared to Rmb700 million loss in 4Q24). The YU7 SUV launch and first delivery date were confirmed for July 2025. Supported by strong demand for the SU7 sedan, the premium YU7 SUV is expected to drive incremental EV shipments in FY25F, supporting the company’s target of 350,000 units (137,000 units in 2024).

Revised Target Price and Rationale

The “Add” recommendation is reiterated based on Xiaomi’s strong high-end phone sales and successful overseas expansion in the IoT business. The target price increases to HK\$77.0, with FY25-27F EPS forecasts raised by 4-7%, based on a 35x FY26F P/E ratio, reflecting the fast EV business profitability. Strong EV deliveries and premium phone sales are identified as re-rating catalysts. Downside risks include a slower recovery in the global smartphone market and protracted operational losses in the EV business.

Key changes in this note
FY25-27F revenue decreased by 1-2% to reflect slower global smartphone market recovery.
FY25-27F gross profit increased by 3-5% due to higher high-end phone sales.
FY25-27F EPS increased by 4-7% due to successful overseas expansion for the IoT business and EV business turning profitable.

Detailed EV Business Outlook

Xiaomi’s EV business is anticipated to see stronger deliveries in 2025F, supported by increased production capacity. The company achieved a vehicle profit margin (VPM) of 23.2% in 1Q25 with 75.9k EV deliveries, which is viewed as impressive. The company reported a Rmb10.9bn net profit and an adjusted net loss of Rmb500m for its EV business in 1Q25 (4Q24: Rmb700m net loss), with a net loss per EV of approximately Rmb6,590 (4Q24: Rmb10,043 net loss per car). With the majority of SG&A expenses allocated to R&D, production and sales costs per unit are expected to decline further, aided by increased production scale, well-established supply chains, and distribution networks.

The 2025F EV delivery forecast is set at 350k units (vs. 137k units delivered in 2024), attributed to improved production efficiency and the launch of the SU7 Ultra in February 2025, along with the upcoming YU7 SUV in July 2025F. Deliveries are projected to reach 490k units in FY26F, driven by continued production capacity expansion and efficiency improvements. The EV business is now expected to achieve a net profit of Rmb881m in FY25F, compared to the previous estimate of Rmb400m, due to stronger EV deliveries and production scale effects.

Investment View and Strategic Advantages

Xiaomi is positioned as the world’s first company to simultaneously operate both a smartphone and EV business. Omni-channel expansion into India, Europe, Latin America (LATAM), and Southeast Asia (SEA) is expected to increase market share in the global smartphone market over the next few years (2024-26F). The Mi User Interface (MIUI) saw its monthly active users (MAU) rise 10% YoY and 2% QoQ to 719m in 1Q25, driven by growth in both domestic and overseas user bases. Internet services revenue from mainland China hit a record high of Rmb6.4bn (+15% YoY, 70% of total 1Q25 Internet services income), thanks to stronger premium smartphone sales in China. Xiaomi’s EV business is expected to succeed due to strong R&D capabilities in advanced driver assistance systems (ADAS), intelligent cockpit, and EV battery technology, along with a healthy balance sheet allowing sustained investments in intelligent features and battery technology. The company continues to leverage its strong brand name, user base, and cross-country distribution channels to rapidly expand its EV business.

Potential Catalysts and Risks

Share price catalysts include:

Stronger-than-expected delivery of its EV models SU7/YU7, and continued VPM improvements.
Stronger high-end phone sales in China and Europe.
Sustained revenue growth in IoT business, especially in overseas markets.
Stable Internet services income growth of 15% and above, and GPM of 76% or more, in FY25F.

Downside risks:

Slower global smartphone market recovery.
Increased competition in China’s high-end smartphone market affecting smartphone GPM and ASP.
Wider operational losses by its EV business due to keener competition in the Rmb200k-300k price segment.

Financial Performance Highlights

FYE Dec 31 (Rmb m)	1QFY25	1QFY24	yoy % chg	4QFY24	qoq % chg	Prev. FY25F	Comments
Revenue	111,293	75,507	47.4	109,005	2.1	479,826	1Q25 revenue grew 47% yoy (+2% qoq), driven by all business segments:
Operating costs	(98,542)	(68,427)	44.0	(100,076)	(1.5)	(428,737)	smartphone (+9% yoy), IoT (+59% yoy) and Internet services (+13% yoy)，
EBITDA	12,751	7,080	80.1	8,929	42.8	51,089	also new contributions from EV business (c.17% of total revenue).
EBITDA margin (%)	11.5	9.4	N/M	8	N/M	10.6
Depn & amort.	(1,783)	(1,394)	27.9	(1,462)	22.0	(8,987)	1Q25 GPM increased by 0.5% pts yoy (+2.2% pts qoq) to 22.8%, mainly driven by
EBIT	10,968	5,686	92.9	6,815	60.9	42,102	strong GPM expansion of IoT business (+5.4% pts yoy to 25.2%) and Internet services
Interest expense	(961)	520	(284.9)	(489)	96.6	(918)	(+2.% pts yoy to 76.9%), while the smartphone GPM fell 2.4% pts yoy to 12.4% due to
Interest & invt inc	271	88	207.9	506	(46.5)	200	higher component costs.
Fair value changes on investments	2,827	(1,226)	330.5	655	331.8	3,111	1Q25 R&D expenses rose by 30% yoy to Rmb6.7bn, primarily due to
Share of gain/(loss) of investments	64	155	(59.1)	(3)	2,479.4	436	increased investment in EV-related businesses and AI development.
Pretax profit	13,168	5,222	152.1	7,484	75.9	41,384
Tax	(2,275)	(1,049)	116.9	(412)	451.7	(6,811)
Tax rate (%)	17.3	20.1	N/M	6	N/M	16.5
Minority interests	31.6	8.8	256.8	(129)	124.5	(117)	1Q25 adjusted net profit grew 65% yoy (+57% qoq) to Rmb10.68bn, c. 10% above
Net profit	10,924	4,182	161.2	6,943	57.3	34,456	our estimates, thanks to the revenue contributions from all business segments,
Adjusted net profit #	10,676	6,491	64.5	8,316	28.4	38,345	especially the stronger-than-expected premium phone sales in Chian and significant
EPS (Rmb cts)	43.76	16.70	162.0	27.85	57.1	138.78	revenue and GPM growth in the IoT business, as well as the narrowed operational
Adjusted EPS # (Rmb cts)	42.77	25.92	65.0	33.36	28.2	154.44	losses in EV business (Rmb0.5bn net loss in 1Q25 vs. Rmb0.7bn net loss in 4Q24).

# Adjusted net profit (non-IFRS measure) excluded fair value changes on investments, change of value of financial liabilities to fund investors, share-based compensations, amortisation, and income tax effects

EV Revenue and Profit Margins

1Q25 EV sales revenue: Grew 12% QoQ to Rmb18.6bn
EV deliveries: 76k units (+9% QoQ)
Vehicle Profit Margin (VPM): Expanded to 23.2% (from 20.4% in 4Q24)
Adjusted net loss: Narrowed to Rmb500m (vs. Rmb700m loss in 4Q24)

Operational Metrics and Forecasts

Operational metrics (FYE 31 Dec)	FY18	FY19	FY20	FY21	FY22	FY23	1Q24	2Q24	3Q24	4Q24	FY24	1Q25	FY25F	FY26F	FY27F
Revenue breakdown by segment (Rmb m)	174,915	205,839	245,866	328,309	280,044	270,970	75,507	88,888	92,507	109,005	365,906	111,293	469,075	568,339	665,706
– Smartphone	113,800	122,095	152,191	208,869	167,217	157,461	46,480	46,516	47,452	51,311	191,759	50,612	219,186	255,717	288,641
– IoT and lifestyle products	43,817	62,088	67,411	84,980	79,795	80,108	20,374	26,760	26,102	30,868	104,104	32,339	121,900	141,779	158,657
– Internet-based services	15,956	19,842	23,755	28,212	28,321	30,108	8,048	8,266	8,463	9,339	34,115	9,076	39,465	44,593	50,436
– Advertising services	10,100	10,654	12,700	18,100	18,500	20,500	5,500	6,000	6,200	7,000	24,700	6,600	28,405	32,666	37,566
– Gaming	n.a.	3,198	4,200	4,000	4,100	4,400	1,200	1,000	1,100	1,232	4,532	1,200	4,759	4,997	5,246
– Value added services	5,856	5,989	6,855	6,112	5,721	5,208	1,348	1,266	1,163	1,951	5,728	1,276	6,301	6,931	7,624
– Smart EV and other new initiates				6,369	9,697	16,662	32,754	18,580	85,350	123,075	164,798
Gross profit margin by segment (%)	12.7%	13.9%	14.9%	17.7%	17.0%	21.2%	22.3%	20.7%	20.4%	20.6%	20.9%	22.8%	22.0%	22.0%	22.0%
– Smartphone	6.2%	7.2%	8.7%	11.9%	9.0%	14.6%	14.8%	12.1%	11.7%	12.0%	12.6%	12.4%	11.8%	12.5%	12.5%
– IoT and lifestyle products	10.3%	11.2%	12.8%	13.1%	14.4%	16.3%	19.9%	19.7%	20.8%	20.5%	20.3%	25.2%	24.0%	23.0%	23.0%
– Internet-based services (MIUI O/S)	64.4%	64.7%	61.6%	74.1%	71.8%	74.2%	74.2%	78.3%	77.5%	76.5%	76.6%	76.9%	76.8%	76.8%	76.8%
– Smart EV and other new initiates				15.4%	17.1%	20.4%	18.5%	23.2%	22.0%	22.0%	22.0%
Smartphone unit sales (million units)	118.7	124.6	146.4	190.3	150.5	145.6	40.6	40.8	43.1	44.0	168.5	41.8	180.0	200.0	215.0
– China	52.7	38.4	36.9	50.5	40.9	38.0	9.5	10.0	0.0	20.5	40.0	13.3	42.0	44.0	44.0
– Overseas	66.0	86.2	109.5	139.8	109.6	107.6	31.1	30.8	43.1	23.5	128.5	28.5	138.0	156.0	171.0
– ASP (Rmb/ unit)	959	980	1,040	1,098	1,111	1,081	1,145	1,152	1,101	1,166	1,138	1,211	1,218	1,279	1,343
Internet-based services
– MAUs (million)	233	310	396	509	582	641	658	676	686	702	702	719	773	850	935
– ARPU (Rmb)	82.5	75.5	67.3	62.3	51.9	49.2	49.6	49.6	12.4	13.5	50.8	51.1	53.5	55.0	56.5
– Connected devices (million units)	151	235	325	434	589	740	786	822	861	888	888	944	1039	1209	1353
Smart EV business
– Unit sales						27,307	39,790	69,697	136,854	75,869	350,000	490,000	637,000
– ASP (Rmb 000‘/ unit)						229	239	234	234	238	244	251	259

Note: MAU refers to monthly average user; ARPU refers to average revenue per user

Smartphone Market Share Analysis

China: Xiaomi is ranked top in China in terms of smartphone market share (units sold in 1Q25).
India: Xiaomi is ranked third in India in terms of smartphone market share (units sold in 1Q25).
Europe: Xiaomi is ranked third in Europe in terms of smartphone market share (units sold in 1Q25).
Latin America: Xiaomi is ranked third in Latin America in terms of smartphone market share (units sold in 1Q25).

Earnings Revisions

CATL-H (3750 HK) Initiated with Add Rating: Global Expansion on Track (May 2025)

Singapore Stock Market Strategy: Top Picks for EMDP and Sustainable Growth (2025)

FYE Dec 31 (Rmb m)	FY25F			FY26F			FY27F
	Old	New	% chg	Old	New	% chg	Old	New	% chg
Total revenue	479,826	469,075	-2%	569,877	568,339	0%	672,190	665,706	-1%
Gross profit	100,001	103,223	3%	119,195	124,915	5%	140,589	146,579	4%
Gross margin (%)	20.8%	22.0%	1.2% pts	20.9%	22.0%	1.1% pts	20.9%	22.0%	1.1% pts
EBITDA	43,322	46,393	7%	57,009	60,211	6%	71,122	74,306	4%
EBITDA margin (%)	9.0%	9.9%	0.9% pts	10.0%	10.6%	0.6% pts	10.6%	11.2%	0.6% pts
Net profit	34,456	36,956	7%	46,461	49,069	6%	59,269	61,937	5%
EPS (Rmb)	1.53	1.63	7%	1.99	2.10	6%	2.52	2.62	4%

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