Broker: UOB Kay Hian
Date of Report: August 7, 2025

Xiaomi Corp (1810 HK): Robust Growth Forecasted for 2Q25 as IoT, EV, and Internet Services Lead the Charge

Executive Summary: BUY Rating Maintained with Strong Upside Potential

UOB Kay Hian maintains a BUY rating on Xiaomi Corporation, projecting robust growth for the second quarter of 2025. Driven by the Internet of Things (IoT), electric vehicle (EV), and internet services segments, Xiaomi is expected to demonstrate a significant surge in revenue and adjusted net profit, despite margin pressures in its smartphone business. The target price is slightly trimmed to HK\$69.20, reflecting updated segment outlooks and share dilution.

Stock Overview and Key Data

• Current Share Price: HK\$54.00
• Target Price: HK\$69.20 (Upside: 28.1%)
• Market Cap: HK\$1,390,416 million (US\$204,473 million)
• Shares Issued: 25,748 million
• GICS Sector: Communications Equipment
• 52-Week Range: HK\$61.45 / HK\$15.58
• Major Shareholders: Smart Mobile Holdings Ltd (8.56%), Lin Bin (2.09%)
• FY25 NAV/Share: RMB 9.72
• FY25 Net Cash/Share: RMB 0.85
• 3-Month Avg Daily Turnover: US\$1,057.5 million

2Q25 Earnings Preview: Strong Revenue, Adjusted Profit Jumps Over 70%

Xiaomi is poised to report 2Q25 results later this month, with revenue projected to climb 28.4% year-on-year to RMB 114.2 billion. This growth will be underpinned by continued momentum in IoT, EV, and internet services. Despite sequential margin contraction—mainly due to rising memory costs in smartphones and a shift in IoT product mix—adjusted net profit is expected to soar 71.4% year-on-year to RMB 10.6 billion.

Segment Performance Analysis

Smartphone Business: Market Share Gains Amid Margin Pressure

• Global Smartphone Shipments: 42.4 million units (flat YoY); 15% market share (flat YoY).
• China Smartphone Shipments: 10.4 million units (+3% YoY); 15% market share (+1ppt YoY).
• ASP: Expected at ~RMB 1,080 (similar to 2Q24, down from 1Q25’s RMB 1,211), reflecting promotional activity such as the 618 sales festival.
• Revenue Forecast: RMB 45.8 billion (-1.6% YoY).
• Segment Margin: 11.5% (-0.6ppt YoY, -0.9ppt QoQ).
• Rising DDR4 memory prices are expected to impact margins. Despite volume resilience, revenue and profitability are pressured by lower ASPs and cost inflation.

IoT and Lifestyle Products: Tablets and Wearables Drive Growth

• Revenue Forecast: RMB 36.1 billion (+35% YoY).
• Segment Margin: 22.5% (+2.8ppt YoY, -2.7ppt QoQ).
• Growth is led by tablets and wearables, while large home appliances show signs of slowdown.

Internet Services: Steady Growth and High Margins

• Revenue Forecast: RMB 9.3 billion (+12.2% YoY).
• Segment Margin: 77.0% (-1.3ppt YoY, +0.1ppt QoQ).
• Internet services remain a dependable profit engine, maintaining sector-leading margins.

EV Business: SU7 Ultra Deliveries Propel ASP and Margin Expansion

• 2Q25 SU7 Deliveries: Over 81,000 units, outpacing the previous quarter.
• Increased SU7 Ultra deliveries have lifted ASP and margins.
• Revenue Forecast: RMB 22.2 billion (+19.4% QoQ).
• Gross Margin: 24.5% (+1.3ppt QoQ).
• These figures exclude the YU7 SUV model, with deliveries commencing only from July 6, 2025.

Financial Highlights and Key Metrics

Forecast Revisions and Key Estimate Changes

• 2025 earnings forecast trimmed by 1.0% to RMB 40.6 billion.
• 2026/2027 earnings forecasts raised by 2.4%/2.5% to RMB 53.2 billion and RMB 60.7 billion, respectively.
• Revenue assumptions are higher for IoT and EV, but lower for smartphones. Margin assumptions are higher for EV but lower for smartphones and IoT. Opex assumptions are slightly higher.

Valuation Breakdown: Core and EV Segments

• Target Price: HK\$69.20
• Core Business: HK\$49.20 (30x 2025F PE, 1SD above 5-year historical mean)
• EV Business: HK\$20.00 (10-year DCF basis, 9.6% WACC, implies 5.5x 2025F P/S)
• EV valuation raised to reflect improving sales; core business valuation slightly lowered due to softer smartphone sales and margins. Dilution from earlier share placement is factored in.

Profit & Loss, Balance Sheet, and Cash Flow Overview

Key Profitability and Growth Metrics

• Gross Margin (2025F): 22.9%
• Pre-tax Margin (2025F): 10.3%
• Net Margin (2025F): 8.7%
• ROA (2025F): 9.7%
• Turnover Growth (2025F): 27.4%
• EBITDA Growth (2025F): 39.3%
• Net Profit Growth (2025F): 71.7%
• EPS Growth (2025F): 42.7%

Conclusion: Xiaomi Positioned for Multi-Segment Growth

Xiaomi continues to outperform peers in its domestic smartphone market, even as global shipment volumes remain flat. The company’s strength in IoT, robust EV momentum led by SU7 Ultra, and stable internet services revenue all underpin a compelling growth narrative. Despite rising costs and margin pressure in smartphones, the diversified business model and aggressive innovation in IoT and EV segments position Xiaomi for sustained financial outperformance. UOB Kay Hian maintains a constructive outlook, reiterating a BUY recommendation with a revised target price of HK\$69.20.