Xiaomi will report its 4Q23 results in late March. We estimate 4Q revenue will deliver +10% YoY/+3% QoQ growth, and adj. net income will climb 180% YoY to RMB 4,096mn, mainly driven by strong smartphone sales and resilient internet revenue. We think 4Q23E results will be largely in-line with market expectations given outstanding sales of Xiaomi 14 and Double 11 sales event. Overall, we expect Xiaomi's smartphone sales will continue to improve with market recovery and continued share gains, and we are positive on EV product launch in 2Q24E and shipment ramp-up into 2H24E. We slightly trimmed our FY23-25E EPS by 1-6% for weaker 4Q23E GPM and EV business expenses. Our new TP of HK$ 19.54 is based on the same 24x FY24E P/E. Maintain BUY. Catalysts include EV product launch and smartphone market share gain.

Smartphone: strong shipment recovery with QoQ ASP hike. Xiaomi's

4Q23 shipment increased 23% YoY (vs. +8% YoY for industry) with market share of 13%, based on Canalys. Xiaomi's strong shipment recovery was mainly boosted by the outstanding Xiaomi 14 model sales in 4Q23. In terms of ASP, we expect 4Q23E ASP to increase 5.4% QoQ to RMB 1,050 due to stronger sales of high-end model. However, we think smartphone GPM will trend down to 16.0% due to gradual pick-up of BOM costs and promotion of Double 11 sales events. Looking into FY24E, we are positive on market share gain momentum (esp. overseas), and we expect Xiaomi's global shipment to rebound 6%/3% YoY to 155mn/160mn units in FY24/25E.

AIoT/internet: continued strength in internet revenue but weaker AIoT

product sales. We estimate AIoT/Internet revenue will deliver -0.8%/+10.1% YoY in 4Q23E (vs +8.5%/+9.7% YoY in 3Q23). We expect AIoT's QoQ sales to decline, attributable to weak season for TV/air conditioner/refrigerator/ washing machine. We also expect AIoT GPM to trend down to 13.5%, due to higher BOM costs and product mix shift. For internet business, we think continued growth in 4Q23 was supported by strong advertising revenue.

Overall, our FY23/24E adj. EPS is 4%/21% above consensus due to our positive view on higher GPM and better expense control.

Maintain BUY with new TP of HK$ 19.54; Positive on smartphone market recovery and EV product launch in 2Q24E. We slightly trimmed our FY23-

25E EPS by 1-6% for weaker 4Q23E GPM and expense concerns over EV business. Our new TP of HK$ 19.54 is based on the same 24x FY24E P/E.

Trading at 15.5x FY24E P/E, we think the valuation is attractive (vs 23x 5- year avg. P/E). Maintain BUY.