Financial Services Association, April 3 (Editor Liu Rui) Since March 28$XIAOMI-W (01810.HK)$After its first model, the Xiaomi SU7, was officially launched, it attracted attention at home and abroad. On the morning of April 3, at the first delivery ceremony of the Xiaomi SU7, Lei Jun said that in just a few days, the Xiaomi SU7 had more than 100,000 orders, and the number of locked orders had already exceeded 40,000.

The popularity of the Xiaomi SU7 has clearly attracted the attention of overseas capital markets. In recent days, many Wall Street investment banks have released research reports on the Xiaomi SU7, and they have all expressed their optimism about the Xiaomi SU7 products and the popular planned performance.

However, although many investment banks raised the target price of the Xiaomi Group (01810.HK) Hong Kong stock, many investment banks questioned the profitability and sustainability of demand in the Xiaomi auto business. Meanwhile, Nomura Securities also chose to lower its target price for Xiaomi and raised concerns about the risk of the overall weakening of the electric vehicle market.

On the first day of resuming trading on Tuesday after a two-day market closure, Xiaomi once surged by nearly 14%, but then regained gains. In the end, the market closed with an increase of only 9%. On Wednesday, Xiaomi's stock price fell further by 4.42%. The trend in Xiaomi's stock price may also confirm the market's confused mood.

The popularity of SU7's initial pre-orders brought a big surprise to Wall Street

For many Wall Street investment banks, the initial scheduled performance of the Xiaomi SU7 was amazing, and it also received common “praise” from many investment banks.

According to information on Xiaomi's Weibo account, the number of pre-orders for the SU7 car exceeded 10,000 units just four minutes after it was released, breaking 20,000 vehicles in seven minutes, reaching 50,000 units in 27 minutes, and the number of orders reached 89,000 within 24 hours of launch.

J.P. Morgan Chase specifically emphasized in the report that the pricing of the Xiaomi SU7 is very attractive and the configuration is competitive, which enabled the SU7 sales momentum to start strong: 50,000 pre-orders were obtained in just 27 minutes. In contrast, it took 40 days for Kyokkrypton 007 to obtain the same number of pre-orders.

Goldman Sachs also wrote in the report that the first launch of the Xiaomi SU7 is now far better than expected, and orders are unusually strong. For Goldman Sachs, this is a “surprise”.

HSBC Global Research also mentioned that Xiaomi set a price of 216,000 yuan, lower than the brokerage's estimate of 260,000 yuan, which will bring strong demand for the car.

Nomura, on the other hand, pointed out in the report that the number of reservations for the Xiaomi SU7 was higher than expected, and the company's electric vehicle market share is expected to grow rapidly.

Are Xiaomi's car building prospects really bright?

However, despite the impressive performance of the initial launch schedule, Wall Street has mixed opinions on the future development prospects of Xiaomi's electric vehicle business.

HSBC is clearly one of the most optimistic investment banks in the world. HSBC Global said that after seeing the popular reservation performance of the Xiaomi SU7, the company raised its SU7 delivery forecast by 40% and 97%, respectively, which means it expects the Xiaomi SU7 to deliver 70,000 units and 118,000 units in 2024 and 2025, respectively.

Considering the first SUV that Xiaomi plans to launch at the end of this year, HSBC also raised its forecast for Xiaomi's total electric vehicle delivery in 2024/25/26 by 40%, 53%, and 43%, respectively, to 70,000, 168,000, and 252,000 units, respectively.

HSBC also raised Xiaomi's 2024-26 net profit forecast by 14% -19%, reflecting an increase in the forecast for Xiaomi's electric vehicle delivery volume and a more positive outlook on its gross margin. The broker maintained Xiaomi's buy rating, and the target price was raised from HK$20.2 to HK$21.8.

Goldman Sachs mentioned that Xiaomi launched three different versions of the SU7, which means that the product structure is more balanced and may bring higher than expected sales volume and average sales price. As a result, Goldman Sachs raised the target price for the Xiaomi-W from HK$18.9 to HK$20, maintaining the “buy” rating.

Building cars may drag down Xiaomi's profitability

Comparatively speaking, there are also investment banks that are less optimistic.

J.P. Morgan notes that Xiaomi's electric vehicle business is expected to lose money in the first few years, thereby dragging down the profitability of the Xiaomi Group. This expectation is actually not surprising, because even Lei Jun himself confessed at the SU7 press conference that the current pricing is a loss of money.

As domestic car companies compete more and more fiercely, from giants BYD and Tesla to car company rookie NIO Auto, they have now launched price wars to seize share in an increasingly competitive market. For Xiaomi, this obviously also means more pressure to sell.

J.P. Morgan said investors will continue to pay attention to the company's electric vehicle sales momentum and electric vehicle development strategy. Xiaomo reiterated its purchase rating for the Xiaomi-W, and the target price remained unchanged at HK$21.

Bank of America Securities, on the other hand, commented that although the Xiaomi SU7 has attracted good demand due to its price advantage, Bank of America is cautious about the sustainability of demand and high operating costs for the SU7.

Bank of America specifically mentioned that there are already hundreds of brands in the domestic electric vehicle market, which means that Xiaomi is expected to allocate more resources for sales and marketing to promote its electric vehicles while continuing to invest in the R&D of the second model, which will put pressure on the profitability of its core smartphone business.

As a result, although the Bank of America raised Xiaomi's target price from HK$15.7 to HK$16.2, it maintained its neutral rating. The brokerage believes that after SU7 achieves satisfactory order performance, investors will begin to pay attention to the valuation of the company's electric vehicle business.

Risk of overall weakness in the electric vehicle market

In contrast, Nomura Securities is probably the party most pessimistic about Xiaomi's stock price outlook. Although the investment bank is also optimistic about the market performance of the Xiaomi SU7, it is not optimistic about Xiaomi's stock price prospects as a result.

Nomura wanted to hold back in the report. First, he pointed out that the number of reservations for the Xiaomi SU7 was higher than expected, and the company's electric vehicle market share is expected to grow rapidly. Xiaomi also demonstrated its ecosystem integration capabilities through HyperOS, making it a strong competitor to Huawei. These factors could have a positive impact on Xiaomi's stock price in the short term.

However, the report also points out that the electric vehicle market as a whole is currently facing the dilemma of declining valuations. Market sentiment is weak and there is still uncertainty, all of which may have an impact on Xiaomi's business performance.

As a result, the broker lowered Xiaomi's target price from HK$18.6 to HK$17 and rated it as neutral.

Editor/Somer