1Q24 Results Exceed Our Expectations
The company announced 1Q24 results: revenue of 75.507 billion yuan, up 27.0% year on year, 2.5% higher than our expectations; adjusted net profit of 6.491 billion yuan, up 100.8% year on year, 17.6% higher than our expectations, mainly due to mobile phone gross margin and Internet business revenue exceeding expectations.
Development trends
The share of smartphones in emerging markets grew strongly in 1Q24, and mobile phone gross margin showed impressive year-on-year performance. In 1Q24, Xiaomi's global smartphone shipments increased 33.7% year on year to 40.6 million units, exceeding the 10% growth rate of the global market; according to Canalys, Xiaomi's market share increased by 3ppt to 13.8% year on year, ranking third in the world. In particular, the company performed well in emerging markets. The market share in the Middle East/Latin America/Africa/Southeast Asia increased by 7.1pp/2.0pp/4.4pp/4.5ppt, respectively. In terms of ASP, 1Q24 mobile phone ASP decreased 0.6% year over year to 1,144.7 yuan, and remained stable. Overall shipment volume and ASP, 1Q24's mobile phone business revenue increased 32.9% year-on-year to 46.480 billion yuan. Considering the rise in the price of components such as storage, the gross margin of 1Q24 mobile phones increased 3.6 ppt year over year and decreased by 1.6 ppt to 14.8% month on month. We believe it remains at a good level, showing strong cost control capabilities.
Strong sales of major appliances have driven the rapid growth of IoT, and IoT gross margin and Internet business revenue have reached record highs. 1Q24's IoT revenue increased 21.0% year over year to $20.374 billion, mainly due to strong revenue growth in tablets (YoY +70.5%) /large appliances (YoY +46.0%) and wearable products. IoT gross margin increased 4.1ppt/month-on-month increase of 5.9ppt to 19.9%, mainly due to high-margin products such as tablets/wearables, which accounted for an increase in revenue share. In terms of the Internet service business, 1Q24 revenue increased 14.5% year over year to 8.048 billion yuan, of which overseas Internet service revenue increased 39.0% year over year to 2.5 billion yuan, a record high.
The number of Xiaomi SU7 car locks exceeds 80,000 units, and the entire ecological layout of people and cars is accelerating. The company said that as of April 30, the number of Xiaomi SU7 locks had reached 8,8063 units, and order demand was strong. At the same time, the company has strengthened its automobile sales network and plans to have 219 stores and 143 service centers by the end of 2024. We are optimistic that the company will achieve the annual delivery target of 100,000 cars, and we are optimistic about the car growth space under the “whole ecosystem of people and cars” strategy.
Profit forecasting and valuation
We have kept our original profit forecast unchanged. The current stock price corresponds to 25.8 times/24.4 times the 2024/2025 adjusted net profit price-earnings ratio. Maintaining an outperforming industry rating and a target price of HK$23.0 (SOTP valuation), corresponds to an adjusted net profit price-earnings ratio of 29.6 times/27.9 times 2024/2025, with 21.4% upside compared to the current stock price.
risks
The global macroeconomic economy affects demand for smart phones and IoT products, and smart car sales are lower than expected.