2024Q1 revenue grew rapidly, and adjusted net profit exceeded expectations. 2024Q1 Xiaomi Group's revenue is 75.5 billion yuan, yoy +27%. By business, smartphone, IoT and consumer goods, and internet business revenue was 465/204/8 billion yuan, yoy +33%/+21%/+14.5%. The adjusted net profit of 2024Q1 was 6.5 billion yuan, yoy +101%. The adjusted net profit of the Q1 core business (excluding the 2.3 billion dollars of innovative business expenses such as electric vehicles and 200 million share compensation expenses) was 9 billion yuan, which was better than expected.
Mobile phones: Shipments have recovered, and market share has increased. Xiaomi 2024Q1 phones shipped about 40.6 million units, yoy +34%. According to Canalys, the 2024Q1 Xiaomi smartphone market share increased to 14%, yoy+3pct.
Q1 ASP yoy -0.6% to 1144.7 yuan. Both mainland China and overseas ASP increased, but the share of overseas market revenue with low ASP increased. In terms of gross margin, the Q1 mobile phone's gross profit margin was 14.8%, yoy+3.6pct, mainly due to product upgrades and price reductions for core components. Looking ahead to 2024, we expect that there is still room for growth in the market share of Xiaomi phones, and shipments and ASP are expected to continue to increase. However, due to rising storage and other costs, we expect gross margin to decline in subsequent quarters.
AIoT, Internet: The structure continues to improve, and gross margin reaches a record high. In terms of AIoT, as of Q1, 786 million devices have been connected to the AIoT platform, yoy +27%; the number of users with five or more connected devices to AIoT reached 15.2 million, yoy +24.2%. Q1 gross margin was 19.9%, yoy+4.1pct, mainly due to the simultaneous increase in revenue share and gross margin of products with high gross margin such as tablets and wearables.
In terms of the Internet, 2024Q1's overseas Internet revenue reached 2.5 billion yuan, yoy +39%, accounting for 31.2% of Internet revenue, yoy+5.5 pct. Q1 658 million monthly active users worldwide, yoy +10.6%. The gross margin of the Q1 Internet business was 74.2%, yoy+1.9pct. Mainly due to the increase in the share of high-margin advertising revenue, the advertising business Q1 revenue was 5.5 billion yuan, yoy +25%.
Xiaomi raised delivery targets, and gross profit exceeded expectations. In terms of intelligent driving, Xiaomi currently has a smart driving team of over 1,000 people, and plans to expand to 1,500 people this year and 2,000 people next year. Xiaomi City NOA aims to officially open 10 cities in May and nationwide in August. In terms of smart cockpits, Xiaomi will enable the entire ecosystem of people and cars to be connected across terminals. In addition, the new Xiaoai Big Model intelligent voice will control the car in depth. According to the results report, the 2024 SU7 delivery target was raised from 100,000 vehicles to 120,000 units.
The Xiaomi Group's latest strategy has been upgraded to a “full ecosystem of people and cars”. The ecological chain is closed to enhance the interactive experience, increase the profit margin of the automobile business and enhance business value through IoT products and value-added services in the future. According to Xiaomi Investor Day, the gross margin of Xiaomi cars is expected to be 5-10%, which exceeds market expectations.
Reiterate the “buy” rating. We expect Xiaomi Group revenue in 2024-2026 to be 3373/3891/434.2 billion yuan, yoy +24%/+15%/+12%, non-GAAP core business net profit of 270/295/32.1 billion yuan, yoy +1%/+9%/+8%. Based on Xiaomi's core business (excluding innovative business expenses such as car building) 15x 2024eP/E, automobile 2x 2024e P/S, combined with investment value, the Xiaomi Group's target price of HK$23 was maintained, and the “buy” rating was reaffirmed.
Risk warning: Domestic smartphone competition intensifies, AIoT progress falls short of expectations, overseas market policy risks, Xiaomi's car construction falls short of expectations, and changes in the macroeconomic environment have exceeded expectations.