Yesterday, Xiaomi released its latest financial report, with second-quarter revenue of 88.9 billion yuan, a year-on-year increase of 32%, and adjusted net income of 6.2 billion yuan, a year-on-year increase of 20.1%. R&D investment was 5.5 billion yuan, up 20.7% year-on-year.

Xiaomi CEO Lei Jun said this is the most outstanding quarterly report in history!

After the opening today, $XIAOMI-W (01810.HK)$it opened high and rose more than 8% as of the time of publication, approaching the year's high of HK$20.35.

Specifically, Xiaomi's excellent financial report this time mainly focuses on the smart electric car and smart phone businesses.

1. Xiaomi's auto business was listed separately in the financial report for the first time, with innovative business revenue of 6.4 billion yuan, including 6.2 billion yuan from smart electric cars. In the single quarter, Xiaomi delivered a total of 27,307 new vehicles in the Xiaomi SU7 series. As of the end of the reporting period, Xiaomi's overall gross margin for the auto business was 15.4%.

From the perspective of deliveries, with the opening of the Xiaomi car factory's double-shift production in June 2024, and the optimization of the production line maintenance in July 2024, the monthly delivery volume of Xiaomi cars has exceeded 10,000 units for two consecutive months in June and July, and it is expected that the Xiaomi SU7 series will achieve the target of cumulative deliveries of 0.1 million units ahead of schedule in November 2024, and strive for a new target of cumulative deliveries of 0.12 million units for the entire year of 2024.

2. Xiaomi's smart phone business revenue maintained high-speed growth in Q2, reaching 46.5 billion yuan, a year-on-year increase of 27.1%. Xiaomi's smart phone shipments in the second quarter reached 42.2 million units, a year-on-year increase of 28.1%. According to Canalys data, in terms of smart phone shipments, Xiaomi has been ranked among the top three in the global market for 16 consecutive quarters in Q2, with a market share of 14.6%, and it is the brand with the fastest year-on-year growth rate among the top five.

In addition, the group has obtained board approval for a share buyback limit of 10 billion yuan on June 6. The amount of share buybacks this year has reached about 3.68 billion yuan, with a remaining limit of 6.32 billion yuan.

What is the institutional view?

• Credit Suisse raises Xiaomi's target price to HKD 25.5, surprised by the gross margin of electric vehicles

After the financial report was released, Credit Suisse stated in a report that it was surprised by Xiaomi's second quarter gross margin of 15.4% for electric vehicles. In addition to quarterly profits far exceeding expectations, it believes that this is a catalyst for Xiaomi's reevaluation.

In the second quarter, Xiaomi's AloT revenue and profit margin exceeded expectations, which can fully offset the decline in profitability of the mobile phone business. The bank expects Xiaomi's electric vehicle business to continue to deliver impressive performance and alleviate investors' concerns about the sustainability of the electric vehicle business. Therefore, it maintains a "buy" rating on Xiaomi with a target price of HKD 25.5.

At the same time, it is expected that in the next quarter, Xiaomi's smart phone profitability may face slight downward pressure due to the rise in component costs, but the higher profitability of other divisions than expected may help maintain overall profitability at a healthy level. Credit Suisse also believes that Xiaomi's electric vehicle profitability should continue to improve, benefiting from a better product portfolio and scale expansion.

• China Everbright raises Xiaomi's earnings per share forecast for fiscal years 2024-2026 by 6-8% and sets a target price of HKD 24.4, bullish

CICC's research report on Xiaomi Group stated that it has raised the earnings per share forecast for the 2024-26 fiscal years by 6-8% to reflect the strong performance in the second quarter. The target price has been raised to HK$24.4, corresponding to a PE ratio of 23.9 times the fiscal year 2024, maintaining a "buy" rating.

The report indicates that Xiaomi Group's second quarter revenue and adjusted net profit increased by 32% and 20% respectively year-on-year, with the adjusted net profit surpassing the bank and market consensus of 21% and 27%. The gross margin for the second quarter's electric car business reached 15.7%, far exceeding the market's previous expectation of 5-10%. The bank continues to be bullish on Xiaomi's global market share growth trend for smartphones in the second half of the year, strong growth in the AIoT business, accelerated expansion of the new retail strategy, and accelerated delivery of Xiaomi EVs.

• Haitong Int'l is bullish on Xiaomi, raising the target price to HK$23.9. The launch of the new Xiaomi 15 will be bullish for the stock price.

Haitong Int'l marginally raised the target price to HK$23.9, outperforming the large cap: Xiaomi announced that its second quarter 2024 performance exceeded expectations, with a strong gross margin, and an enterprise value profit rate of 15%, which is a major surprise.

The report states that Xiaomi has recently increased its smart phone 5G SoC orders from MediaTek and Qualcomm, indicating an upside potential for the second half of 2024. For the smart phone sector, the next catalyst will be the launch of the Xiaomi 15, with management indicating a comprehensive integration of artificial intelligence.

Furthermore, despite the upward revision of expectations, the second quarter 2024 performance is still not optimistic. The gross margin for smartphones remains the same as the previous quarter at 12.1%, a decrease of 2.7 percentage points quarter-on-quarter, due to competition and rising component costs. The gross margin for the next fiscal quarter is expected to decrease slightly quarter-on-quarter.

• Citi raised Xiaomi's target price to HK$22.7, expecting the company's smart phone profit margin to bottom out in the third quarter.

Citi stated that Xiaomi Group's second quarter performance exceeded expectations, and expects the stock price to respond positively to the strong electric car profit margin. The target price for the company has been marginally raised to HK$22.7, along with an upward adjustment to the company's profit forecast.

Analysts Kyna Wong and others pointed out in a report that the gross margin of Xiaomi's electric vehicle business is expected to be at least 18% in 2024-2026. The profit margin of the company's smart phone is expected to bottom out in the third quarter. The company's adjusted net profit forecast for 2024-2026 is respectively increased by 13%, 30%, and 17%. Recent catalysts for the company include the launch of Xiaomi 15 and details of the next-generation electric vehicle.

Editor/ping