Xiaomi delivered strong 2Q24 revenue/adj.net profit growth of 32%/20% YoY. Adj. net profit is 21%/27% ahead of our/consensus estimates, mainly driven by stronger EV/internet GPM and improving efficiency. Xiaomi reported its first EV business financials with a quarterly GPM at 15.7%, well above market expectation of 5-10%, and mgmt. guided QoQ GPM expansion into 3Q/4Q24E. Looking ahead, we are positive on Xiaomi smartphones' global market share gains, new retail strategy execution, AIoT business growth momentum and EV shipment delivery to drive earnings growth into FY24E-25E. We raise FY24-26E EPS by 6-8% to factor in strong 2Q results and better EV profitability, and lift SOTP-based TP to HK$24.4, implying 23.9x FY24E P/E. Upcoming catalysts include SU7 monthly shipments and smartphone market share gains.
2Q24 earnings beat on strong IoT/internet/EV margins. Xiaomi's 2Q24 global smartphone shipments increased 28.1% YoY and ASP dropped 0.8% YoY due to an increasing mix of lower-ASP overseas smartphone shipments. By segment, smartphone/AIoT/internet revenue grew 27.1%/20.3%/11.0% YoY, boosted by strong SP/Pad/wearables/large home appliance shipments and a growing global user base. Smartphone GPM came in at 12.1% (vs. 1Q24 14.8%) due to rising BOM costs, while internet segment GPM reached 78.3% (vs. 1Q24 74.2%) thanks to a higher mix of advertising business and overseas internet income. Xiaomi reported its first EV business financials with a quarterly GPM 15.7%, well above market expectation of 5-10%.
2H24 outlook: upbeat QoQ EV GPM expansion; new retail strategy to accelerate. Xiaomi maintained 120k EV annual delivery guidance with EV GPM to improve QoQ into 3Q/4Q24E. Xiaomi's new retail strategy executed beyond initial expectations with annual new store opening target raised from 3,000 to 4,000 stores. Its overseas retail channel expansion plan is also set to boost SP/AIoT sales with expanded SKUs. Overall, we expect Xiaomi's revenue/adj. net profit to grow 26%/21% YoY in FY24E.
Our FY24-26E EPS are 26-33% above consensus; Maintain BUY. We raise FY24-26E EPS by 6-8% to factor in strong 2Q24 results, and lift SOTP- based TP to HK$ 24.4, implying 23.9x FY24E P/E. Reiterate BUY. Catalysts include SU7 monthly shipments and smartphone market share gains.
