2024Q2 revenue is growing rapidly. 2024Q2 Xiaomi Group's revenue is 88.9 billion yuan, yoy +32%. Among them, smartphone, IoT, consumer goods, and internet business revenue was 46.5/26.8/8.3 billion yuan, yoy +27%/+20%/+11%. The revenue from the smart tram and innovation business was 6.4 billion yuan. The adjusted net profit of 2024Q2 was 6.2 billion yuan, yoy +20%, and the adjusted net profit of the core business (excluding 1.8 billion adjusted net loss from innovative businesses such as electric vehicles) was 8 billion yuan.
Mobile phones: Global market share continues to rise, and gross margin is expected to pick up in the future. Xiaomi 2024Q2 phones shipped about 42.2 million units, YOY +28%. According to Canalys, the 2024Q2 Xiaomi smartphone market share increased to 14.6%. In terms of gross margin, the gross profit margin of Q2 phones was 12.1%, yoy-1.2pct, mainly due to the continued rise in core components. Looking ahead to 2024, the company expects that the rise in screen costs and memory costs will basically end, and gross margin may continue to improve in the future.
AIoT, Internet: The structure continues to improve. In terms of AIoT, up to the Q2 AIoT platform, the number of connected devices reached 0.822 billion, yoy +25.6%; the number of users with five or more connected devices to AIoT reached 16.1 million, yoy +24.2%. Q2 gross margin was 19.7%, yoy+2.2pct.
On the Internet side, 24Q2 has 0.676 billion monthly active users worldwide, yoy +11.5%. Among them, overseas internet revenue reached 2.7 billion yuan, yoy +32.9%, accounting for 32.1% of internet revenue, yoy+5.3 pct. The gross margin of the Q2 Internet business was 78.3%, yoy+4.2pct. Mainly due to the increase in the share of high-margin advertising revenue, the advertising business Q2 revenue was 6 billion yuan, yoy +16.9%.
Xiaomi's gross margin exceeded expectations. In the second quarter of 2024, the Xiaomi SU7 series delivered 27,307 new vehicles. Considering the continued expansion of production capacity, the company expects to complete the target of 0.1 million vehicles delivered in November 2024, impacting the target of 0.12 million vehicles for the whole year. As of June 30, 2024, the number of car dealerships reached 87, covering 30 cities in mainland China. In terms of gross margin, the gross margin of the company's smart cars reached 15.4% in the second quarter. It is expected that the gross margin of the smart car business will continue to increase as the scale effect increases and some of the current free benefits are converted to paid benefits.
Reiterate the “buy” rating. We expect the company's revenue in 2024-2026 to be 338.5/387.6/432.7 billion yuan, yoy +25%/+14%/+12%, non-GAAP core business net profit of 31.1/33/36.6 billion yuan, yoy +16%/+6%/+11%. Based on Xiaomi's core business (excluding innovative business expenses such as car building) 15x 2024e P/E, and car 2x 2024e P/S, we believe that the Xiaomi Group's reasonable target price is HK$23, reaffirming the “buy” rating.
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.