24Q2 performance

Overall performance: Revenue recorded 88.89 billion yuan (yoy +32%), exceeding Bloomberg's forecast of 86.75 billion yuan; gross profit margin of 20.69%, slightly higher than Bloomberg's forecast of 19.57%; operating profit of 5.89 billion yuan (yoy +45.7%), significantly exceeding Bloomberg's estimate of 4.09 billion yuan; GAAP net profit recorded 5.07 billion yuan (yoy +38.3%), clearly exceeding Bloomberg's forecast of 3.78 billion yuan; Adjusted net profit of 6.17 billion yuan (yoy +20.1%) clearly exceeded Bloomberg's estimate of 4.85 billion yuan.

By business: 1) Mobile phone business: revenue recorded 46.52 billion yuan (yoy +27.1%), slightly higher than Bloomberg's forecast of 46.27 billion yuan, gross margin of 12.10% (yoy-1.2pct, qoq-2.7pct); 2) IoT business: revenue recorded 26.76 billion yuan (yoy +20.3%), higher than Bloomberg's forecast of 25.44 billion yuan, gross margin of 19.70% (yoy+2.1pct, qoq- 0.2pct); 3) Internet business:

Revenue recorded 8.27 billion yuan (yoy +11.0%), slightly higher than Bloomberg's estimate of 8.1 billion yuan, gross margin of 78.30% (yoy+4.2pct, qoq+4.1pct); 4) Innovative businesses such as smart cars recorded 6.4 billion yuan in revenue, with a gross margin of 15.4%.

Mobile phone shipments are higher than market growth. Follow the mobile phone business gross margin trend 1) Shipments are growing faster than the market, and the high-end trend is obvious: Xiaomi phone shipments in the second quarter increased 27.2% year on year, significantly higher than the market growth rate (11.9%), mainly driven by high growth in Latin America, the Middle East, Southeast Asia and Africa (the year-on-year growth rate of Xiaomi phone shipments in the second quarter: Latin America +35%, Africa +45%, Middle East +37%, Southeast Asia +41%). Meanwhile, the trend of high-end mobile phones in mainland China (3k-4k yuan mobile phone market share increased significantly to 5.3% year on year) 16.8%; 4k-5k yuan mobile phone market share increased 3.5% to 20.1% year over year; 5k-6k mobile phone market share increased 2.3% to 8.9% year over year), partially offsetting the impact of high sales growth in emerging markets with low ASP overseas. ASP decreased by only 0.8% to 1103.5 yuan year over year. 2) Affected by rising component costs, the gross margin of the mobile phone business is in a downward range. It is recommended to pay attention to the subsequent mobile phone gross margin trend: the gross margin of the mobile phone business in the second quarter was 12.10%, down 1.2 pct year on year, and 2.7 pct from month to month. It is recommended to pay attention to the subsequent gross margin trend.

The gross margin optimization of the IoT and Internet business was obvious, and the revenue side maintained impressive growth 1) Revenue side: ① The IoT business recorded a year-on-year growth rate of 20.3% to 26.8 billion yuan, a record high, mainly driven by the increase in overseas revenue of major appliances and IoT in mainland China. ② Internet business revenue recorded 8.27 billion yuan, +11.0% year over year; 2) Profit side: ① IoT core products have a trend of OEM conversion, and gross margin increased 2.1 pct to 19.7% year over year. ② The gross margin of the Internet business increased 4.2 pct year on year, and increased 4.1 pct to 78.3% month over month, mainly driven by increased share of overseas revenue (stronger awareness of overseas payments), product structure optimization (high-end machines bring high-quality customers), and high bargaining power brought about by the increase in the number of users.

The automobile business was disclosed for the first time, and the gross margin was as high as 15.4%

Innovative businesses such as smart cars recorded 6.4 billion yuan in revenue this quarter, of which automobile revenue was 6.2 billion yuan.

In the second quarter, more than 0.027 million Xiaomi SU7 series cars were delivered, and ASP was 0.229 million yuan. In June of this year, the Xiaomi car factory began double shift production, and production capacity was greatly optimized. It is recommended to pay attention to subsequent production capacity and the pace of car delivery. On the profit side, after increasing production capacity, economies of scale were evident. At the same time, when the order volume was high, Xiaomi's bargaining power with suppliers was relatively strong. The gross margin of the Xiaomi car business reached 15.4% this quarter. It is recommended to continue to pay attention to the gross margin level of the subsequent automobile business.

Investment advice

We expect the company's revenue to be 343.6/402.5/450.6 billion yuan in 2024/2025/2026, achieving +26.8%/+17.1%/+11.9% YoY; adjusted net profit of 214/237/27.7 billion yuan, achieving +11.1%/+10.7%/+16.9% YoY, maintaining a “buy” rating.

Risk warning

Raw material costs for the hardware business have risen; production capacity in the automotive business has fallen short of expectations.