Lay out the entire ecosystem of people and cars, and aim to become a new generation of global hard-core technology leaders. The company is a consumer electronics and intelligent manufacturing company with smartphones, smart hardware, and IoT platforms as the core. The company began to lay out the smart electric vehicle business in 2021, the company's smart electric vehicle delivery began in the first half of 2024, and the entire ecosystem strategy of people and cars was gradually completed. The company's total revenue in 2023 was 271 billion yuan, including smartphone revenue of 157.5 billion yuan, accounting for 58.1% of total revenue; IoT and consumer products revenue of 80.1 billion yuan, accounting for 29.6% of total revenue; and total Internet service revenue of 30.1 billion yuan, accounting for 11.1% of total revenue.

The smartphone market is recovering moderately, and the wave of AI and high-end strategies have led to an increase in ASP. Benefiting from the wave of AI mobile phone switching, IDC expects global smartphone shipments to increase 4% year-on-year to 1.211 billion units in 2024, and global smartphone shipments will grow moderately from 2025 to 2028. According to Canalys, the company shipped 0.146 billion smartphones in 2023, accounting for 12.8% of the market share, and the company ranked third in the world in terms of shipment volume. The company's smartphone business firmly implements a dual brand strategy. The Xiaomi brand launched folding machines and high-end flagship models, and continues to promote the high-end smartphone strategy, which is expected to drive the ASP improvement of the company's smartphones. According to IDC data, 1-3Q24's smartphone shipments were 0.126 billion units, up 19.57% year over year.

Delivery of smart cars will begin in the first half of 2024 to achieve the full ecological layout of people and cars. The company's smart electric vehicle business began in 2021. The company established a wholly-owned subsidiary to be responsible for the smart electric vehicle business, invested in the construction of the Xiaomi Gigafactory, built six major workshops for new energy vehicles, and applied for many patents on core technology. The company's smart electric vehicles began delivery in 2Q24, and are competitive among models in the same price segment. In October, it achieved a monthly new vehicle delivery volume exceeding 0.02 million vehicles, achieved a cumulative production target of 0.1 million new vehicles on November 13, and 0.13 million vehicles for the whole year of 2024. With the smooth launch and delivery of the company's smart electric vehicles, the company's business expanded into a new layout, gradually improved the entire ecological layout of people and cars, and provided new impetus for the company's performance growth.

The number of AIoT and Internet business users continues to expand, and the 3Q24 Internet revenue scale reached a record high.

The company began to lay out the AIoT business in 2013, and launched the Mijia brand to lay out the smart home market in 2016. The number of devices connected to the company's AIoT platform continues to grow, and the number of monthly active users of Mijia and Xiaoai students continues to grow. 3Q24 The company's Internet business revenue reached a record high. The development of the company's AIoT platform and Internet business has laid a good foundation for the entire ecological layout of the company's people and vehicles.

Profit forecast and valuation: We are optimistic that the company's smartphone business will benefit from the increased profitability brought about by the wave of AI switching and high-end technology. At the same time, the company's AIoT and Internet business are showing a growing trend. The company's net profit for 2024-2026 is 18.7/23.5/28 billion yuan (+7.2%/25.7%/18.9%), PE is 36.3/28.9/24.3 times, giving “superior to the market” ratings.

Risk warning: downstream demand falls short of expectations; industry competition intensifies; risk of exchange rate fluctuations.