小米集团(1810.HK):预期一季度业绩毛利率改善 维持“买入”评级

Xiaomi Group (1810.HK): Expecting first-quarter results and gross margin improvements to maintain the “buy” rating

浦銀國際 ·  05/15  · Researches

We reiterated Xiaomi's “buy” rating and maintained the HK$15.4 target.

Xiaomi's consumer business remained weak in the first quarter, but gross margin improved, and the “buy” rating was reiterated.

The consumer electronics industry continued its relatively weak trend in the first quarter since the fourth quarter of last year, and we expect this weak trend to continue in the second quarter. Xiaomi's smartphone and IoT business will inevitably be affected by this trend, but we expect Xiaomi's gross margin to perform better in the first quarter. This is mainly due to the previous decline in the influence of exchange rates, inventory, etc., while prices of upstream raw materials fell at the same time. This year, Xiaomi's scale and profit strategy began to be fully reflected. Furthermore, we believe that the highlights of Xiaomi's investment this year are: 1) the expected recovery of the consumer electronics industry in the second half of the year provides beta room for the industry to rise; 2) the market is too pessimistic about the valuation of Xiaomi's NEV business, and we believe that next year's NEV revenue contribution will contribute to the increase in valuation for the Xiaomi Group. Therefore, we reaffirm Xiaomi's “buy” rating.

Xiaomi's first quarter business preview and full-year performance outlook: In the mobile phone sector, we expect Xiaomi's mobile phone shipments in the first quarter to be slightly higher than 30 million units, a year-on-year decline of more than 20%, while the average sales price remained roughly the same month-on-month, with a slight year-on-year decline. The gross margin of the mobile phone business is expected to return to an all-time high of around 11%. In the IoT sector, due to the decline in consumer demand in major categories such as television, we expect revenue performance to weaken in the first quarter; while gross margin increased month-on-month and remained stable year over year. In the internet sector, we expect revenue to remain around 7 billion dollars in a single quarter, while gross margin is stable month-on-month. Overall, Xiaomi's revenue in the first quarter was slightly weak, falling more than 20% year on year, but gross margin is expected to reach a record high of over 19%. Gross margin is the most important driving force behind Xiaomi's excellent profit performance. Affected by the decline in investment and revenue growth in new businesses such as automobiles, we expect Xiaomi's cost rate in the first quarter to remain close to the high in the fourth quarter of last year.

Profit forecast and valuation: We raised Xiaomi's net profit forecast for this year and next two years to reflect changes in the fair value of some assets and give a target market sales rate of 2.5x next year's automobile business revenue.

As a result, we keep Xiaomi's target price of HK$15.4 unchanged, with a potential increase of 39.7%.

Investment risk: Demand for consumer electronics products such as smartphones did not recover as expected, and growth was weak in the second half of the year. The speed at which mobile terminals and supply chains are being removed from inventory is weaker than expected, dragging down mobile phone brands' shipments. Competition in the industry has once again intensified, and players' profit margins are under pressure. Overseas macro-environment fluctuations affect overseas consumer electronics demand. Smart electric vehicles are not progressing as expected.

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