Xiaomi will report 1Q24 results in late May. We estimate 1Q revenue/adj. net profit to deliver 26%/67% YoY growth to RMB75.2bn/5.4bn, 5%/19% above consensus, backed by strong smartphone shipments, better GPM across all segments and prudent expense controls. Looking ahead, we believe Xiaomi's global smartphone share gain will continue in LATAM/EMEA/SEA/EU markets backed by multiple product launches in 2H24E, and margin shall remain resilient given rising BOM costs are offset by premiumization and an improving mix. Overall, we are positive on the strong momentum of Xiaomi's smart EV business and resilient core segments. We raise FY24-26E EPS by 11-21% and lift SOTP-based TP to HK$23.77 to reflect stronger smartphone, EV momentum and better margins. We are looking to see more details on EV progress, AI strategy and product pipeline.
Smartphone: strong shipments with better-than-feared margin. Canalys reported Xiaomi's global shipments increased 33% YoY (vs 10% YoY for the industry) with market share of 14% in 1Q24 (vs 11% in 1Q23). Xiaomi's 1Q24 shipment strength was driven by both domestic and overseas market demand. We estimate a flattish ASP in 1Q24 and GPM to trend down QoQ to 14.5% (vs 16.4% in 4Q23) due to memory/component cost hikes. Looking ahead, we are positive on Xiaomi's global share gain momentum and multiple new model launches in 2H24E (e.g. Xiaomi 15, Mix Fold). We expect Xiaomi's shipments to increase 14% YoY to 167mn units in FY24E and rebound 2%/3% YoY to 170mn/175mn in FY25E/26E.
AIoT/Internet: an improving AIoT mix and resilient Internet revenue. We estimate AIoT/Internet revenue to increase 19%/7% YoY in 1Q24E (vs -5%/ +10% YoY in 4Q23), mainly due to strong Pads/home appliance sales and pre-installations/ads revenue that benefited from an expanding global SP user base. We expect AIoT GPM to reach 18.5% in 1Q (vs 13.9% in 4Q23) on higher Pads and home appliance revenue contribution, while Internet GPM will likely remain relatively stable at 75.0% (vs 75.7% in 4Q23).
Our FY24-26E EPS are 17%/25% above consensus; Reiterate BUY. Xiaomi's share price rallied 23% over the past month, driven by stronger SU7 orders, shipment deliveries and positive consumer feedback. We expect its upcoming 1Q24E earnings will share more updates on EV-related progress, AI strategy and product pipeline. Reiterate BUY with a new SOTP-based TP of HK$23.77.