2Q24 Results Exceed Our Expectations
The company announced 2Q24 results: revenue of 88.888 billion yuan, up 32.0% year on year, 1.1% higher than our expectations; adjusted net profit of 6.175 billion yuan, up 20.1% year on year, 13.7% higher than our expectations. Mainly the gross margin of the Internet business and gross margin of innovative businesses such as automobiles exceeded expectations.
Development trends
The market share of mobile phones continued to rise in 2Q24, and the progress of high-end technology accelerated. In terms of shipment volume, in 2Q24, Xiaomi's global smartphone shipments increased 28.1% year-on-year to 42.2 million units, with a market share of 14.6%, continuing to rank third. Focus on market segments: Mainland China/Latin America/Southeast Asia/Middle East/Africa India's market share increased by 0.8pp/2.1pp/3.1pp/4.1ppt to 14.2%/18.6%/17.2%/21.2%/11.7% year-on-year. In addition, the share of high-end mobile phone shipments in 2Q24 increased 2.0ppt to 22.1% year-on-year, and high-end technology progressed in an orderly manner. In terms of ASP, mobile ASP in the second quarter was 1,103.5 yuan, which was generally stable over the same period last year. 2Q24 mobile phone revenue increased 27.1% year over year to 46.516 billion yuan; gross margin decreased 1.2 ppt yoy/down 2.7 ppt to 12.1% month over month, mainly due to component prices.
Major appliances have driven both IoT revenue and gross profit growth, and Internet revenue has reached a record high. 2Q24's IoT revenue increased 20.3% year over year to 26.76 billion yuan, mainly due to strong revenue growth in major appliances (QoQ +200.5%) /tablet (QoQ +7.5%) products. IoT gross margin increased by 2.2 ppt to 19.7% year-on-year, mainly due to the increase in revenue share of high-margin products. In the Internet service business, 2Q24 revenue increased 11.0% year over year to 8.266 billion yuan, and gross margin increased 4.2 ppt to 78.3% year over year.
Automobile gross margin has exceeded expectations, and we are optimistic about the space for collaborative growth with the three growth curves. 2Q24 automobile and other innovative businesses generated 6.369 billion yuan (automobile revenue 6.2 billion yuan), delivered 0.0273 million vehicles, and ASP was 0.2286 million yuan. The gross profit margin of the automobile business was 15.4%, far exceeding market expectations. The adjusted net loss for 2Q24 automobile and other businesses was 1.8 billion yuan. The company plans to sprint to a new target of 0.12 million vehicles throughout the year; looking forward to the future, we are optimistic that car deliveries will increase month by month as production capacity climbs, while increasing gross profit margins as costs are diluted. In the long run, the company's three curves of personal devices, smart home devices, and smart travel devices have completed a comprehensive layout. We are optimistic about the growth space formed by closed-loop collaboration between the three future growth curves.
Profit forecasting and valuation
Considering that the gross margin of the company's automobile business exceeded expectations, we raised the adjusted net profit for 2024/2025 by 11.2%/10.6% to 21.039 billion yuan/23.389 billion yuan. The current stock price corresponds to 18.7 times/16.8 times the 2024/2025 adjusted net profit price-earnings ratio. Maintaining an outperforming industry rating and target price of HK$23.0 (based on the SOTP valuation method) corresponds to 24.6 times/22.1 times the 2024/2025 adjusted net profit price-earnings ratio, with 31.3% upside compared to the current stock price.
risks
The global macroeconomy affected demand for smartphones and IoT products, and smart car sales fell short of expectations.