Xiaomi (1810.HK)_ 4Q24E Preview_ Likely Another Strong Beat Fueled by China Subsidy

Summary of Xiaomi (1810.HK) Conference Call Company Overview - Company: Xiaomi Corporation - Ticker: 1810.HK - Industry: Technology, specifically smartphones and IoT products Key Financial Highlights - 4Q24E Results: Expected to beat expectations with adjusted net income forecasted at RMB 6.8 billion, 19% above consensus [1][2] - Revenue Forecast: Anticipated total revenue of RMB 106 billion, representing a 15% quarter-over-quarter (QoQ) increase and a 45% year-over-year (YoY) increase [2] - Smartphone Sales: Projected to grow by 13% YoY to RMB 49.9 billion, driven by a 5% increase in shipments and a 7% increase in average selling price (ASP) [2] - IoT Revenue: Expected to reach RMB 29.6 billion, a 45% YoY increase, supported by subsidies [2] - Internet Revenue: Anticipated to rise 15% YoY to RMB 9.1 billion due to increased advertising and pre-installation income [2] Gross Margin Insights - Overall Gross Margin: Expected to be 21.0%, up 0.6 percentage points QoQ [2] - Smartphone Gross Margin: Forecasted to stabilize at 12.0%, reflecting a 0.3 percentage point increase QoQ due to lower memory prices [2] - IoT Gross Margin: Estimated at approximately 20.0% [2] - Internet Gross Margin: Expected to be around 76.0% [2] Market Position and Performance - Smartphone Market Share: Xiaomi achieved a 13% global market share with 42.7 million shipments in 4Q24, a 4.8% YoY increase [2] - China Market Share: In China, Xiaomi's share reached 16% with 12.2 million units shipped, a 28.4% YoY increase [2] Future Outlook and Catalysts - Target Price Increase: Target price raised by 26% to HK$51.7 based on improved growth and gross margin outlook across all segments [1][3] - **Upcoming Products**: Anticipated catalysts include the launch of Mi 15 Ultra, SU7 Ultra, and AI smart glasses [1] - **EV Segment**: Forecasted to contribute RMB 17.4 billion in revenue in 4Q24E with a gross margin of 20$1,122.3 billion (US$144.2 billion) [3] - Expected Total Return: 15.7% based on the new target price [3] - Valuation Methodology: Sum-of-the-parts (SOTP) valuation based on 20x core business earnings and 1.0x EV sales [22] Risks - Competitive Pressures: Risks include increased competition in the smartphone market and potential challenges in maintaining market share against rivals like Huawei [23] - Cost Pressures: Rising expenses related to new store expansions and interest rate increases could impact profitability [23] This summary encapsulates the key points from the conference call regarding Xiaomi's financial performance, market position, future outlook, and associated risks.