On Friday, CLSA updated its financial outlook on Xiaomi (OTC:XIACF) Corp (1810:HK) (OTC: XIACF), raising the price target to HK$32.50 from the previous HK$24.50. The firm maintained its Outperform (2) rating on the stock, signaling confidence in the company's business trajectory.
The revision follows the analyst's assessment that Xiaomi likely experienced a solid performance across all business segments. The forecast for the third quarter of 2024 anticipates a total revenue increase of 27.6% year-over-year to Rmb90.5 billion, with smartphone revenue potentially rising by 12.7% due to higher average selling prices and increased sales. The AIoT (Artificial Intelligence of Things) segment is expected to see a 22% jump, bolstered by strong demand for large home appliances, tablets, wearables, and overseas sales.
Xiaomi's electric vehicle (EV) deliveries are also highlighted as a significant contributor to the company's revenue growth, with a fast ramp-up leading to 39,000 units delivered, accounting for 10% of the total revenue. Despite a stable average selling price for EVs, the adjusted net profit is projected to remain flat year-over-year at Rmb6.1 billion. This stagnation is attributed to lower gross profit margins in the smartphone division and losses in the EV sector.
However, the report suggests that the smartphone gross profit margin has likely reached its lowest point and that EV losses have decreased quarter-over-quarter to Rmb1.7 billion. Excluding EV losses, the adjusted net profit is expected to be around Rmb7.8 billion.
Looking ahead to the fourth quarter of 2024, CLSA anticipates revenue growth to be approximately 33% year-over-year. The firm has adjusted its net profit forecasts upward by 2% and 3% for the fiscal years 2024 and 2025, respectively, largely due to a more optimistic EV forecast. The revised price target reflects these updated expectations for Xiaomi's financial performance.
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