20230830-招银国际-小米集团-W-01810.HK-2Q23_beat_on_record-high_margin__Reiterate_BUY_8页_1mb

Xiaomi Company Update Summary

Performance Overview

• Xiaomi reported second-quarter 2023 (2Q23) financial results, with an adjusted net income of RMB 5.14 billion, representing a 147% year-over-year (YoY) increase. Revenue was RMB 67.4 billion, down 4% YoY.
• Key drivers included record-high gross profit margin (GPM) of 21.0%, improved operating efficiency, and healthier inventory levels.
• Results beat estimates by 29% for net income and were largely inline with market consensus for revenue.

Key Metrics and Drivers

• Gross profit margin reached 21.0%, a record high, supported by lower component costs, inventory optimization, and broad-based margin recovery.
• Smartphone shipments declined 16% YoY, but average selling price (ASP) increased 2.8% YoY due to premiumization strategy.
• Other segments, such as IoT and internet services, showed growth: IoT revenue grew 12% YoY, and internet services margin improved to 70.8%.

Future Outlook

• Maintain a positive view on earnings recovery for the second half of 2023 (2H23E), driven by cost optimization, new product launches, and market share gains.
• Adjusted net income estimates for fiscal years 2023-2025 were revised 10-14% higher than consensus, reflecting stronger margin recovery.
• 2H23E projections suggest 54-133% YoY growth in third and fourth quarters for adjusted net income.

Valuation and Rating

• Reiterate BUY rating with a new target price of HK$17.69, offering a 43% upside from the current price of HK$12.38.
• Based on 24x estimated price-to-earnings (P/E) for fiscal year 2024, aligning with an attractive risk-reward profile.
• Stock trades at 17.8x forward P/E, favorable compared to peers.

Catalysts

• Upcoming catalysts include new product launches, electric vehicle (EV) progress, increased smartphone market share, and recovery in internet revenue.

Analyst Certification and Disclaimers

• Analyst confirms personal views are accurate and no compensation ties to report content.
• Disclosures note investment risks, uncertainty in returns, and reliance on market factors; CMB International Global Markets cannot guarantee accuracy or outcomes.