The "Big Bank" report lowers Xiaomi's target price to 65.4 yuan, with electric vehicle production capacity and smartphone profit margins dragging down recent stock prices

Huayan published a report stating that Xiaomi Corporation (01810.HK) electric vehicle production capacity and smartphone profit margins are recent factors dragging down its stock price. It is expected that the third-quarter financial report will meet expectations, and the electric vehicle division will achieve profitability. Huayan has lowered Xiaomi's target price from HKD 75.9 to HKD 65.4, maintaining a "Buy" rating.

Huayan noted that Xiaomi's stock price has fallen 22% since early September, attributing the poor performance to the company's delay in expanding electric vehicle production capacity and market concerns about the timely delivery of electric vehicles. Additionally, due to rising component material prices, there are concerns about the gross profit margin of its smartphone business and the demand for Internet of Things products. Accordingly, Huayan has lowered its earnings forecasts for Xiaomi Corporation for 2026 and 2027 by 9% and 7%, respectively, to reflect the pressures facing business expansion.

Despite recent weakness, Huayan remains confident in Xiaomi's high-end strategy for its core business due to the company's strong execution capabilities and believes that as visibility for the electric vehicle P2 factory becomes clearer in 2026, Xiaomi's stock price has upside potential.

Huayan stated that Xiaomi will announce its third-quarter financial report for 2025 in mid-November, expecting its third-quarter net profit to be approximately RMB 10.1 billion, with a year-on-year growth rate slowing down. According to Huayan's estimates, Xiaomi's third-quarter revenue is expected to be RMB 108.4 billion (a year-on-year increase of 17%), with a gross profit margin of 22.3%. It is anticipated that the gross profit margin for the smartphone business will reach 11% in the third quarter; IoT revenue is expected to be RMB 26.6 billion, and electric vehicle shipments in the third quarter are expected to reach 109,000 units, with the gross profit margin slightly declining to 25.2%. The gross profit margin for Xiaomi's smartphone business for the fourth quarter of 2025 has been revised down to 10%.

Based on better operating expense control, Huayan has raised its net profit forecast for Xiaomi in 2025 by 7%; however, due to a 4% to 5% downward revision in revenue estimates and a reduction in gross profit margin forecasts by 0.7 and 0.4 percentage points, respectively, Huayan has lowered its earnings forecasts for Xiaomi in 2026 and 2027 by 9% and 7%, respectively