Key Takeaways:
Xiaomi Corp. (1810.HK) reported Q2 revenue of RMB 108.9bn, down 6% YoY, with adjusted net profit falling 43% to RMB 6.2bn, as auto gross margins retreated and legacy smartphone and IoT businesses continued to decline.
"Memory price increases are expected to slow in the third and fourth quarters, and prices are unlikely to remain at five times previous levels over the long term," management said on the earnings call. The company also confirmed it remains on track to expand its automobile business overseas in the second half of 2027.
Auto revenue was RMB 24.9bn, slightly below the RMB 25.5bn Street estimate, as deliveries rose 28% QoQ to 104,200 units. Auto gross margin fell 720bps YoY to 19.2%, with the refreshed SU7's lower starting price dragging blended ASP to RMB 229k. Dolphin Research estimates core operating profit for Xiaomi Auto swung back to a loss of RMB 2.6bn in the quarter.
Smartphone revenue was RMB 42.1bn, down 7.5% YoY, with shipments falling 26% YoY while ASP rose 25% YoY. Smartphone gross margin held at 8.5%, down 300bps YoY, reflecting tight memory supply. IoT revenue fell 19% YoY to RMB 31.3bn, while internet services revenue was RMB 9.0bn, down 0.6% YoY.
Shares rose 4.66% to HKD 27.4 on Tuesday with turnover of HKD 3.69bn. Citi maintained its Buy rating with a HKD 34 target price, forecasting smartphone shipments of 126 million, 130 million, and 135 million units for 2026-28, and EV deliveries of 450,000, 700,000, and 950,000 units respectively.
The company guided 550,000 EV deliveries for the full year, but only 216,000 were delivered in the first seven months. With SU7 and YU7 combined monthly sales running around 30,000, the market now looks to the PENGCHENG range-extended SUVs — the N70 Max at RMB 259,900 and N90 Max at RMB 299,900 — which begin shipments in September. Most brokers expect 460,000-500,000 units for the year, and a formal guidance cut on the earnings call could serve as a clearing event for the stock.
The results show legacy businesses have not yet stabilized, with smartphone margins stuck below 10% and IoT still declining more than 20% YoY. Investors will watch whether management lowers the 550k delivery target and whether PENGCHENG pre-sales gain traction in the competitive RMB 200k-300k SUV segment, where BYD, Li Auto, and XPeng all compete.
This article is for informational purposes only and does not constitute investment advice.
