Xiaomi held its strategic product launch event on 22 May, featuring the self- developed 3nm SoC chip “XRING O1 and T1”, Xiaomi 15S Pro, Pad 7 Ultra and SUV YU7. We believe Xiaomi’s self-developed chip strategy will enhance product differentiation, cost structure and competitiveness of its flagship smartphones in the premium market in the long term, and Xiaomi’s RMB50bn investment into chips in next 10 years will continue to strengthen its technology leadership and AIoT ecosystem. In addition, we expect the new YU7 model to boost sales and profitability after coming into the market in July. We reiterate BUY with SOTP-based TP of HK$ 59.99 based on 36.1x FY25E P/E. Upcoming catalysts include 1Q25 results, AI glasses launches and EV order/profitability updates.
　　Newly self-developed 3nm SoC XRING O1 to benchmark Apple A18 Pro. Xiaomi officially unveiled two XRING SoC chips: O1 and T1. The XRING O1 will be adopted in Xiaomi 15S Pro and Xiaomi Pad 7 Ultra, and it is built on 2nd-gen 3nm process, which is used by Apple’s A18 Pro and Qualcomm’s Snapdragon 8 Elite. Xiaomi’s ORING T1 chip with self- developed 4G baseband will be used in Watch S4 eSIM 15th Anniversary Edition. We believe O1 chip is benchmarked against Apple’s A18 Pro, and it is primarily used in Xiaomi’s products rather than for external sales. Mgmt. guided RMB 50bn R&D investment in the next 10 years, and we believe its in-house SoCs will be gradually used in its EV and IoT products. In addition, we believe Xiaomi will adopt dual-SoC strategy for its flagship models with its self-developed chips and external suppliers (e.g. Qualcomm, MediaTek).
　　SUV YU7 to come into market in July; official price yet to be disclosed. Xiaomi announced the YU7 electric SUV in three models: Standard, Pro, and Max, featuring a preliminary self-driving system, large screen and high- performance battery. Standard model offers a driving range of 835km with a 96.3 kWh battery, while Pro/Max models offer ranges of 760km/770km. Even though the official price is yet to be disclosed, we believe YU7 is set to become a new challenger to Tesla model Y in China, which has a driving range of 593km with starting price at RMB263.5k.
　　Xiaomi 15S Pro and smart home products. Xiaomi’s flagship 15S Pro is also released with starting price of RMB 5,499, which is equipped with self- designed ORING O1 SoC, largely in-line with market expectation. Other new products include Xiaomi Civi 5 Pro, Xiaomi TV S Mini LED and smart home products (air conditioner/washing machine/refrigerator/water purifier).