Xiaomi delivered robust 1Q25 results with revenue and adjusted net income surging 47% and 65% YoY to RMB111bn and RMB11bn respectively, exceeding consensus by 2% and 18%. In particular, IoT segment achieves another record high quarter in terms of both revenues (RMB32.3bn) and GPM (25.2%) thanks to strong large home appliance, tablets and wearables. Smart EV GPM expanded 2.7ppts QoQ to 23.2%, well above our anticipation mainly on better scale effect and improved product mix. Helped by stronger GPM, 1Q25 EV adj. net loss continued QoQ reduction to RMB195m vs. RMB730m in 4Q24. Maintain sector top BUY with unchanged TP of HK$75.25.
　　Key Factors for Rating
　　1Q25 highlight: Revenue reached RMB111bn (+47% YoY) with improved GPM at 22.8% (+2.2ppts QoQ), beating BOCIe and consensus by 2% and 1-1.4ppts, mainly driven by strong IoT performance in both sales (+59% YoY) and GPM (+4.7ppts QoQ). OPM improved 3.6ppts QoQ to 9%, reflecting decent OPEX leverage. Adj. NI of RMB10.7bn surpassed BOCIe and consensus by 10% and 18% respectively.
　　Smart EV business: 1Q25 revenue rose by 11.5% QoQ to RMB18.6bn, largely in line. GPM expanded 2.7ppts QoQ to 23.2% driven by larger deluxe Ultra sales mix, enhanced scale effect, scale-back of purchase incentives and sales of high- margin vehicle accessories, well above initial estimates. Helped by stronger GPM and strict OPEX control, 1Q25 adj. net loss continued QoQ reduction to RMB195m. At present, we leave our volume/revenue forecasts for EV business intact, with potential volume movement counting on demand cannibalisation between YU7 and SU7, as well as capacity release speed in Beijing phase-two plant. We may review our forecast after seeing more colours about future pipelines, capacity deployment as well as financials outlook in annual investor event next month.
　　Smartphones: Revenue reached RMB51bn (+9% YoY), driven by both shipments (+3% YoY to 42m) and ASP (+6% YoY to RMB1,211). The GPM was up 0.4ppt QoQ to 12.4% thanks to higher premium smartphone mix (25% in 1Q25). We anticipate GPM to increase sequentially driven by: 1) more high-end mix such as Xiaomi 15 Ultra/15S Pro; 2) lower component cost besides memory; 3) national subsidy; 4) long term margin upside from Xring SoC insourcing.
　　IoT: Revenue and GPM growth momentum continued, propelled by strong shipments across large home appliances (revenue +114% YoY), tablets (1Q25 shipment ranked No.3 globally), and global wearables (1Q25 bands shipment ranked No.1 globally). Xiaomi targets to gain Top3 market share in major large home appliance in 2025. We project 17% revenue CAGR for Xiaomi IoT over 2024-27E.
　　Internet services: Revenue grew 13% YoY to RMB9.1bn with stable GPM at 76.9%, primarily driven by strong advertising performance (+20% YoY) in 1Q25. With stable MAU growth in both China and overseas, particularly among premium users, we expect internet services revenue to reach RMB38bn in 2025.
　　Key Risks for Rating
　　Domestic OEMs competition; Geopolitical conflict and trade/tariff war; Component price increase; Tax dispute in India; Unsatisfactory EV progress.
　　Valuation
　　We lifted 2025/26E EPS slightly to reflect more bullish IoT margin forecasts. With Xiaomi’s unrivalled premiumisation in the global consumer electronics and EV markets and its exposure in AI, AR glasses and robotics, we continue to reiterate Xiaomi as our top BUY. Our HK$75.25 TP is based on SOTP combining 21x 2026E P/E on traditional business and 4x 2026E P/S on EV business.