Xiaomi’s 2Q revenue/NP growth of 31%/75% YoY are largely in line with our/ market expectations, and GPM was upbeat at 22.5% (+1.8ppt YoY) thanks to strong EV GPM offset by softer smartphone. For 2H25E, mgmt. turned slightly conservative on the smartphone market, and revised FY25E shipment guidance to 175mn (vs prior 175-180mn) with softer GPM given BOM cost hikes (DDR4, battery). Despite near-term headwinds, we are constructive on Xiaomi’s long- term strategy: 1) Smartphone: global share gains and premiumiumization; 2) IoT: large home appliances momentum and overseas channel expansion; 3) Smart EV: YU7 demand, European market (2027E) and profitability upside. We trim our FY25-27E adj. EPS by 0-2% to reflect revised guidance and better EV profitability. Our new SOTP-based TP of HK$ 62.96 implies 26.3x FY26E P/E.
　　Upcoming catalysts include product launch and EV capacity ramp-up.
　　2Q25 in line; Strong IoT/EV segment offset by softer smartphone ASP/
　　GPM. 2Q revenue/adjusted NP growth of 31%/75% was largely in-line with our/market estimates, and 2Q GPM was upbeat at 22.5% (+1.8ppt YoY/- 0.3ppts QoQ) as a result of 1) smartphone BOM cost hikes (DDR4, battery), 2) a better IoT product mix, and 3) strong EV GPM with SU7 Ultra delivery.
　　Smartphone: shipment guidance revised to 175mn in FY25E; Target Chinese share gains and 4Q GPM recovery. 2Q revenue declined 2%
　　YoY with weaker GPM of 11.5%. Mgmt. revised FY25E shipment guidance to 175mn (vs prior 175-180mn), implying +4% YoY. Despite near-term headwinds, mgmt. reiterated long-term business target: 1) 1ppt share gain in China market each year and 200mn global shipments in long term (on par with Samsung/Apple), and 2) LT GPM expansion given premiumization strategy and core technology R&D (self-developed chips, OS and imaging).
　　Smart EV: upbeat 2Q GPM; Target to expand to Europe in FY27E. For
　　EV, we are impressed by 1) 2Q GPM improvement to 26.4% thanks to scale benefits and SU7 Ultra deliveries, 2) 2Q net loss narrowed to RMB300mn, and 3) target to enter European market in FY27E. Mgmt. also expected the high-level GPM to sustain, supported by a strong order backlog, high-end positioning, standardized manufacturing platform and economies of scale.
　　IoT/Internet: overseas expansion, domestic large home appliances. 2Q
　　IoT segment remained strong with 45% YoY growth and GPM of 22.5%.
　　Mgmt. is positive on overseas channel expansion and domestic large home appliances market (TAM multiple times upside). For Internet biz, 2Q sales climbed 10% YoY with record-high overseas sales mix of 33%. For robotics, mgmt. will focus on factory automation to improve efficiency in near term.