Xiaomi’s 4Q25 results were better than feared, with revenue/adj. net profit growth of +7%/-24% YoY, 1%/10% above Bloomberg consensus estimates, thanks to better smartphone ASP (+7% YoY), smart EV’s stronger operating income and better operating leverage. Looking into FY26E, while smartphone/auto industry headwinds remain in near term, we believe Xiaomi is well-positioned to strengthen its industry leadership given its solid execution in premiumization strategy, IoT overseas expansion, share gains of new-gen SU7/YU7 and leading multi-modal AI capability. Overall, we lower our FY26-27E NP by 4-9% to factor in 4Q25 results and weaker GPM in FY26-27E. Our new SOTP-based TP of HK$44.47 implies 29.5x/23.9x FY26/27E P/E. Reiterate BUY.
4Q25 better than feared on better smartphone mix, EV momentum and resilient internet. Xiaomi’s 4Q25 revenue/adj.net profit growth of +7%/- 24% YoY is better-than-feared, being 1%/10% above consensus and 2%/18% above our estimates. By segment: 1) smartphone: revenue was - 14% YoY due to weaker shipments (-12%) despite ASP hikes (+7%), and lower GPM of 8.3% (vs 11.1% in 3Q) given higher memory cost; 2) IoT: revenue was down 20% YoY due to fading subsidy impact in China, despite stronger tablets/TVs in overseas markets; 3) Smart EV: revenue climbed 122% YoY with 145k deliveries and ASP +6.6% YoY. In particular, EV’s operating income continued to improve to RMB 1.1bn in 4Q (vs. RMB 0.7bn in 3Q).
2026 outlook: SP premiumization, EV model launches, IoT overseas expansion and AI initiatives to accelerate. During earnings call, despite auto/smartphone demand weakness in near term, mgmt. is confident to navigate the headwinds and enhance industry leadership: 1) Memory cost: LTA with suppliers and no supply shortage concerns, and limited impact on IoT/EV. 2) Smart EV: 550k delivery target in 2026 and overseas expansion in 2027 on track. 3) IoT: overseas TAM (ex. NA) is 3 times that of China, and overseas expansion will accelerate in 2026 (target 1k stores vs. 450 in FY25). 4) AI investment: RMB60bn AI spending in 2026-28, and clear AI model roadmap will strengthen ecosystem with AI/OS/chip capabilities.
Accelerated AI developments set to bear fruit in 2026-27; Reiterate BUY. We adjust our FY26-27E adj. EPS by 4-9% to reflect FY25 results and softer GPM into 2026-27 due to memory cost hikes. Our new SOTP-based TP of HK$44.47 implies 29.5x/23.9x FY26/27E P/E. Reiterate BUY.