Xiaomi Earnings: Positive Early Orders for EVs; Fair Value Raised to HKD 16.80 From HKD 16.50

Xiaomi’s first-quarter 2024 result was slightly above our expectations. Year-on-year growth was strong, with revenue increasing 27% and gross margins holding at 22.3% despite component price increases. Operating profit, excluding investment valuation changes, was also up 101% to CNY 4.8 billion, but we note that the first quarter of 2023 was a weak comparable. First-quarter 2024 profitability was similar to the third and fourth quarters of 2023. The company also continues to spend strongly on research and development, with related expenses up 25% year on year to CNY 5.2 billion, driven in part by spending on smart electric vehicles and other growth initiatives such as robotics. We await the second-quarter result to see how profitable the strong initial electric vehicle sales are.