Xiaomi Earnings: Margins Rising and Strong EV Debut; Fair Value Raised to HKD 19.70 From HKD 16.80

Xiaomi’s second-quarter 2024 result exceeded our expectations, with the electric vehicles segment reporting a gross margin of 15.4% in the first quarter of selling EVs. Xiaomi indicated that the EV business contributed around CNY 2 billion in operating losses. Still, we estimate this is broadly in line with the research and development and other startup costs booked before the EVs started selling. Consolidated second-quarter revenue increased by 32%, with operating profit excluding investment valuation changes also up 46% to CNY 6 billion. This was the highest quarterly operating profit since the first quarter of 2021 despite it being the first quarter to include EV sales. The company’s margins are increasing across its portfolio due to increasing scale and premiumization.