Shares of Chinese EV maker Xiaomi jump after earnings, margins beat expectations

By Jiahui Huang

Xiaomi shares (HK:1810) rose sharply in Hong Kong after the smartphone and gadget maker posted an earnings beat and margins from its new electric-car business topped estimates.

Shares of the Chinese company were 7.3% higher at 18.80 Hong Kong dollars (US$2.41) early Thursday, on track for their largest one-day percentage gain in more than four months. The stock was the best performer on the benchmark Hang Seng Index.

Xiaomi on Wednesday reported a 39% increase in second-quarter net profit on record revenue, thanks to sales gains across its segments. Its electric-vehicle business, which the company reported for the first time, delivered a better-than-expected gross profit margin of 15.4%, putting it among the few Chinese automakers that boast double-digit gross margins. Tesla reported a 14.6% automotive gross margin for the quarter.

Citi analysts, in a research note, described Xiaomi's results as a beat on the "far beyond expectation" margin of its EV sector. They raised the stock's target price to HK$22.70 from HK$22.40 while keeping a buy rating.

Daiwa analysts said the impressive EV margin was supported by better-than-expected deliveries, favorable pricing from suppliers and ancillary sales.

The company's delivery target of 100,000 vehicles by early November and 120,000 vehicles by the end of 2024 will drive its gross margin higher in the second half, the analysts said in a note. Daiwa maintained an outperform rating on the stock and raised the target price to HK$20.00 from HK$18.00.

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08-21-24 2348ET

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