Moving towards high-end! Goldman Sachs and Citibank both raised Xiaomi's target price, and its market value is expected to return to $100 billion

Overnight, Xiaomi launched a series of new products at its annual technology conference, including the flagship Xiaomi 15 series, SU7 Ultra, and AIoT products. In response, Goldman Sachs and Citigroup both raised their target price for Xiaomi to around HKD 30 per share, indicating a potential upside of 17.6% from Wednesday's closing price, with expectations that its market value could return to USD 100 billion.

Goldman Sachs noted in its report on October 30:

We have raised Xiaomi's target price for the next 12 months to HKD 30.7 per share, which implies an expected market value of USD 100 billion, with a projected price-to-earnings ratio of 22 times, and we maintain a buy rating.

Xiaomi ranks third in the global smartphone market share and is expected to continue its year-on-year recovery in revenue and shipments in 2024. Despite facing rising cost pressures, Xiaomi has maintained stable gross and operating profit margins through premiumization and growth in internet revenue, while the strong start of its smart electric vehicle business also provides room for future valuation enhancement.

Citigroup also raised its target price and earnings expectations for Xiaomi in its latest report:

Thanks to the smartphone/electric vehicle business, Xiaomi's adjusted earnings per share (EPS) expectations for 2025/26 have been raised by 11% and 16%, respectively. The new target stock price is HKD 30.6 per share, based on a 21.3 times core business price-to-earnings ratio and a 2.5 times electric vehicle sales ratio.

At the same time, the smartphone shipment expectations for 2024 to 2026 have been raised from 166/171/176 million units to 168/176/182 million units, with gross margins also improving, expected to reach 12.5%/12.2%/11.9%, respectively; the electric vehicle shipment expectations have been raised to 122,500/250,000/400,000 units for 2024 to 2026, with gross margins increasing to 18.0%/19.8%/19.8%.

Goldman Sachs: Revenue Expectations Increase, Market Value Expected to Return to USD 100 Billion

Goldman Sachs summarized the key points of this launch event and expressed its views:

1. HyperOS 2.0: System performance, graphics, networking, and security have been enhanced. HyperConnect has been upgraded, with terminal-side capabilities becoming ecosystem capabilities, supporting interconnectivity with the Apple ecosystem. AI features have become highlights, including AI dynamic wallpapers, AI albums, AI writing, and AI voice recording. The Xiaomi 15 also offers 20 different custom colors and 2 different frame options at the same price, which we believe helps meet a broader consumer base.

2. Xiaomi 15 Series: Hardware specifications and prices have been increased (starting prices for Xiaomi 15/15 Pro are HKD 4,499 and HKD 5,299, respectively), with increases of HKD 200/300 compared to the previous generation. The new models use a 3nm Snapdragon chip, with upgraded screen technology, improved fingerprint scanners, and batteries. We believe such pricing remains highly competitive, and we expect Xiaomi to continue its success in the premium smartphone market.

3. Automobiles: Xiaomi's delivery volume reached 20,000 units in October, and it is expected that the total delivery volume for 2024 will exceed the target of 120,000 units. The SU7 Ultra set a record for the fastest four-door car at the Nürburgring, with a pre-sale price of 815,000 yuan, receiving 3,700 reservations within the first 10 minutes. We predict that the delivery volume of the SU7 Ultra will be 3,680 units in 2025, with an average selling price of 800,000 yuan (starting from the second quarter of 2025), accounting for 5% of the electric vehicle revenue in 2025, and we also see potential incremental revenue streams from high-end customization (such as accessories and modifications).

4. Home Products: Xiaomi continues to expand its product matrix for televisions, white goods, and smart door locks, launching innovative products such as dual-drum washing machines and smart locks, exploring the high-end market for home appliances.

In terms of revenue outlook, Goldman Sachs raised Xiaomi's revenue forecast for 2024-2026 by 1%, mainly benefiting from the growth in revenue from Chinese smartphones, AIoT, and smart electric vehicles. The adjusted net profit forecast for 2024-2026 was raised by 1-5%, mainly due to increased profit contributions from AIoT and home appliance businesses, and reduced losses in electric vehicles.

At the same time, Goldman Sachs raised Xiaomi's 12-month target price to HKD 30.7 (previously HKD 27.8), which implies a 12-month expected market value of USD 100 billion, maintaining a buy rating. Goldman Sachs reminded that future attention should be paid to the performance of Double 11, the initial sales report of Xiaomi 15, the release of the Redmi K80 series, and the overseas launch of the Xiaomi 15 series.

Citigroup: Continuing to Move Towards High-End, Outlook for Mobile Phones and Automotive Business Improved

Citigroup emphasized in its report that Xiaomi's mobile phones and automobiles are expected to further increase their market share in the high-end market:

1. Smartphone Business: Xiaomi launched its latest flagship model, the Xiaomi 15, which is the first to feature the Qualcomm Snapdragon 8 Elite processor, supporting more powerful AI functions, competing with the iPhone 16 Pro+, and is expected to continue increasing market share in the high-end market priced between 4,000 to 6,000 yuan in China. We have raised our smartphone shipment expectations for 2024 to 2026 from the previous 166/171/176 million units to 168/176/182 million units; gross margins have also improved, expected to reach 12.5%/12.2%/11.9%, respectively.
2. Electric Vehicle Business: Xiaomi's electric vehicle launched the SU7 Ultra, which achieved excellent results on the Nürburgring track, enhancing Xiaomi's position in the high-end sports car market and potentially boosting the shipment volume of the SU7 Max. At the same time, we have raised the electric vehicle shipment expectations to 122k/250k/400k for 2024 to 2026, with gross margins increasing to 18.0%/19.8%/19.8%.
3. Other Product Release Highlights: The HyperOS 2 system brings significant improvements in performance and user interface, including AI-driven translation, writing assistance, and voice memo functions. The SU7 Ultra electric vehicle attracted 3,680 orders with 1,548 horsepower and an acceleration time of 1.98 seconds, priced at 814,900 yuan Citi expects that, benefiting from the smartphone/electric vehicle business, Xiaomi's adjusted earnings per share (EPS) forecasts for 2025/26 will be raised by 11% and 16% respectively, with a new target price of HKD 30.6 per share, based on a 21.3 times core business price-to-earnings ratio and a 2.5 times electric vehicle sales ratio