Today, $小米集团-W(01810)$ stock price surged, at one point rising over 5%, driven by a surprising counter-trend growth in its smartphone business gross margin.
Previously, against the backdrop of high memory prices and a pressured consumer terminal market, market expectations for Xiaomi's smartphone business were relatively low. After the earnings report was released, the numbers showed that Xiaomi's smartphone revenue declined 7.5% year-over-year, and shipments also decreased significantly by 26.5% compared to the same period last year. However, the primary reason for this was the company's optimization of its product mix, which involved cutting shipments of mid-to-low-end models.
The effects of this product premiumization strategy have been quite notable, achieving a good balance between lower volume and higher value. The smartphone business gross margin reached 8.5%, exceeding the market's prior expectation of 8.26%. The average selling price (ASP) for its smartphone business surged 25.9% year-over-year to RMB 1,351, reaching an all-time high. Domestically, sales of high-end models priced above RMB 3,000 surged 32.1%, surpassing the 30% share mark for the first time. Its premium flagship models priced above RMB 4,000 have also gained widespread consumer recognition. Benefiting from this premiumization strategy, the increased shipments of high-end models helped offset some of the profit compression caused by rising memory prices, alleviating public concern about significant profit pressure on Xiaomi's smartphone business and demonstrating its resilience.
In terms of institutional views, Goldman Sachs believes Xiaomi's overall Q2 results were in line with expectations, with the 8.5% smartphone gross margin being the biggest positive surprise. The firm also believes that the smartphone gross margin will bottom out and recover in Q3 of this year. Regarding the electric vehicle (EV) business, Goldman Sachs noted that it still fell short of expectations due to factors such as intense domestic competition and rising memory prices, and consequently lowered its EV shipment volume forecasts for Xiaomi.
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