To The Moon

Xiaomi Group has just announced its Q3'24 financial results, and overall the company performed well in several business areas, realizing significant growth and also exceeding market expectations.And the margins also have more room to grow in the future after efficiency improvements in the automotive business.

A higher valuation is expected to be supported if the IoT and automotive businesses continue to gain momentum and the internet services business also picks up further.

Performance and Expectations

According to the financial data released by Xiaomi Group, the key financial indicators for 3Q2024 are as follows:

• Revenue of 92.51 billion yuan, up 30.5% year-on-year, exceeding market expectations of 90.28 billion yuan.

• Operating profit of 18.88 billion yuan, up 17.2% year-on-year

• Adjusted net profit of $6.25 billion, up 4.4% year-on-year, higher than the expected $5.91 billion.

• R&D expenses: $6.0 billion, up 19.9% year-on-year.

• Selling and promotion expenses: $6.3 billion, up 32.6% year-on-year.

  

  

Business Segment Performance

Smartphone: Revenue of 47.5 billion yuan was realized in Q3, up 13.9% year-on-year.Global smartphone shipments amounted to 43.1 million units, an increase of 3.1% year-on-year, with a gross margin of 20.8%, mainly due to Xiaomi's continued expansion in the high-end market, especially in mainland China, where the company shipped at an average price of around RMB 1,100, and high-end smartphone shipments accounted for 20.1% of the overall shipments, an increase of 7.9 percentage points year-on-year.

IoT and Consumer Lifestyle Products: Revenue reached RMB26.1 billion, an increase of 26.3% year-on-year, and gross margin improved to 20.8%, mainly due to the increase in the number of connected devices on the AIoT platform and the scale effect, with the number of connected devices increasing by 23.2% year-on-year to 861 million units, of which the shipments of refrigerators and washing machines reached record highs, with the platform's shipment volume increasing by58.4%, and shipments of wearable products increased by over 50% year-on-year.

Internet services: Revenue amounted to RMB8.5 billion, an increase of 9.1% year-on-year, and gross profit margin improved to 77.5%.The stability and continued growth of this segment was mainly due to an increase in the share of advertising.

Intelligent Electric Vehicles and Innovation Business: revenue was 9.7 billion yuan and gross margin improved to 17.1% despite an adjusted net loss of 1.5 billion yuan.Quarterly deliveries of Xiaomi SU7 series were 39,790 units, and as of November 13th, it has achieved the goal of accumulating 100,000 new vehicles, and will continue to make every effort to sprint to the goal of fully delivering 130,000 new Xiaomi SU7 series vehicles.

Of course, the growth in sales of automobiles and other related products has increased the company's selling expenses and administrative expenses.Other than that, the overall operating expense ratio remained relatively stable.

Investment highlights

The main reasons for the results exceeding expectations include:

• Strong market demand: Global demand for smartphones and IoT products continued to grow, especially in the high-end market.

• Innovation-driven: The Company increased its investment in R&D and launched a number of new products to improve competitiveness.

• Cost control: Despite the increase in selling and promotion expenses, the overall cost was properly controlled and a high gross margin was maintained.

• Competitiveness enhancement: due to extreme price/performance ratio, Xiaomi is a fish out of water in the wind in the era of consumer downgrading

• Intelligent Electric Vehicle (IEV) sector: sizable revenue and manageable loss due to large initial investment and fierce competition in the market.

Market Feedback

The market feedback on Xiaomi's 3Q2024 earnings has actually been very positive and has been rising strongly ahead of the earnings report, reflecting the market's recognition of Xiaomi's ability to grow and innovate at this stage.