20230207-招银国际-小米集团-W-01810.HK-4Q22_preview__a_challenging_quarter_but_the_worst_is_likely_over__Maintain_BUY_8页_1mb

Xiaomi (1810 HK) 4Q22 Preview Summary

Core Content

Xiaomi is expected to report its 4Q22 results in late March. The forecast indicates a revenue decline of 23% YoY to RMB65.5bn, and an adjusted net profit decline of 70% YoY to RMB1.33bn. This decline is attributed to global smartphone weakness, higher R&D expenses for smart EVs, and one-off charges from a revised warranty policy. However, the report suggests that the worst of the earnings decline is likely over, and the company is expected to see a sequential recovery in 1Q23E due to China's re-opening and improved channel inventory.

Main Points

• Smartphone Segment:

  • 4Q22 shipment declined by 27% YoY, with 11% market share globally (1st among Chinese brands).
  • Decline was driven by 40% in India and 37% in China.
  • ASP is expected to improve QoQ due to a better product mix and flagship launches.
  • Shipment is projected to remain flat YoY at 150mn in FY23E and grow 4% YoY to 156mn in FY24E.
  • ASP is expected to decline 1% YoY in FY23E and increase 13% YoY in FY24E.

• AloT/Internet Segment:

  • Revenue is expected to decline 16% YoY in 4Q22E, primarily due to macroeconomic weakness and reduced ad spending from major clients.
  • GPM for AloT is expected to recover to 14% QoQ in 4Q22E, while GPM for internet services is expected to drop slightly to 70.0%.
  • The segment is expected to recover gradually in 2023, supported by China's re-opening and policy easing in gaming and advertising.

• Earnings Recovery Outlook:

  • The report suggests that Xiaomi's earnings will start to recover sequentially in 1Q23E, driven by China's re-opening and healthier inventory levels.
  • The target price (TP) is raised to HK$14.73, based on a 24x FY23E P/E multiple, which is a 7% discount to the 5-year average P/E.
  • The TP is 15% above the current price of HK$12.82.

• Valuation and Peer Comparison:

  • Xiaomi's closest peers include Apple, Samsung, and Sunny Optical, which trade at 25x or higher forward P/E.
  • The report highlights product launches, market share gains, internet revenue recovery, and smart EV progress as key catalysts.
  • Xiaomi's P/E multiple is lower than peers, indicating potential undervaluation and upside.

Key Figures

Financial Forecast (FY20A–FY24E)

Outlook

• Xiaomi's smartphone shipments are expected to remain flat YoY in FY23E and grow 4% YoY in FY24E.
• AloT and internet services are expected to recover gradually in 2023, driven by improved macroeconomic conditions.
• Gross margin is expected to improve slightly to 18.0% in FY23E and 17.9% in FY24E.
• The report maintains a BUY rating, highlighting positive recovery expectations and potential catalysts.

Conclusion

Xiaomi is currently facing challenges in 4Q22, but the report indicates that the worst is likely over, with recovery expected in 1Q23E. The target price is raised to HK$14.73, reflecting improved visibility of earnings recovery and a higher P/E multiple. The company's diversified business model and strategic initiatives such as smart EV development are expected to drive future growth and improve market position.