20221107-招银国际-小米集团-W-01810.HK-3Q22_preview__a_soft_quarter_but_expect_QoQ_recovery_in_4Q22_8页_1mb

Xiaomi (1810 HK) 3Q22 Preview Summary

Core Content Overview

Xiaomi is set to report its 3Q22 results in late November. The forecast indicates a soft quarter with revenue and adjusted net profit declining by 10% and 62% YoY, respectively, to RMB70.5bn and RMB1.97bn. This decline is attributed to smartphone weakness, rising inflation, and macroeconomic challenges. However, the report anticipates a QoQ recovery in 4Q22 due to product launches and inventory adjustments.

Main Points

Revenue and Profit Trends

• 3Q22E Revenue: RMB70.531bn, down 10% YoY from 3Q21.
• 3Q22E Adjusted Net Profit: RMB1.974bn, down 62% YoY.
• Gross Margin (GPM): Expected to remain flat at 16.6% for 3Q22E, slightly down from 17.0% in 3Q22.
• Overall Revenue Forecast (FY22E-FY24E): RMB292.5bn, RMB327.6bn, RMB373.9bn.
• Adjusted Net Profit Forecast (FY22E-FY24E): RMB8.835bn, RMB13.986bn, RMB15.641bn.
• EPS Forecast (FY22E-FY24E): RMB0.35, RMB0.56, RMB0.63.

Segment Analysis

• Smartphones:
  • 3Q22E Shipment: 40.005mn units, down 9% YoY.
  • ASP (Average Selling Price): Expected to drop 3% YoY to RMB1,060.
  • Forecast (FY22E-FY24E): Shipment is expected to drop 16% YoY to 159mn units, then grow by 7% and 6% YoY in FY23 and FY24, respectively.
• IoT and Lifestyle Products:
  • 3Q22E Revenue: RMB19.019bn, down 9% YoY.
  • GPM: Expected to drop to 13.5% in 3Q22E from 14.3% in 2Q22.
• Internet Services:
  • 3Q22E Revenue: RMB7.005bn, down 5% YoY.
  • GPM: Expected to drop to 72% in 3Q22E from 73% in 2Q22.
• Advertising Services:
  • 3Q22E Revenue: RMB4.551bn, down 5% YoY.
  • GPM: Expected to drop to 72% in 3Q22E from 73% in 2Q22.

Earnings Revisions

• CMBIGM Adjustments:
  • FY22E-FY24E adjusted net profit is 10-18% lower than consensus.
  • FY22E-FY24E EPS is 6-17% below consensus due to more conservative shipment estimates.

Key Information

Valuation

• Current P/E (FY23E): 16.0x, which is close to 1 standard deviation below the 3-year average of 15.9x.
• Target Price (TP): HK$12.51, a 29% upside from current price (HK$9.70), based on a 20x FY23E P/E.
• Valuation Catalysts:
  • Product launch.
  • Stronger shipment.
  • Share gain.
  • Internet revenue recovery.
  • Smart EV progress.

Market Position

• Xiaomi is expected to recover its global smartphone market share to 14.0% in 3Q22, up from a trough in 4Q21.
• The report highlights Xiaomi's expanding user base, global share gain, and established product portfolio as positives.
• Despite challenges, the firm maintains a BUY rating due to the attractive risk-reward ratio.

Financial Summary

• Revenue Trends:
  • FY22E revenue is expected to be RMB292.5bn, down 11% YoY from FY21.
  • FY23E revenue is projected to grow by 12% YoY to RMB327.6bn.
  • FY24E revenue is expected to grow by 14% YoY to RMB373.9bn.
• Gross Margin:
  • Expected to remain stable at 16.7% in FY22E, rising to 17.0% in FY23E and 17.1% in FY24E.
• Operating Margin:
  • Expected to be 1.2% in FY22E, rising to 4.2% in FY23E and 4.2% in FY24E.
• Adjusted Net Margin:
  • Expected to be 3.0% in FY22E, rising to 4.3% in FY23E and 4.2% in FY24E.

Key Financial Ratios

Outlook and Investment Recommendation

• Maintain BUY with a new TP of HK$12.51.
• The report remains positive on Xiaomi's long-term potential, especially in overseas markets and in the development of smart EVs.
• The firm is expected to benefit from product launches and inventory adjustments in 4Q22, leading to QoQ recovery.

Figures and Tables

• Figure 1: Xiaomi revenue trend.
• Figure 2: Xiaomi margin trend.
• Figure 3: Xiaomi smartphone shipment forecast.
• Figure 4: Global smartphone market share.
• Figure 5: Overseas internet service revenue growth.
• Figure 6: Xiaomi's solid MIUI MAU growth.
• Figure 7: 3Q22 results preview.
• Figure 8: Revenue breakdown.
• Figure 9: CMBIGM earnings revision.
• Figure 10: CMBIGM estimates vs consensus.
• Figure 11: 12M forward P/E band.
• Figure 12: 12M forward P/B band.

Conclusion

Xiaomi is expected to experience a soft 3Q22 due to smartphone weakness and macroeconomic headwinds, but the firm anticipates a QoQ recovery in 4Q22. Despite the challenges, Xiaomi's long-term growth prospects, including expanding user base, global market share gains, and product innovation, are viewed positively. The firm maintains a BUY rating with a revised target price of HK$12.51, reflecting confidence in its future performance and valuation.