Smartphones and EVs drive Xiaomi's FY 24 performance

Xiaomi Corp. released its FY 24 results on March 18, 2025, posting a 35% y/y increase in revenue to CNY366bn in FY 24, driven by an increase in sales of premium smartphones, EVs and home appliances. As a result, EBIT impressively jumped by 57.6% to CNY23bn, with its margin expanding to 6.3%. Net profit grew by 35.4% to CNY23.7bn, with a margin of 6.5%. The positive results led to a two-day rally in the company’s stock, with the share price rising 4.3% and reaching a high of CNY59.45 the following day. In addition, Xiaomi's Q4 24 sales exceeded analysts' quarterly revenue estimates by 6.6%.

Xiaomi Corporation, which was established in 2010 and is headquartered in Beijing, China, is a global leader in the research, development, and sales of smartphones, Internet of Things (IoT) devices, and lifestyle products. The company also provides Internet services and engages in investment activities. With over 45,000 employees, Xiaomi is publicly traded on the Hong Kong Stock Exchange.

Xiaomi's business operations are divided into four primary segments. The Smartphone segment, which constitutes 52% of the company's total sales in FY 2024, focuses on the sales of smartphones. The IoT and Lifestyle products segment, accounting for 29% of the sales mix, includes the sales of various in-house products such as smart televisions, laptops, AI speakers, and smart routers. The Internet services segment, which represents 9% of total sales, provides advertising services and Internet value-added services and the Smart EV and other new initiatives segment, representing 10% of sales, offers repair services for Xiaomi's hardware products and explores new business ventures.

Ramp up of EV segment

Xiaomi Corporation is poised for significant growth and innovation over the next few years, driven by strong R&D investments. Overall, the company expects its R&D expenses to exceed CNY100bn over 2021-2025. R&D expense is expected to grow at a CAGR of 26.4%, reaching CNY30bn in FY 25 from CNY9.3bn in FY 20. In the EV segment, Xiaomi has achieved notable accolades, including the receipt of top safety ratings across three categories in the China Insurance Automotive Safety Index 2024 and four categories in the IVISTA China Intelligent Vehicle Index 2024.

In addition, Xiaomi's vehicles were recognized among the top 10 car bodies in China for 2024. These achievements underscore Xiaomi's commitment to safety and quality in its EV offerings. Xiaomi also met its annual delivery target, surpassing 130,000 vehicles in 2024, and aims to deliver over 350,000 vehicles in 2025.

To bolster its EV portfolio, Xiaomi plans to officially launch the Xiaomi YU7 in mid-2025. Beyond the automotive sector, Xiaomi is set to expand its retail presence significantly. The company plans to establish 10,000 new Mi Homes overseas over the next five years, enhancing its global footprint and bringing its innovative products closer to consumers worldwide.

Rise in cash and short-term investments

Xiaomi reported modest performance over FY 21-24, posting a revenue CAGR of 3.7% to reach CNY366bn. EBIT grew at a CAGR of 4.8% to CNY23bn in FY 24, with margins expanding from 6.1% to 6.3%, driven by operational efficiencies. Net income rose at a CAGR of 7% to CNY23.7bn in FY 24, with margins expanding from 5.9% to 6.5%. This growth in net income was driven by interest and investment income.

The company's FCF has fluctuated over the last three years, reaching CNY36bn in FY 24 from a negative CNY1.6bn in FY 21. This improvement helped in the strengthening of cash and short-term investments from CNY86.2bn as of end- FY 21 to CNY101bn as of end-FY 24. Total debt increased from CNY30.7bn to CNY36bn in FY 24. However, the capital gearing ratio, calculated as total debt-to-equity, improved from 22.3% in FY 21 to 19% in FY 24.

In comparison, Shenzhen Transsion, a local peer, posted a revenue CAGR of 11.6% over FY 21-24, reaching CNY68.7bn in FY 24. Net income surged at a CAGR of 12.4% to CNY5.5bn in FY 24.

Solid run in stock price

Over the past year, the company's stock has soared about 188%, signaling robust business fundamentals. In comparison, Shenzhen Transsion’s stock fell by about 27% over the same period.

Despite the sharp run-up in share prices, the company is trading lower compared to its historical average. Xiaomi is currently trading at a P/E of 37.8x, based on the FY 25 estimated EPS of CNY1.3, which is lower than its 3-year historical average of 50.5x. However, it is trading higher than Shenzhen Transsion’s P/E (16.3x). Likewise, the company is currently trading at an EV/EBIT multiple of 33.2x, based on the FY 25 estimated EBIT of CNY35.5bn, which is lower than its 3-year historical average of 39.9x. However, it is trading higher than Shenzhen Transsion’s valuation of 14x.

Xiaomi is monitored, and largely liked by a total of 37 analysts, 27 of whom have ‘Buy’ ratings, five have ‘Outperform’ ratings, and three with ‘Hold’ ratings for an average target price of CNY57, implying 14.4% upside potential from the current price. Their views are further supported by an anticipated EBIT CAGR of 36.3% over FY 24-27, reaching CNY61.9bn, with margins of 8.9% in FY 27. In addition, analysts estimate net profit CAGR of 33.3%, reaching CNY55.8bn with margins of 8% in FY 27, with EPS expected to increase to CNY2.2 in FY 27 from CNY0.9 in FY 24. Likewise, analysts estimate an EBIT CAGR of 12% and net profit CAGR of 18.7% for Shenzhen Transsion.

Overall, the company has demonstrated strong financial performance, with significant revenue and profit growth driven by premium smartphone, EV, and home appliance sales. The company has achieved top safety ratings in its EV segment and plans to expand its global retail presence. However, the group is prone to few risks, including competitive costs, supply chain risks and credit risks.