Xiaomi (01810) Report Interpretation

Overview

This earnings-preview update examines why J.P. Morgan does not expect a quick recovery in Xiaomi's earnings or stock catalysts. Its Neutral view rests on weak near-term EV delivery momentum, sustained smartphone cost pressure, and limited near-term earnings relevance from AI and robotics, despite valuations that it considers reset to attractive levels.

Core views

J.P. Morgan expects Xiaomi's 2Q26 earnings to be subdued, with earnings down 44% year on year. The institution attributes the weakness to smartphone gross-margin pressure, slower IoT growth and sluggish EV momentum ahead of the new-model launch. It cuts FY26 and FY27 adjusted EPS by 11% and 10%, respectively, to RMB0.97 and RMB1.18, reflecting lower assumptions across the core business and EV/new-business operations. The central near-term issue is the FY26 EV shipment goal. Xiaomi had achieved only about 30% of its 550k-unit annual target in 1H26. Even with the SkyNomad extended-range SUV expected to generate some order momentum in 2H26, deliveries begin only in September. Reaching the target would require more than 60,000 EVs a month during the remaining five months, above Xiaomi's record monthly shipment of about 50,000 in December 2025. Lead times for the SU7 and YU7 had mostly fallen below 10 weeks, which J.P. Morgan views as a sign of softer momentum for existing models. Its FY26 EV-shipment estimate is 465k units, and it expects the company eventually to lower its 550k target. The report argues that such a reset could create a near-term bottom for the stock by aligning expectations. Smartphone profitability is the second constraint. J.P. Morgan expects Xiaomi to maintain an 8.0% smartphone gross margin in 2Q26, but sees memory-cost inflation extending pressure into 2H26. It lowers its smartphone gross-margin forecasts to 7.8% for 3Q26 and 8.5% for 4Q26, from 8.2% and 9.5% previously, as it estimates DRAM ASPs will rise 15–18% quarter on quarter and NAND ASPs 7–9% in 3Q26 and 4Q26. The institution expects the margin to trough in 3Q26 and recover modestly from 4Q26 as Xiaomi reduces specifications and improves product mix through higher ASPs and lower low-end volumes. It raises its forecast for 2026 smartphone ASP growth to 20% year on year from 15%, but expects smartphone shipments to fall 24% in 2026 because of higher ASPs. AI and robotics remain strategically promising but are not, in J.P. Morgan's view, meaningful stock drivers over the next 12 months. The report notes that MiMo V2.5 ranked first in OpenRouter's global month-to-date LLM token usage and that Xiaomi Robotics-1 topped the RoboCasa365 ranking. However, it expects the related revenue streams to be immaterial in the next year, while ongoing AI investment weighs on near-term operating profit. It also argues that the AI-infrastructure upcycle continues to pressure smartphone gross margins through memory costs. Valuation provides some support but does not change the Neutral stance. J.P. Morgan says the stock may already be near historical trough valuation levels of 10–15x P/E, or HK$24–27, after the steep correction since 1H26. Its HK$31 Jun-27 target price uses a sum-of-the-parts approach: 11.0x ex-cash 12-month-forward earnings for the hardware and internet-services core business, plus 1.1x 12-month-forward price-to-sales for EV and new business. The valuation incorporates RMB31,652 million of 12-month core earnings, RMB177,189 million of EV and new-business revenue, RMB173,500 million of cash and cash equivalents, and derives equity value of RMB716,581 million, or HK$31 per share. J.P. Morgan remains Neutral because overseas EV growth and a meaningful smartphone-margin inflection are still some way off.

Analysis framework

J.P. Morgan assesses the near-term earnings outlook through segment operating assumptions, including smartphone shipments, ASPs and gross margins, EV deliveries and EV/new-business revenue. It then compares Xiaomi's delivery pace and model lead times with the FY26 EV target, revises earnings estimates, and values the company using a sum-of-the-parts framework that separates the core hardware and internet business from EV and new business.

Methodology notes

• Valuation methodsSOTP (Sum-of-the-Parts) Valuation

  Sum-of-the-parts valuation

  The report values Xiaomi's core hardware and internet business separately from EV and new business, then adds cash to derive a per-share target price.

• Industry AnalysisVolume-price decomposition

  Smartphone volume, ASP and gross-margin analysis

  The report links higher memory costs, higher smartphone ASPs, lower shipment volumes and product mix to its smartphone revenue and margin outlook.

• Industry AnalysisSupply-demand framework

  EV shipment pace and delivery lead-time analysis

  The report uses 1H26 deliveries, required monthly shipments and falling model lead times to assess whether Xiaomi can meet its annual EV shipment target.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Xiaomi (01810.HK)

  Primary covered company; its earnings outlook is tied to EV delivery execution, smartphone margins, IoT demand and the pace of EV expansion.

  Strengths

  Valuations have reset to levels J.P. Morgan considers attractive; SkyNomad could improve 2H26 EV order momentum, and a higher-ASP smartphone mix may support a modest margin recovery from 4Q26.

  Weaknesses

  EV deliveries are behind the FY26 target pace, while higher memory costs and lower smartphone volumes pressure earnings.

  Comparison

  The FY26 target would require more than 60k monthly EV shipments over the final five months, above the roughly 50k record monthly shipment in December 2025.

  Risks

  Domestic EV competition, weaker IoT demand and a reduction in the FY26 EV shipment target are identified as negative risks.

Key data

• 2Q26 earnings outlookYoY down 44%J.P. Morgan expectation, driven by smartphone gross-margin pressure, slower IoT growth and sluggish EV momentum.
• FY26 EV shipment target550k unitsJ.P. Morgan considers it unachievable; its FY26 estimate is 465k units.
• 1H26 progress toward FY26 EV target~30%Implies more than 60k EVs per month over the remaining five months to meet the target.
• Record monthly EV shipment~50k unitsAchieved in December 2025, below the monthly pace implied by the FY26 target.
• Smartphone gross margin8.0% in 2Q26; 7.8% in 3Q26E; 8.5% in 4Q26E3Q26 and 4Q26 forecasts reduced from 8.2% and 9.5%.
• Memory ASP changeDRAM +15–18% QoQ; NAND +7–9% QoQJ.P. Morgan estimate for 3Q26/4Q26 and a source of smartphone margin pressure.
• FY26/FY27 adjusted EPSRMB0.97 / RMB1.18Reduced by 11.3% and 10.1% from prior estimates of RMB1.09 and RMB1.31.
• Target priceHK$31.00Jun-27 target, reduced from HK$35.00; based on SOTP.

Impact & implications

The report sees a possible expectation-reset benefit if Xiaomi lowers its FY26 EV target, but does not regard this as sufficient for a more constructive stance. It says valuation support is offset by delayed overseas EV expansion, continued smartphone-margin pressure and AI/robotics revenue that is not expected to be material within 12 months.

Risks

• Intensifying competition in China's domestic EV market could weaken Xiaomi's EV performance.
• Weaker IoT demand could lead to further cuts to revenue expectations.
• A cut to the FY26 EV shipment target is identified as a key negative risk.
• Persistently high memory prices could delay smartphone gross-margin recovery.

What to watch

• Whether Xiaomi revises down its 550k-unit FY26 EV shipment target.
• Monthly EV shipments after SkyNomad deliveries begin in September.
• SU7 and YU7 delivery lead times as an indicator of demand momentum.
• The direction of memory prices and the resulting smartphone gross-margin recovery.
• Progress in overseas EV expansion and evidence of a meaningful smartphone-margin inflection.