Xiaomi Corp (01810): Xiaomi 18 Pro launch advances premiumization, but tests consumer willingness to absorb higher prices

Overview

This report assesses Xiaomi's 18 Pro and 18 Pro Max launch as another step in its premiumization strategy. Bernstein sees meaningful hardware, software and ecosystem upgrades, but flags the higher pricing as a near-term test in a competitive smartphone market and weak macro backdrop.

Core views

Xiaomi launched the 18 Pro at RMB5,999 and the 18 Pro Max at RMB6,999, each RMB1,000, or roughly 20%, above the corresponding Xiaomi 17-series launch prices. Bernstein views this as a further move toward premiumization. The institution notes that feature improvements are substantial and that rising memory costs support the price increase, but remains cautious on consumer reception because smartphone competition remains intense and macro conditions are weak. The pricing move is therefore a direct test of Xiaomi's ability to command higher prices. The hardware upgrade is broad. The 18 Pro and Pro Max use Qualcomm's Snapdragon 8 Elite Gen 6 2nm chipset, larger batteries and dual 200MP main and telephoto cameras. The 18 Pro combines a 6.4-inch form factor with a 7,000mAh battery, while the Pro Max differentiates itself with a 6.9-inch display, 8,500mAh battery and enhanced cooling. Against premium peers, the Pro Max is priced at RMB6,999, below the iPhone 18 Pro Max at RMB10,999 and in line with the vivo X500 Pro Max, while its battery and camera specifications are positioned competitively. Software and ecosystem developments extend the handset proposition. HyperOS 4 and Super XiaoAI 2.0 are intended to move Xiaomi toward a system-level AI assistant that can access information across apps, devices and user context, including trip planning and cross-device interactions. Xiaomi is also introducing cloud-enhanced AI services, usage credits and paid tiers. Bernstein expects near-term AI revenue to remain immaterial, but believes these capabilities could improve user engagement, deepen ecosystem stickiness and support brand loyalty over time. Xiaomi also refreshed its Pad 9 tablets, Band 11, Watch S5 and smart-home lineup, including Mini LED TVs, washing machines, smart kitchen products, locks and a premium coffee machine. Bernstein maintains Outperform with a HK$35.00 target price, versus a HK$26.18 close on 23 September 2026, implying 34% upside. Its forecasts show revenue declining 6.0% to RMB429,746 million in 2026E before rising 16.8% to RMB501,976 million in 2027E. Operating profit is forecast to fall from RMB47,901 million in 2025 to RMB24,894 million in 2026E, then recover to RMB36,556 million in 2027E; reported EPS is projected at RMB0.89 in 2026E and RMB1.29 in 2027E, after RMB1.62 in 2025. The target is based on a sum-of-the-parts valuation. Bernstein values the Smartphone and IoT business using 10x 2026E P/E and 8x 2026E EV/EBIT, and Internet Services using 15x 2026E P/E and 12x 2026E EV/EBIT; these multiples are unchanged. For the EV business, it combines DCF, P/E and EV/sales approaches, using a 12% WACC and 2% long-term growth rate in the DCF, a 15x 2035E P/E multiple discounted back, and 2x one-year-forward EV/sales.

Analysis framework

Bernstein assesses the launch-price change alongside the handset specification upgrade and peer positioning, then considers how operating-system AI and broader ecosystem products may support engagement and brand loyalty. It supports the investment view with financial forecasts and a sum-of-the-parts valuation separating Smartphone and IoT, Internet Services and EV operations.

Methodology notes

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

  Sum-of-the-parts valuation

  Bernstein values Xiaomi's Smartphone and IoT, Internet Services and EV businesses separately and combines the results into its HK$35.00 price target.

• Valuation methodsDCF (Discounted Cash Flow)

  DCF valuation of the EV business

  The EV valuation uses a 12% WACC and 2% long-term growth assumption to discount future cash flows.

• Valuation methodsP/E and PEG Valuation

  Forward P/E valuation

  Bernstein applies forward P/E multiples to Smartphone and IoT, Internet Services, and an EV scenario based on 2035E earnings discounted back.

• Valuation methodsEV/EBITDA valuation

  Forward EV/EBIT valuation

  The report applies 2026E EV/EBIT multiples to Xiaomi's Smartphone and IoT and Internet Services businesses.

Asset mapping & comparison

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

• Xiaomi Corp (1810.HK)

  Primary covered company; the report links premium handset upgrades, ecosystem AI integration and pricing execution to the investment case.

  Strengths

  Meaningful 18-series hardware upgrades, expanding AI capabilities and a broad connected-device ecosystem.

  Weaknesses

  Near-term AI revenue contribution is expected to remain immaterial.

  Comparison

  The Xiaomi 18 Pro Max is priced below the iPhone 18 Pro Max and broadly alongside selected Chinese premium Android peers.

  Risks

  Consumer rejection of higher prices, weak demand and more intense competition could undermine premiumization.

Key data

• Xiaomi 18 Pro starting priceRMB5,999RMB1,000 above the Xiaomi 17 Pro launch price.
• Xiaomi 18 Pro Max starting priceRMB6,999RMB1,000, or about 20%, above the prior-series launch price.
• Price targetHK$35.00Based on Bernstein's SOTP valuation.
• Closing priceHK$26.18As of 23 September 2026.
• Implied upside34%Target price versus closing price.
• 2026E revenueRMB429,746 millionForecast to decline 6.0% year on year.
• 2027E revenueRMB501,976 millionForecast to grow 16.8% year on year.
• Reported EPSRMB0.89 in 2026E; RMB1.29 in 2027EVersus RMB1.62 in 2025.

Impact & implications

Bernstein argues that the 18 series can reinforce Xiaomi's premium positioning through improved specifications, system-level AI and a broader ecosystem. However, the higher handset prices make customer acceptance central to whether premiumization can translate into stronger pricing power.

Risks

• Hardware sales volumes may miss expectations.
• Smartphone and IoT premiumization may prove unsuccessful.
• Current or future vehicle sales may disappoint.
• Product-quality issues, recalls or weak public-relations management could damage performance.
• Weak domestic or global consumer demand, a deteriorating competitive landscape, technological disruption, unfavorable Chinese policies and geopolitical tensions could pressure the outlook.

What to watch

• Consumer reception to the RMB1,000 launch-price increase for the Xiaomi 18 Pro and Pro Max.
• Hardware sales volumes and the pace of smartphone and IoT premiumization.
• Adoption of HyperOS 4, Super XiaoAI 2.0 and paid AI-service offerings.
• Sales of Xiaomi's current and future vehicles.