Xiaomi's Valuation Could Rise on Market-Share Gains — Market Talk

Xiaomi's electric-vehicle gross profit margin will likely to rise to 28% in 3Q from 26.4% in 2Q, Daiwa analysts write in a note. They attribute the rise to higher product mix of premium models such as the SU7 Ultra and YU7 Max, their higher average selling prices and economies of scale. The higher gross profit margin will likely enable Xiaomi to achieve single-quarter or single-month breakeven in 2H this year, they add. Xiaomi is working to technically increase the capacity of its Ph2 factory, while pushing the capacity limit of its Ph1 factory, where capacity reached more than 30,000 units in July, they say.(jiahui.huang@wsj.com; @ivy_jiahuihuang)

Xiaomi's smartphone shipments may face some pressure in 3Q due to limited product releases, Daiwa analysts write in a note. Daiwa projects the company to deliver 42.2 million units in 3Q and 192 million units this year. Xiaomi set a full-year smartphone shipment target of 170 million-175 million units. Rising memory component costs will likely pressure gross profit margin for low- to mid-end models in 2H, Daiwa says. The investment bank expects possible on-quarter margin recovery in 4Q, thanks to a stronger product launch pipeline. In the long run, Xiaomi remains strategically focused on premiumization via investing in chips, AI and research and development, Daiwa says. It maintains a buy rating on the stock and raises its target price to HK$76.00 from HK$72.00. Shares are last at HK$52.25. (jiahui.huang@wsj.com; @ivy_jiahuihuang)

Xiaomi is likely to maintain its solid momentum for the rest of the year, according to Deutsche Bank Research analyst Bin Wang in a commentary. Xiaomi's 2Q adjusted net profit was slightly above market expectations, the analyst notes. DB expects Xiaomi's second EV plant to start production in September, which should help Xiaomi's 3Q EV delivery volume hit a record high. The company is likely to book 98,500 units in 3Q and 144,000 units in 4Q, Wang says. That pushes the full-year delivery volume to 400,000 units, Wang says. DB keeps a buy rating and raises its target price to HK$77.00 from HK$76.00. Shares last trading 0.1% higher at HK$52.50. (tracy.qu@wsj.com)