【行业研究报告】小米集团-W-Weak 3Q22 as anticipated; Expect sequential recovery ahead

24Nov202224Nov2022CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdateXiaomi(1810HK)Weak3Q22asanticipated;ExpectsequentialrecoveryaheadXiaomi’s3Q22weaknessiswellexpectedgivenglobalmacroweaknessandsmartphonedemanddecline.3Qrevenue/adj.netprofitdeclineof10%/59%YoYislargelyin-linewithour/consensusestimates(note),drivenby1)smartphonedecline(-11%YoY),2)weakIoT/internetrevenue(-9%/-4%YoY),and3)higherR&Dexpense(+26%YoY)forEVandnewinitiatives.Keytakeawaysfromearningscallinclude1)smartphone:healthyinventorylevelinChinabutgradualdestockinginoverseasmarket,2)AIoT:solidlargehomeappliancesinChinabutchallengingsalesinoverseas(esp.EU),and3)internet:stableMAUgrowthwithweakadsales.Lookingahead,weremainpositiveonXiaomi’sglobalsharegain,expandinguserbaseandEVupside,andwebelievemacrosequentialrecoveryin1H23Ewillbeamajorpositivecatalystforthestock.WeslightlyadjustedourestimatesandournewTPofHK$12.28isbasedonsame20xFY23EP/E.3Q22weaknesslargelyin-linewithsmartphonedeclineandslowerAIoT/internet.Bysegment,smartphonerevenuedropped11%YoYwithshipment/ASPdown8%/3%YoY,givenweaknessacrossallregionsandheavypromotionsinIndiaduringfestivalseason.AIoTdeclined9%YoY,mainlyduetoweakEUmarketonstrongdollarandhighinflation.Internetrevenuealsodeclined3.7%YoYduetoweakadsbudgetandlesssmartphoneshipment.3QGPMcameinat16.6%(vs18.3%in3Q21)mainlydraggedbylowersmartphoneGPMonpromotionsanddestocking.4Q22Eoutlook:seasonaldemandtospeedupdestockingprogressoverseas.Whileinventorydestockingandmacroweaknesswillremainanoverhangin4Q22E,webelievepromotionseason(e.g.BlackFridayandXmas)willspeedupdestockingoverseas.Weestimaterevenue/earningswilldeclineto15%/57%YoYin4Q22E,following10%/59%declinein3Q22.Inaddition,wearepositiveonmarketshareexpansioninLATAM/SEAmarketsandhealthycontentvaluegrowthinTVadbusinessrevenue.Attractiverisk/reward;MaintainBUY.While4Q22demandwillremainsluggish,webelievemostnegativeshavebeenpricedinandsequentialmacrorecoverywillbethepositivecatalystin4Q22E.Currentvaluationat16.2xFY23EP/Eiscloseto1-sdbelow3-yravg.P/Eat15.9x.MaintainBUYwithnewTPofHK$12.28,basedonsame20.0xFY23EP/E.CatalystsincludesmartEVprogress,productlaunchandmarketsharegain.TargetPriceHK$12.28(PreviousTPHK$12.51)Up/Downside25.4%CurrentPriceHK$9.80ChinaTechnologyAlexNG(852)39000881alexng@cmbi.com.hkLilyYANG,Ph.D(852)39163716lilyyang@cmbi.com.hkClaudiaLIUclaudialiu@cmbi.com.hkStockDataMktCap(HK$mn)199,351.6Avg3mthst/o(HK$mn)9.952wHigh/Low(HK$)19.66/8.45TotalIssuedShares(mn)20342.0Source:FactSetShareholdingStructureLinBin8.6%SmartMobileHoldingsLtd8.6%Source:HKExSharePerformanceAbsoluteRelative1-mth5.9%-1.4%3-mth-12.3%-1.9%6-mth-14.8%0.1%Source:FactSet12-mthPricePerformanceSource:FactSetEarningsSummary(YE31Dec)FY20AFY21AFY22EFY23EFY24ERevenue(RMBmn)245,866328,309286,870308,047346,419YoYgrowth(%)19.433.5(12.6)7.412.5Adjustednetprofit(RMBmn)13,006.422,039.58,878.413,734.115,554.5EPS(Adjusted)(RMB)0.540.880.360.550.62ConsensusEPS(RMB)nana0.370.550.67P/E(x)17.426.825.116.214.3P/B(x)2.93.81.61.51.4Yield(%)0.00.00.00.00.0ROE(%)19.814.80.58.58.9Netgearing(%)60.496.070.379.354.1Source:Companydata,Bloomberg,CMBIGMestimates