【行业研究报告】小米集团-W-4Q22 preview: a challenging quarter but the worst is likely over; Maintain BUY

7Feb2023
CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdate
Xiaomi(1810HK)
4Q22preview:achallengingquarterbuttheworstis
likelyover;MaintainBUY
Xiaomiwillreport4Q22resultsinlateMarch.Weestimate4Qrevenue/adj.net
profittodecline23%/70%YoYtoRMB65.5bn/1.33bn,mainlydrivenbyglobal
smartphoneweakness,higherR&DexpenseforsmartEVandone-offcharges
forwarrantypolicychange.Lookingahead,webelieve4Q22Eweaknesshas
beenpricedin,andsmartphonesalesispoisedtorecoversequentiallyin1Q23E,
drivenbyChinare-openingandimprovingchannelinventory.Overall,webelieve
theworstislikelyoverforXiaomi’searningsdecline,andweadjustedourTPto
HK$14.73,basedonP/Emultipleof24xFY23EP/E(vsprev.20xFY23EP/E).
MaintainBUY.CatalystsincludeEVprogressandmarketsharegain.
Smartphone:sluggishshipmentbutacceleratedinventorydestocking
in4Q22.CanalysreportedXiaomi’sglobalshipmentdeclined27%YoYin
in4Q22.CanalysreportedXiaomi’sglobalshipmentdeclined27%YoYin
4Q22(vs-18%YoYforindustry),andhadmarketshareof11%in4Q(No.1
amongChinesebrands).Xiaomi’s4Q22weaknesswasmainlydraggedby
40%/37%YoYdeclineinIndia/China.IntermsofASP,weestimate4Q22
ASPtoimproveQoQduetobetterproductmixandflagshiplaunches(e.g.
Mi13Pro)in4Q22.Lookingahead,wearepositiveonXiaomi’sdiversified
overseasexposureandacceleratedinventorydestockingin2H22E.We
expectXiaomi’sshipmenttostayflattishYoYto150mninFY23Eandgrow
4%YoYto156mninFY24E,whileASPwillgrow-1%/+13%inFY23/24E.
AIoT/internet:macroweaknessonAIoTandadsbusiness.Weestimate
AIoT/Internetrevenuetodecline16%/3%YoYin4Q22E(vs-9%/-3.7%YoY
in3Q22),mainlyduetomacroweaknessandloweradsspendingfrommajor
clients.WeexpectAIoTGPMtorecoverQoQto14%in4Q(vs13.5%in3Q)
givenlowerTVpanelpricing,whileAIoTGPMwillslightlydropQoQto70.0%
(vs72.1%in3Q).Lookingahead,backedbyChinare-openingandpolicy
easingongaming/adssectors,weexpectbothAIoT/internetsegmentsto
delivergradualrecoveryin2023.OurFY23EEPSis10%aboveconsensus
mainlyduetobettermixofhigher-GPMinternetservice.
Theworstislikelyover;RaiseTPtoHK$14.73onhighervisibilityof
earningsrecovery.Despitenear-termmacroweakness,webelievethe
worstislikelyoverforXiaomi’searningsdecline,andrevenue/earningswill
starttorecoverQoQin1Q23E,drivenbyChinare-openingandhealthy
inventorylevelinChina/India.Assuch,weadjustedourTPtoHK$14.73,
basedonhigher24xFY23EP/E(7%discountto5-yearavg.P/E)givenpost-
COVIDearningsrecoveryandimprovingsectorsentiment.MaintainBUY.