Key Takeaways:
Xiaomi Group reported Q2 net profit of 9.46 billion yuan, up 21% from a year earlier and beating the 5.76 billion yuan consensus estimate.
"Top of mind for investors is how Xiaomi's smartphone unit is coping with elevated memory costs, and whether its product mix can keep shifting toward higher-priced models that provide a stronger cushion," Kenny Ng, a strategist at China Everbright Securities International, said.
Revenue fell 6.1% to 108.92 billion yuan, slightly above the 108.33 billion yuan estimate. Operating profit dropped 19% to 10.87 billion yuan, versus the 5.85 billion yuan forecast. First-half revenue totaled 208.06 billion yuan, with net profit of 14.19 billion yuan.
The profit beat may extend a rally that has lifted Xiaomi shares nearly 20% in Hong Kong since the end of June, the best quarterly performance in over a year. The stock trades at 17 times forward earnings, below its five-year average and compared with 22 times for the Nasdaq 100 Index.
The smartphone maker's EV business has been a relative bright spot, though its delivery target of 550,000 units for the year "is becoming increasingly challenging," Bernstein analysts including Eunice Lee wrote in a note. "While still achievable, it will require flawless execution and a rapid ramp of new SkyNomad model."
Options traders are pricing a 3.6% swing in either direction for Xiaomi shares after the results, more than the average 2.8% fluctuation seen following the last eight quarterly reports. Short interest has dropped to 8.2% of the free float from a record high of 9.3% in June, according to S3 Partners.
The earnings beat shows management is containing costs despite memory-price pressure that has weighed on the smartphone segment. Investors will watch the EV delivery ramp and gross-margin trajectory in coming quarters to gauge whether the profit momentum holds.
This article is for informational purposes only and does not constitute investment advice.
