The analyst rating for Xiaomi (01810.HK) is maintained at Neutral due to several concerns highlighted in the report. The company has underperformed the Hang Seng Index (HSI) by nearly 40% over the past six months, primarily due to market worries about smartphone margin compression, weak demand growth for smartphones and IoT products, and uncertainties surrounding electric vehicle (EV) production capacity and demand in China.
Despite a downward adjustment in Xiaomi's valuation, the outlook remains challenging as data from the smartphone supply chain continues to worsen, and the shortening waiting times for EV deliveries suggest weaker-than-expected demand. Additionally, the broker anticipates that smartphone gross margins will hit a low point in the second and third quarters of 2026 before gradually recovering. The EV product cycle is expected to pick up in the second half of 2026, but production may face limitations due to delays in factory approvals.
Consequently, JP Morgan has lowered Xiaomi's core earnings projections for 2026 and 2027 and reduced the target price from HKD 45 to HKD 38, reflecting the ongoing challenges the company faces.
