JPMorgan Maintains Neutral Rating on Xiaomi Amid Concerns Over EV Shipments

JPMorgan released a report on May 12, reaffirming its target price of HKD 35 and a 'neutral' rating for Xiaomi Group (01810.HK). According to Jin10, the bank noted that despite a significant year-on-year decline in revenue growth in the smartphone and electric vehicle sectors for the first quarter of 2026, Xiaomi's overall adjusted net profit might exceed expectations due to improved gross margins in smartphones and IoT. Memory cost pressures are expected to persist into the second quarter, with DRAM and NAND prices potentially rising by 40-60% quarter-on-quarter. However, Xiaomi may defend its gross margin, which is around 8%, by increasing prices and exiting certain market segments. The bank forecasts a 27% year-on-year decrease in earnings per share for the 2026 fiscal year, which is still 12% below market consensus. A new concern has emerged regarding Xiaomi's electric vehicle shipments, which totaled only 110,000 units from the beginning of the year to April. There is uncertainty about whether Xiaomi can achieve its target of over 550,000 electric vehicle shipments. The bank believes that if electric vehicle shipments do not increase in the second quarter, Xiaomi is likely to lower its guidance for the 2026 fiscal year. Given these factors, the bank slightly adjusted its earnings per share forecast for the company while maintaining its target price and 'neutral' rating.