On Thursday, BofA Securities adjusted its stance on Xiaomi (OTC:XIACF) Corp (1810:HK) (OTC: XIACF), elevating the stock from Neutral to Buy and increasing the price target to HK$22.00, up from the previous HK$17.50.
The upgrade follows Xiaomi's second-quarter results, which surpassed expectations, driven by strong electric vehicle (EV) deliveries with robust gross margins (GM), significant growth in the Internet of Things (IoT) segment, and improved internet sales and GM.
The analyst at BofA Securities highlighted that Xiaomi's adjusted earnings for the second quarter outperformed both the firm's estimates and the consensus by 19% and 27%, respectively.
This performance was primarily attributed to a solid GM of 20.7%, which was one percentage point above both BofA Securities' and consensus estimates. Enhanced margin profiles led to an increase in GM in both the EV sector and Xiaomi's core business.
In response to these positive results, BofA Securities has revised its earnings estimates for Xiaomi from 2024 to 2026, increasing them by 20% to 69%. The firm's rationale for the upgrade includes raised margin expectations for Xiaomi's operations.
Furthermore, the price objective has been adjusted to HK$22.00, following a valuation base rollover to 2025, which was previously set between the second half of 2024 and the first half of 2025.
Additionally, BofA Securities applied a higher price-to-sales (P/S) multiple of 3.0x to Xiaomi's EV business, an increase from the previous 1.8x. This revision reflects a more optimistic outlook on the company's valuation, particularly in its burgeoning EV division.
InvestingPro Insights
As Xiaomi Corp (OTC: XIACF) continues to impress with its strong performance in the EV and IoT sectors, InvestingPro data further solidifies the company's positive outlook. With a market capitalization of $60.76 billion and a P/E ratio of 24.78, Xiaomi stands out as a significant player in the technology sector. The company's adjusted P/E ratio for the last twelve months as of Q1 2024 is even more attractive at 23.18, suggesting a more favorable earnings perspective. Additionally, Xiaomi's PEG ratio during the same period is remarkably low at 0.19, indicating potential undervaluation relative to its earnings growth.
InvestingPro Tips highlight Xiaomi's robust financial health, noting that the company holds more cash than debt, a reassuring sign for investors. Furthermore, two analysts have revised their earnings upwards for the upcoming period, reflecting growing confidence in Xiaomi's financial trajectory. The company's low revenue valuation multiple and the fact that it is trading at a low earnings multiple also make it an intriguing option for value investors. Xiaomi's cash flows are strong enough to cover interest payments comfortably, and the company has demonstrated a high return over the last year, with a significant price uptick in the past six months.
For investors seeking more in-depth analysis and additional insights, InvestingPro offers further tips related to Xiaomi's performance and prospects. As the company continues to grow and evolve, staying informed with the latest data and expert tips can provide a valuable edge in making informed investment decisions.
Visit InvestingPro for a comprehensive list of tips and to gain access to the full suite of advanced investment tools: https://www.investing.com/pro/XIACF
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