Xiaomi Corporation
Biweekly Valuation – Valutico | April 09, 2024
From Smartphones to Smart Cars
Since its foundation by Jun Lei in 2010, Xiaomi has been synonymous with innovation, rapidly ascending the ranks to become a global smartphone powerhouse, boasting a significant 12.9% market share. But it didn’t stop there. Expanding its empire into the Internet of Things (IoT), Xiaomi now connects everything from your wrist to your living room, seamlessly integrating a wide array of smart devices and internet services into the fabric of everyday life.
Redefining Mobility
The leap into 2024 marks a thrilling pivot for Xiaomi Corporation, as it charges headfirst into the electric vehicle (EV) sector. Moving beyond its stronghold in consumer electronics, Xiaomi is now set to electrify urban mobility, leveraging its deep tech expertise in one of the fastest-growing markets.
The SU7: Xiaomi’s Electric Masterpiece
The debut of Xiaomi’s SU7 electric vehicle is a watershed moment, heralding a new era of high-performance, eco-friendly sedans. Priced competitively at 215,900 yuan, the SU7 emerges as a potent rival to the Tesla Model 3, blending unparalleled aesthetics, intelligence, and driving dynamics, encapsulated in CEO Jun Lei’s vision of creating the most coveted sedan under 500,000 yuan.
A New Competitive Saga
As Xiaomi speeds into the EV arena, it faces stiff competition from automotive titans like Tesla, Nio, and BYD. Each brings to the table a unique blend of innovation and excellence, but Xiaomi’s ambition to weave its vehicles into its sprawling ecosystem of mobile and home devices sets the stage for an unparalleled Human x Car x Home connectivity.
Price War
Xiaomi’s launch of a competitively priced, high-end electric vehicle amplifies the price competition in the industry, potentially impacting profit margins sector-wide. While Xiaomi’s reputation for value might initially provide an advantage, sustaining such a pricing strategy in the EV market, known for narrow margins, is challenging. The brand is braced for potential financial turbulence in its EV division, a testament to its aggressive market penetration tactics.
Valutico’s View
As per Valutico’s analysis, Xiaomi is fairly valued. DCF valuation is at HKD 370 billion, with Trading Comparables suggesting a range of HKD 320-520 billion. However, Xiaomi appears to be trading at lower multiples versus bigger peers such as Apple, Samsung in the smartphones segment and Tesla in the EV segment.
A Journey of Innovation and Challenge
Xiaomi’s audacious foray into the electric vehicle domain is a strategic bet filled with immense potential. With its storied brand and tech innovation prowess, Xiaomi is uniquely poised to carve a niche in the competitive landscape. Yet, the road ahead is fraught with hurdles—scaling production, safeguarding margins, and untangling the complex automotive supply chain. Xiaomi’s quest to dominate the electric future is a narrative of ambition, resilience, and the relentless pursuit of excellence.
Disclaimer
This article is for informational purposes only and does not constitute investment advice. It should not be taken as a solicitation, offer, or recommendation to sell or buy any financial instrument.
