[Overseas Stocks Spotlight] "Xiaomi Gains from Huawei's Spillover Effect and Platform Business Shift... Investment Appeal Remains Strong"

[Asia Economy Reporter Eunmo Koo] Samsung Securities evaluated Xiaomi as still attractive for investment due to Huawei's reflected benefits and its transition to a platform business.

Xiaomi's revenue for the second quarter of this year was 53.54 billion yuan, a 3.1% increase compared to the same period last year, surpassing the consensus estimate of 51.4 billion yuan. Adjusted net profit rose 129.8% to 4.49 billion yuan, exceeding the consensus of 2.4 billion yuan. Profit and loss from subsidiaries and investee companies amounted to 1.16 billion yuan, causing a sharp increase in net profit for the second quarter.

Although smartphone shipments decreased, this was offset by a rise in market share in Europe and an increase in average selling price (ASP). Smartphone sales recorded 31.6 billion yuan, down 1.2% year-on-year due to the impact of lockdowns. Shipments were 28.3 million units, a decline of over 11%, but the increase in ASP compensated for this. The Internet of Things (IoT) segment revenue grew 2.1% year-on-year to 15.3 billion yuan, showing a slowdown in growth.

Samsung Securities analyst Cheolmin Kim explained in a report on the 29th, "However, sales are increasing in TVs domestically and home products overseas, which is considered a temporary factor due to lockdowns," adding, "Internet service revenue grew 29% year-on-year as game sales increased."

The impact of Huawei sanctions is viewed positively. Analyst Kim stated, "With the strengthening of U.S. sanctions, uncertainty around Huawei's smartphone business has increased," and predicted, "From next year, new product launches will be difficult, and Huawei's smartphone sales will sharply decline." He also noted, "As of the first quarter this year, the market where Huawei holds the largest share is the $100 price segment, which is also the market where Korean manufacturers and Xiaomi follow Huawei, so these companies will relatively benefit more."

It is an analysis that it is time to evaluate Xiaomi as a platform. Analyst Kim said, "Currently, Xiaomi's business structure is transitioning from being smartphone-centered to a platform based on hardware infrastructure," and predicted, "Revenue from fintech and e-commerce in internet services continues to grow at a high rate of over 30%, and in the future, it will grow to the level of advertising and gaming, making the internet service business have a more stable profit structure." He concluded, "Xiaomi's stock price is undergoing a valuation reassessment due to Huawei's reflected benefits and the business model transition, so its investment attractiveness remains strong."

This content was produced with the assistance of AI translation services.