J.P. Morgan on Xiaomi (1810.HK): Margin Pressure Persists, No Inflection Point Yet, Maintain Neutral
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J.P. Morgan maintains a Neutral rating on Xiaomi (1810.HK) with a target price of HK$35. Despite the stock falling 43% over the past year, analysts argue the turning point has not arrived. While 4Q25 results aligned with expectations—revenue reaching RMB 116.9 billion—core business margins are projected to decline further in 1H26. Analysts forecast a 25% year-over-year drop in 2026 EPS to RMB 1.10, well below the Bloomberg consensus of RMB 1.42.
This weakness is primarily driven by soaring memory costs that are pressuring smartphone gross margins, expected to fall slightly above 7.5% in 2026. This falls considerably short of the historical average. Meanwhile, electric vehicle deliveries remain heavily weighted toward the second half of the year, relying on the YU9 model as a primary catalyst. While the updated SU7 secured 30,000 orders in just three days, this was insufficient to trigger higher delivery estimates.
Historically, valuation bottoms align near 2x forward price-to-book or 10-12x forward price-to-earnings, implying a potential 20% downside to roughly HK$26-27. AI and humanoid robotics represent promising long-term drivers but lack the immediate catalysts needed to reverse the stock's trajectory. Consequently, J.P. Morgan prefers to wait for clearer signs of margin stabilization or revenue acceleration before turning constructive.