Should You Buy Xiaomi Stock Now?
Joe Wong, Dealer
Joe Wong is a seasoned investor with over 15 years of experience in both the financial markets and entrepreneurial ventures. A Macquarie University alumnus with a Bachelor’s degree in Applied Finance from Australia, Joe is a staunch advocate in the Value Investing approach.
His portfolio management strategy focuses on identifying undervalued companies with strong fundamentals. This disciplined approach has consistently yielded double-digit returns on his own portfolio. Despite his investment track record, Joe maintains a strong appetite for knowledge and remains an avid reader.
Xiaomi news has been making headlines as the tech giant’s market value recently surpassed an impressive 1 trillion HKD on 4 February 2025. This milestone comes as no surprise, considering the company’s remarkable year-to-date stock increase of 52.5% as of 5 March 2025.
Source: Google Finance
Let’s explore the hidden indicators behind this growth story and assess whether this is the beginning of a larger upward trend or merely a temporary spike.
Let’s delve into the future prospects that make Xiaomi an intriguing investment opportunity right now.
Understanding Xiaomi's Market Position
Source: Canalys
Global Market Share
Xiaomi stands as the third-largest smartphone manufacturer globally, commanding a significant 14% market share [1]. The company’s strategic positioning primarily revolves around delivering high-performance technology at competitive prices, which has proven particularly effective in emerging markets [2].
Source: Xiaomi
The company’s market strategy has yielded impressive results, with smartphone shipments reaching 42 million units globally in the third quarter of 2024, just behind Apple’s 54 million units in the same period.
Moreover, Xiaomi’s approach to product development focuses on its yearly launches of improved models while maintaining consistent price points, strengthening their value-for-money proposition [1].
Source: Xiaomi
Xiaomi achieved a 14.7% market share in Mainland China’s smartphone market and ranked fourth in brand positioning in the September quarter of 2024. Notably, Xiaomi’s smartphone shipments in China surpassed Apple’s, reflecting its growing dominance in the region.
A closer look at the market reveals that although Vivo secured the top position in smartphone shipments, its lead over Huawei is marginal.Therefore, this indicates that the smartphone business in China is highly fragmented and highly competitive.
Consequently, Xiaomi has successfully captured the attention of tech-savvy consumers and value seekers across global markets [2]. The company’s focus on younger demographics, including millennials and Generation Z, has helped to establish a strong presence in key markets like India and China [2].
Notably, Xiaomi’s market strategy minimises traditional advertising costs through digital engagement and community involvement, allowing for more competitive product pricing [2]. This approach has been instrumental in maintaining their position as a leading technology company while expanding into new market segments.
Hidden Growth Indicators
Source: Xiaomi
Xiaomi’s global base of 861 million connected devices as of Q3 2024 has been growing steadily. The Xiaomi Smart Home App and its AI assistant also experienced notable user growth during the same period.
The data represented indicates that there is a growing number of users for Xiaomi applications and this could create a sizable ecosystem, where users become increasingly reliant on Xiaomi, creating a high switching cost for those considering alternative ecosystems.The growing number of active devices will give Xiaomi a good position to generate recurring revenues from its user base in the future
Source: Xiaomi
Xiaomi’s global base of 861 million connected devices as of Q3 2024 has been growing steadily. The Xiaomi Smart Home App and its AI assistant also experienced notable user growth during the same period.
The data represented indicates that there is a growing number of users for Xiaomi applications and this could create a sizable ecosystem, where users become increasingly reliant on Xiaomi, creating a high switching cost for those considering alternative ecosystems.The growing number of active devices will give Xiaomi a good position to generate recurring revenues from its user base in the future
Future Growth Outlook
The company’s earnings are forecast to grow by 23.4% annually [9], substantially outpacing the Hong Kong market average of 11.7% [9]. Revenue growth is expected to maintain a robust pace of 15.4% per year [9], with earnings projected to double over the next few years [10].
Source: Xiaomi
Xiaomi’s expansion strategy is heavily focused on its EV division, targeting both emerging and established markets globally. In September 2024, the company sold 10,000 units of its SU7 sedan, marking a strong debut in the automotive sector. [11]. Building on this succes, the company plans to launch its high-performance tri-motor SU7 Ultra in Q1 2025 [3], another clear demonstration of its commitment to the automotive sector.
The company also signaled that deliveries in October 2024 will be ramped up to 20,000 vehicles due to Xiaomi’s latest introduction to new technological advances in production that could create efficiency in manufacturing.
Source: Simplywallst
Key growth metrics for 2025:
- Return on equity forecast at 4% [9]
- Retail presence expanding to 15,000 outlets globally [12]
- Southeast Asian operations targeting 10 stores in Singapore alone [13]
Subsequently, Xiaomi’s global strategy encompasses both emerging and established markets. The company is primarily focusing on fulfilling domestic demand presently [3], though plans for European expansion are already in motion [3]. Essentially, this approach aligns with their long-term vision of becoming one of the world’s top five automakers within the next 15-20 years [3].
The integration of AI technology into product offerings stands as another crucial growth driver [12]. Through AIOS implementation and enhanced operational efficiency [12], Xiaomi aims to strengthen its market position while maintaining its commitment to innovation and technological advancement.
Conclusion
All things considered, Xiaomi’s remarkable journey from a smartphone manufacturer to a technological powerhouse demonstrates the company’s exceptional growth potential. Their stock performance, backed by a 1 trillion HKD market value and a 49% year-to-date growth, signals strong market confidence.
Undoubtedly, Xiaomi’s aggressive R&D investments, particularly the planned RMB 30 billion allocation for 2025, showcases their commitment to innovation. Their successful entry into the electric vehicle market, marked by impressive SU7 sedan sales, proves their ability to diversify and capture new market opportunities.
Therefore, considering the projected 23.4% annual earnings growth and expanding global presence, Xiaomi appears well-positioned for substantial future growth
Xiaomi has a current Price-to-Earnings (P/E) ratio of 62x, compared to Apple’s P/E ratio of 39 x [3]. Xiaomi’s Price to Sales (P/S) ratio is 26x compared to Apple’s P/S Ratio o f9x and Xiaomi’s net profit margin as at September 2024 was 5.68% while Apple’s net profit margin is 29%.
Based on Xiaomi’s latest Weighted Average cost of capital at 7.67% and using a discounted cash flow valuation model, I have valued Xiaomi at HKD 17.41 per share.
At today’s share price of Xiaomi, this trades at a 72% premium above my intrinsic valuation.
The indicators suggest that Xiaomi is currently overvalued based on today’s share price. This premium could be attributed to the company’s promising growth outlook.
In my opinion, to justify such valuations, Xiaomi must do more to add value to its users, rather than relying solely on competitive pricing. Engaging in price wars could erode margins and undermine long-term profitability
Trade Xiaomi Now using HK SDRs
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The benefits of using an SDR is that it is cost effective as transactions are settled in SGD, so there are no foreign exchange risk exposure
Investors can also buy shares in smaller amounts with investment sizes ranging from 2% to 15% of the underlying shares
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References
[1] – https://canalys.com/newsroom/worldwide-smartphone-market-2024
[2] – https://buildd.co/marketing/xiaomi-marketing-strategy
[3] – https://electrek.co/2024/08/22/xiaomi-eyes-global-expansion-europe-become-top-five-automaker/
[4] – https://technode.com/2024/12/27/xiaomis-rd-investment-to-hit-4-billion-dollars-in-2025/
[5] – http://www.thejakartapost.com/business/2023/06/02/xiaomi-increases-investment-in-innovation-moves-up-on-bcg-most-innovative-list.html
[6] – https://www.trendforce.com/news/2024/07/09/news-featuring-mix-fold-4-xiaomis-smart-factory-opens-with-10-million-annual-flagship-smartphone-capacity/
[7] – https://www.prnewswire.com/news-releases/grow-with-xiaomi-xiaomis-international-internet-partner-strategy-for-2024-announced-301964022.html
[8] – https://www.investing.com/news/stock-market-news/earnings-call-xiaomi-reports-robust-growth-and-expansion-plans-93CH-3583826
[9] – https://simplywall.st/stocks/hk/tech/hkg-1810/xiaomi-shares/future
[10] – https://simplywall.st/stocks/hk/tech/hkg-1810/xiaomi-shares/news/is-it-too-late-to-consider-buying-xiaomi-corporation-hkg1810-1
[11] – https://www.reuters.com/business/autos-transportation/xiaomis-automobile-plant-expansion-be-completed-mid-2025-report-says-2024-10-23/
[12] – https://finance.yahoo.com/news/xiaomi-sehk-1810-eyes-ai-004717206.html
[13] – https://www.channelnewsasia.com/singapore/xiaomi-store-singapore-opening-southeast-asia-expansion-4818786
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