- Reuters
- 8 Hours ago

Xiaomi’s rally will hit valuation potholes
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- Reuters
- Jan 21, 2025

HONG KONG: There is no simple route to valuing China’s Xiaomi. The company, best known for its smartphones and internet-connected rice cookers, air purifiers and other gadgets, began selling electric cars last year. That helped power its market capitalisation to a record high of $117 billion earlier this month. But a look under the hood suggests valuing Xiaomi’s different parts can get messy.
Shows Xiaomi’s Hong Kong-listed shares have seen their price increase at a much quicker pace than the city’s benchmark Hang Seng index over the past 12 months.
Shows Xiaomi’s Hong Kong-listed shares have seen their price increase at a much quicker pace than the city’s benchmark Hang Seng index over the past 12 months.
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Take its bread-and-butter smartphones and internet-of-things business, which accounts for the bulk of Xiaomi’s top and bottom lines.
The company also boasts a small but lucrative online division, comprised of mainly advertising and mobile games distribution.
Together, those units are on track to generate 38 billion yuan ($5.2 billion) of net profit in 2026, analysts at JPMorgan reckon.
Trouble is, there are not that many comparable businesses spanning consumer electronics and internet services. Apple may be the closest peer: using the iPhone-maker’s forecast 2026 earnings multiple of roughly 28 times, Xiaomi’s core business may be worth nearly $150 billion.
Yet that doesn’t account for lacklustre growth in its home market or risks of another regulatory crackdown on the tech sector – factors that dragged down Xiaomi’s stock price prior to the EV hype.
Using the average multiple of domestic internet giants Tencent and Alibaba instead, the business is worth closer to $50 billion.
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Shows Xiaomi is trading closer to its mean analyst target price since the successful launch of its electric-car business.
Shows Xiaomi is trading closer to its mean analyst target price since the successful launch of its electric-car business.
Ascribing value to the fast-growing autos division is even less straight-forward. Analysts polled by Visible Alpha expect the company’s EV shipments to top a whopping one million units by 2030, from around 130,000 last year, as Xiaomi’s sleek Porsche lookalikes win over legions of fans, including Ford Motor F.N boss, Jim Farley.
They have also cranked out high gross margins from relatively low volumes, though future profitability is still unclear.
On a multiple of 2 times forecast 2026 revenue, the average for a group of Chinese electric-car stars and Tesla, the unit clocks in at just $31 billion today; that could rise to $50 billion if investors believe it will hit analyst targets at the end of this decade.
Meanwhile, the road ahead looks even more hazardous for founder Lei Jun. Xiaomi may have effectively navigated US-China tech wars and geopolitical tensions so far, but there are troubling signs that Washington is set to target a wider range of Chinese companies.
Earlier this month, Tencent was unexpectedly blacklisted by the US Department of Defense, which accuses it and more than a hundred others of having links with the Chinese military.
Xiaomi’s own chipmaking ambitions could make it vulnerable to extra scrutiny from Washington.
Xiaomi may be on track to deliver on its EV promises, justifying the stock rally. But valuing the company’s prospects will get trickier from here.
CONTEXT NEWS
Xiaomi’s Hong Kong-listed shares have rallied 163 per cent over the past 12 months, closing at HK$34.70 each on Jan 20. The benchmark Hang Seng has risen 30 per cent over the same period.
