Xiaomi's shares listed in Hong Kong have surged much faster than the Hang Seng index over the last year. The bulk of Xiaomi's revenue comes from its core smartphone and internet-of-things business. They also have a smaller but profitable online segment focused on advertising and mobile game distribution. Analysts at JPMorgan predict these areas could bring in around 38 billion yuan ($5.2 billion) in net profit by 2026.
The challenge lies in finding comparable companies in the consumer electronics and internet services space. Apple is probably the closest match: if we use their projected earnings multiple for 2026, Xiaomi's main business could be valued at nearly $150 billion.
But this doesn't take into account the slow growth in its home market or the potential for more regulatory issues in the tech sector, which previously hurt Xiaomi's stock before the electric vehicle buzz. If we look at the average multiples of local internet giants like Tencent and Alibaba, the valuation drops to about $50 billion.
Since launching its electric car division, Xiaomi's stock has been trading closer to the average target price set by analysts. However, putting a price tag on the rapidly expanding auto segment is even trickier.
Analysts surveyed by Visible Alpha predict that the company's electric vehicle (EV) shipments will exceed one million units by 2030, a significant increase from approximately 130,000 units last year. This surge is attributed to Xiaomi's stylish models, which have garnered a substantial following, including Ford Motor Company's CEO, Jim Farley.
The company has achieved impressive gross margins despite relatively low production volumes, although its future profitability remains uncertain. Based on a multiple of two times the projected 2026 revenue, the current valuation for this group of Chinese electric vehicle manufacturers and Tesla stands at around $31 billion; this figure could potentially increase to $50 billion if investors are confident in meeting analyst projections by the end of the decade.
However, the path forward appears increasingly challenging for founder Lei Jun. While Xiaomi has managed to navigate the complexities of U.S.-China tech tensions thus far, there are concerning indications that the U.S. may expand its scrutiny of Chinese firms. Recently, Tencent was unexpectedly placed on a blacklist by the U.S. Department of Defense, which alleges connections to the Chinese military for it and over a hundred other companies. Xiaomi's aspirations in chip manufacturing could expose it to heightened examination from U.S. authorities.
While Xiaomi seems poised to fulfill its EV commitments, which has contributed to the recent stock surge, assessing the company's future potential may become more complicated moving forward.
Xiaomi's shares, listed in Hong Kong, have surged by 163% in the past year, closing at HK$34.70 on January 20. In comparison, the benchmark Hang Seng index has increased by 30% during the same timeframe.