On October 27, Xiaomi Group (01810.HK) suffered a heavy setback in the capital market. During the day, Xiaomi Group's share price fell 4.44% to HK$43.88 per share. As of the close of the day, Xiaomi closed at HK$45.80 per share, with a total market value of HK$1.19 trillion.
Taking a longer view, compared with the intraday high of HK$59.90 per share on September 25, Xiaomi Group has fallen as much as 26.7% in one month, and its market value has evaporated by about HK$417 billion, which is equivalent to evaporating the market value of about one JD.com Group.
Judging from the news, the market is paying close attention to Xiaomi’s upcoming third quarter results. A number of investment banks have recently released research reports, generally lowering their target prices for Xiaomi Group, which has triggered market concerns about Xiaomi Group's short-term profitability, especially concerns about the gross profit margin of its core smartphone business.
Citibank pointed out in a research report released on October 27 that Xiaomi Group is expected to release its third quarter 2025 results on November 18, but the overall performance may be "slightly lower than the bank's expectations." Citi believes that the main reason for the pressure on performance is lower than expected smartphone gross profit margin and IoT revenue.
Citi analysis said that smartphone gross profit margins were dragged down by "unfavorable regional mix" and "increased memory prices"; while IoT revenue was affected by "the weakening of China's subsidy effect". Therefore, Citi lowered the group's smartphone shipment forecast from 2025 to 2027 by 2 million units and lowered its gross profit margin assumptions.
CICC’s research report also reflected the same concerns. CICC Research pointed out that "taking into account the cost pressure brought by rising storage prices", it lowered Xiaomi's adjusted net profit forecast for 2025/2026. CICC expects that due to the increase in storage prices, the gross profit margin of mobile phones in 3Q25 will decrease by 0.4 percentage points from the previous quarter to 11.1%.
Based on the profit forecast adjustment and the downward shift in the industry valuation center, CICC announced that it will lower Xiaomi's target price by 15.0% to HK$59.5.
However, despite the short-term pressure on the mobile phone business, investment banks generally expressed optimism about the profitability of Xiaomi's automotive business.
CICC predicts that the delivery volume of Xiaomi cars in 3Q25 will reach 109,000 units, and predicts that "the automobile business will make profits for the first time", with a single-quarter profit of 707 million yuan.
Citi also predicts that Xiaomi’s electric vehicle operating profit will turn around from loss to profit in 3Q25, reaching RMB 722 million. CMB International also attributed the strong growth momentum of 3Q25 performance to "the strong momentum and improved profitability of the smart electric vehicle business."
Although all three investment banks have lowered the target price of Xiaomi Group (Citigroup to HK$65, CMB International to HK$61.3, and CICC to HK$59.5), they all maintained a "buy" or "outperform industry" rating, showing their recognition of the long-term value of the "People and Cars" all-ecological model. However, the short-term valuation reconstruction caused by cost pressure and core business gross profit margin is putting significant pressure on Xiaomi's stock price.