On May 23, Xiaomi Group (1810.HK) announced its financial results for the first quarter ending March 31, 2024. The financial report indicated that Xiaomi's revenue for the quarter was 75.507 billion yuan, a year-on-year increase of 27.0%; the adjusted net profit was 6.491 billion yuan, a year-on-year increase of 100.8%.

Specifically, in terms of business, Xiaomi's smartphone business revenue for the quarter was 46.5 billion yuan, a year-on-year increase of 32.9%. Global smartphone shipments reached 40.6 million units, a year-on-year increase of 33.7%. The proportion of high-end smartphone shipments accounted for 21.7%, an increase of 1.4% year-on-year.

The ASP (Average Selling Price) of Xiaomi smartphones slightly decreased by 0.6% from 1,151.6 yuan per unit in the first quarter of 2023 to 1,144.7 yuan. Regarding the decline in this data, during the earnings call, Lu Weibing, a partner and president of Xiaomi Group, stated that on one hand, there were seasonal factors; the launch of Xiaomi 14 was one and a half months earlier than that of Xiaomi 13 last year. On the other hand, Xiaomi has seen rapid growth in emerging markets such as the Middle East, Latin America, Southeast Asia, and Africa, which are generally low ASP regions.

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According to Canalys data, Xiaomi achieved a year-on-year increase in smartphone market share in the Middle East, Latin America, Africa, and Southeast Asia in the first quarter. Specifically, in the Middle East, it ranked second with a market share increase of 7.1% year-on-year to 20.9%; in Latin America, Southeast Asia, and Africa, it ranked third with market share increases of 2.0%, 4.4%, and 4.5% year-on-year, respectively, reaching market shares of 15.3%, 16.5%, and 10.6%.

It is noteworthy that the gross margin of Xiaomi's smartphone division decreased from 16.4% in the fourth quarter of 2023 to 14.8%, mainly due to the increase in core component costs and the increase in inventory impairment provisions. Lu Weibing stated that although external factors, including memory prices, may have a certain impact on the company's performance, these impacts are controllable. As long as there are no extreme changes in the external environment, Xiaomi is confident in maintaining the growth momentum of the overall gross margin seen in the first quarter.

A report from TrendForce Corp indicated that the prices of mobile DRAM and NAND flash memory (eMMC/UFS) surged significantly in the first quarter of 2024, with an expected seasonal increase of 18%-23%. This will have a significant impact on smartphone manufacturers, personal computer manufacturers, data centers, the gaming industry, and electronic equipment manufacturers.

Lin Shiwei, Vice President and Chief Financial Officer of Xiaomi Group, stated during an investor call that if the prices of raw materials continue to rise, Xiaomi would engage in strategic inventory stocking. Additionally, categories such as air conditioners will enter their peak sales season in the second quarter, and in preparation for the "618" sales, Xiaomi will also make corresponding inventory preparations.

Furthermore, the IoT and lifestyle consumer products business revenue for the quarter was 20.4 billion yuan, a year-on-year increase of 21.0%, with the number of IoT devices connected to the AIoT platform reaching 78.61 million, a year-on-year increase of 27.2%. Internet services business revenue reached 8 billion yuan, a year-on-year increase of 14.5%. Lu Weibing stated that Xiaomi will initiate an orderly international rollout of smart home appliances such as air conditioners, refrigerators, and washing machines. Currently, non-smartphone business accounts for 50% of Xiaomi's domestic business revenue, but this proportion is less than 20% in overseas business.

As of April 30, 2024, the cumulative order volume for the Xiaomi SU7 series reached 88,063 units. In terms of intelligent driving, the Xiaomi Smart Driving team has now exceeded 1,000 members. The Xiaomi Smart Driving solution, Xiaomi Pilot Max, is planned to launch urban navigation (urban NOA) in 10 cities across mainland China by the end of May 2024, with full urban navigation expected to be available across mainland China by August 2024. Regarding smart cockpits, the Xiaomi SU7 series comes with Xiaomi's surging OS, enabling cross-device connectivity between the vehicle system and mobile phones, as well as connectivity between the vehicle system and Mi Home smart devices.

Additionally, Xiaomi plans to expand its car sales and service network to 219 outlets covering 46 cities by the end of 2024. Lu Weibing stated that Xiaomi is considering further expansion and will also increase the floor area of shopping mall stores to over 500 square meters."Regarding new energy vehicles, the company is also developing other models. In terms of delivery targets, a minimum of 100,000 units is the guaranteed goal, with the challenge being to deliver 120,000 units for the year," Lu Weibing revealed that Xiaomi will firmly invest in intelligent driving this year, with a budget of about 1.5 billion yuan for 2024, and the total first phase investment will reach 4.7 billion yuan.

In terms of R&D expenditure, due to the progress of the group's research projects, Xiaomi Group's R&D expenditure for this quarter increased by 26.8% from 4.1 billion yuan in the first quarter of 2023 to 5.2 billion yuan, mainly due to the increase in R&D expenditure related to the intelligent electric vehicle business and other innovative businesses. However, it decreased by 5.5% compared to the previous quarter's 5.5 billion yuan.

At the close of the Hong Kong stock market today, Xiaomi Group's share price was 18.94 Hong Kong dollars, down 2.57%.