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Given the further deterioration of the smartphone and consumer IoT markets, the 2022-23E adjusted EPS for Chinese smartphone maker Xiaomi were lowered by 14% and 20%, respectively, said analysts at JPMorgan in a note on Tuesday.
The forecast of Xiaomi’s smartphone shipments this year is also lowered from 184 million units to 156 million units, and the bank now expects Xiaomi’s AloT business to grow by only 4% in 2022, due to weaker consumer demand, they said.
JPMorgan doesn’t see quick recovery in Xiaomi’s shipments next year, given the persistent weakness in the smartphone market, tough competition in Android phone markets as well as uncertainties in Indian market which accounted for 21% of Xiaomi’s total smartphone shipments in 2021.
The bank lowered the target price for Xiaomi’s stock from $12.5 to $11.5, maintaining its rating at Neutral. The bank anticipated continued earnings cuts from the market in the coming six months, which would further weigh on the share price performance.
Xiaomi’s revenue in the second quarter was also forecast to decline 19% year over year and 4% quarter on quarter, with the gross profit margin narrowing to 17%. The adjusted net profit was predicted to cascade 67% on year to 2 billion yuan, said the bank.
India is seeking to restrict Chinese smartphone makers from selling devices cheaper than 12,000 rupees ($150) to kickstart its faltering domestic industry, dealing a blow to brands including Xiaomi, according to Bloomberg News.
The move is aimed at pushing Chinese giants out of the lower segment of the world’s second-biggest mobile market, the report said. It coincides with mounting concern about high-volume brands like Realme and Transsion undercutting local manufacturers, it said.