MORGAN STANLEY says Xiaomi Group (01810.HK) reported Q2 adjusted net profit of
RMB 6.219 billion, down 43% YoY and up 2% QoQ. Smartphone revenue and gross
margin materially beat the bank's expectations; electric vehicle and IoT revenue
slightly missed. Management said storage price rises should normalize in H2,
which would lessen the negative impact on handset margins. MORGAN STANLEY
expects smartphone gross margins to remain resilient in H2 and views this as a
potential positive surprise and re-rating catalyst. Firm maintains Overweight
rating and HK$32 target price.
