Xiaomi's rally will hit valuation potholes

By Katrina Hamlin

HONG KONG, Jan 21 -  That helped power its market capitalisation to a record high of $117 billion earlier this month. But a look under the hood suggests valuing Xiaomi's different parts can get messy.



Take its bread-and-butter smartphones and internet-of-things business, which accounts for the bulk of Xiaomi's top and bottom lines. Trouble is, there are not that many comparable businesses spanning consumer electronics and internet services. Apple may be the closest peer: using the iPhone-maker's forecast 2026 earnings multiple of roughly 28 times, Xiaomi's core business may be worth nearly $150 billion. Yet that doesn't account for lacklustre growth in its home market or risks of another regulatory crackdown on the tech sector – factors that dragged down Xiaomi's stock price prior to the EV hype.

Using the average multiple of domestic internet giants Tencent and Alibaba instead, the business is worth closer to $50 billion.The company also boasts a small but lucrative online division, comprised of mainly advertising and mobile games distribution. Together, those units are on track to generate 38 billion yuan ($5.2 billion) of net profit in 2026, analysts at JPMorgan reckon.



Ascribing value to the fast-growing autos division is even less straight-forward. Analysts polled by Visible Alpha expect the company's EV shipments to top a whopping one million units by 2030, from around 130,000 last year, as Xiaomi's sleek Porsche lookalikes win over legions of fans, including Ford Motor F.N boss, Jim Farley. They have also cranked out high gross margins from relatively low volumes, though future profitability is still unclear. On a multiple of 2 times forecast 2026 revenue, the average for a group of Chinese electric-car stars and Tesla, the unit clocks in at just $31 billion today; that could rise to $50 billion if investors believe it will hit analyst targets at the end of this decade.