Driven by strong core businesses such as electric cars and smartphones, can Xiaomi replicate the success of technology giants such as Apple?

According to the latest news from Zhuifeng Trading Station, Morgan Stanley pointed out in its latest report that it is expected that Xiaomi's market value may reach RMB 2.5 trillion by 2030, and its share price is expected to exceed HK$100. This figure means that Xiaomi's stock price still has room for nearly 100% growth in the next five years.

Morgan Stanley provides a reference framework for Xiaomi's valuation by comparing Apple, Tesla and BYD - soaring sales have led to a significant expansion of valuation.

By analogy between Tesla and BYD, the report expects Xiaomi's electric vehicle business to achieve rapid growth in the next two years (sales CAGR exceeds 100%), and its price-to-sales ratio is expected to reach 2 to 3 times in 2026. In addition, Xiaomi is expected to replicate Apple's success with the "smartphone + AIoT + Internet service" model. Morgan Stanley expects the business's price-to-earnings ratio to reach 20-25 times in 2025.

Dual engines drive long-term growth

Morgan Stanley believes that Xiaomi's long-term growth will be driven by two core engines: the electric vehicle business and the traditional business (smartphone + AIoT + Internet service). Morgan Stanley is expected to

Xiaomi's electric vehicle business revenue will rapidly grow from 33 billion yuan in 2024 to 233 billion yuan in 2027, and further expand to 462 billion yuan in 2030; at the same time, the profit of the electric vehicle business will reach 20 billion yuan in 2027 and 46 billion yuan in 2030. In comparison, the loss in 2024 was 6.2 billion yuan.

Traditional businesses benefit from market share improvement, product structure improvement and overseas expansion. It is expected that revenue will increase from 333 billion yuan in 2024 to 451 billion yuan in 2027, and reach 600 billion yuan in 2030, and profit will increase from 33.4 billion yuan in 2024 to 41 billion yuan in 2027, and reach 70 billion yuan in 2030.

Especially in electric vehicles, the launch of the SU7 Ultra marks a milestone in Xiaomi's business. Morgan Stanley pointed out that in the past fifteen years, Xiaomi’s most attractive selling point was its cost-effective product. In the next decade, Xiaomi's success in the electric vehicle field will accelerate its brand value and gradually gain more market share in the high-end or luxury product field.

Morgan Stanley raised the average selling price forecast for Xiaomi electric vehicles in 2025 and 2026 from RMB 245,000 and RMB 255,000 to RMB 255,000 and RMB 255,000 respectively, and the gross profit margin forecast also increased from 20.2% and 21.9% to 20.7% and 22.2% respectively.

Morgan Stanley expects that driven by two major growth engines, Xiaomi's total revenue will exceed 1 trillion yuan by 2030 and its net profit is expected to exceed 100 billion yuan.

Refer to the valuation evolution of BYD, Tesla and Apple

Investors are concerned about how to value Xiaomi, and Morgan Stanley believes that BYD, Tesla and Apple are the best reference objects.

BYD electric vehicle sales increased by about 70% in 2020 and about 150% in 2021. The price-to-sales ratio (P/S) rose from 1 times in 2020 to 3-4 times in 2021. The price-to-earnings ratio (P/E) fluctuates even more, rising from 20-30 times in 2018-19 to more than 70 times in 2021.

Tesla's price-to-sales ratio has also undergone similar changes, rising from 2-4 times in 2017-19 to 10-18 times in 2020-2022, when the growth rate of electric vehicle sales accelerates from 20-40% to 80-100%. The growth rate then slowed down to 20-40%, and the price-to-sales ratio also dropped to 4-8 times.

By analogy with Tesla and BYD, Morgan Stanley expects Xiaomi's electric vehicle sales to grow rapidly in the next two years, and the business's price-to-sales ratio is expected to reach 2-3 times in 2026. Specifically, Xiaomi's delivery volume is expected to increase significantly from 137,000 vehicles in 2024 to 370,000 vehicles in 2025, and is expected to further climb to 750,000 vehicles in 2026, which means its annual compound growth rate (CAGR) will exceed 100%.

As for Xiaomi's traditional business, Apple is the best reference.

The report pointed out that from 2017 to 2020, Apple's price-to-sales ratio increased from 3 times to 6-7 times, and smartphone shipments increased from -5% to +15%. However, from 2021 to 2025, the correlation between valuation and smartphone shipments decreased, and the price-to-sales ratio remained in a relatively stable range of 5-9 times, as the contribution of service revenue increased, its profit margins and returns were higher, and the valuation was maintained at a higher level.

Morgan Stanley believes that Xiaomi is expected to replicate Apple's success through the "smartphone + AIoT + Internet service" model, predicting that the business's price-to-earnings ratio will reach 20-25 times in 2025.

Combined with the growth performance of electric vehicles, smartphones and AIoT businesses, Morgan Stanley raised its target price for Xiaomi this year to HK$62:

Under the benchmark scenario, it is expected that Xiaomi's market value will reach RMB 1.2-1.6 trillion in the next 6-12 months, corresponding to the stock price of HK$50-67;

Under the optimistic scenario, Xiaomi's electric vehicle business will achieve an unexpected growth, with its price-to-sales ratio expected to reach 3.5-4 times, and its target price may reach HK$75-85, with a corresponding target market value of RMB 1.7-2 trillion.

Under the pessimistic scenario, Xiaomi's electric vehicle business growth is lower than expected, its price-to-sales ratio may remain at 1-1.5 times, and its target price may drop to HK$25-40, with a corresponding target market value of RMB 62.5-95 billion.

Morgan Stanley analysts believe that the valuation premium of Xiaomi's electric vehicle business is reasonable compared to other electric vehicle companies such as Xiaopeng, NIO, Ideal and BYD, as the company is expected to achieve stronger growth in 2025. At the same time, Xiaomi's non-electric vehicle business has a slight discount compared to technology hardware companies such as Sunny Optics and AAC Technology, and its valuation is reasonable.