小米集团 (1810.HK): Xiaomi: Short-term challenges, long-term strategic advantages

We lower our forecasts for the company's adjusted earnings by 4%/8% in 2027/2028 mainly to reflect lower smartphone/IoT revenue given that near-term pressure from component costs and supply constraints may persist, while keeping our 2026 adjusted earnings forecast largely unchanged. We remain constructive on Xiaomi's integrated "Human + Car + Home" ecosystem and increasing synergies across SoC, AI and smart devices in the medium to long term, although we believe the integration with AI and self-designed chips across smart devices requires significant upfront investment. The stock has declined by 33% YTD, which suggests the market has priced in near-term pressure from rising memory costs and component shortages;