Xiaomi Launches Major Share Buyback Amid Strategic Shifts

Xiaomi KYG9830T1067

The Chinese technology conglomerate Xiaomi has initiated a two-pronged strategy to counter recent share price weakness and bolster investor confidence. This move combines a significant capital return initiative with an intensified push in the competitive electric vehicle (EV) sector.

In a direct response to a share price decline of approximately 10% since the start of the year, Xiaomi's board has authorized an automatic share repurchase program valued at HKD 2.5 billion (roughly USD 321 million). This substantial buyback, which takes effect immediately, follows smaller purchases made earlier in the month. The company's leadership is signaling its belief that the current valuation does not reflect the firm's intrinsic value. The announcement provided immediate support to the stock, which closed the trading session up 2.84% at HKD 36.24.

Electric Vehicle Ambitions Fuel Price Competition

Concurrently, Xiaomi is aggressively pursuing growth in its automotive division. To hit its target of delivering 550,000 vehicles by 2026, the company has unveiled new financing options designed to attract customers. These include loans with terms extending up to seven years at exceptionally low interest rates.

For its YU7 model, the upfront payment has been reduced to 49,900 yuan, with monthly installments starting as low as 2,593 yuan. This pricing strategy represents a direct challenge to rivals like Tesla and XPeng in China's fiercely contested EV market. The apparent goal is to capture market share through attractive consumer financing, even if it pressures profit margins in the near term.

Operational Headwinds Persist

Despite these proactive measures, Xiaomi continues to face operational challenges in its core smartphone business. A global shortage of memory chips and rising component costs have compelled the company to revise its smartphone delivery forecast for the current year downward. To reduce this long-term dependency, Xiaomi has outlined a plan to invest 50 billion yuan into its own semiconductor development over the coming decade.

Market Response and Valuation Metrics

The dual strategy of shareholder returns and growth investment has resonated with the market. Investors, particularly from mainland China, seized on the recent price dip. Net inflows via the Southbound Stock Connect channel reached HKD 608.4 million in a single day, bringing the weekly total to HKD 2.58 billion.

From a fundamental perspective, the stock appears moderately valued with a price-to-earnings (P/E) ratio around 19.6, especially considering the solid revenue of CNY 491.13 billion over the past twelve months. Technically, the share price managed to rebound from its 52-week low of HKD 34.25, though it remains down about 38% over a six-month period.

The critical question for Xiaomi's future share performance is whether volume growth in the EV segment can offset the costs of its aggressive pricing and the ongoing strain from chip supply constraints. In the immediate term, maintaining support above the HKD 36 level presents a key technical test for the equity.