Xiaomi’s Share Buyback: A Strategic Move Amid Market Pressures

Xiaomi KYG9830T1067

In response to a steep multi-month decline in its share price, Chinese technology giant Xiaomi has initiated a substantial stock repurchase initiative. The company aims to deploy an automatic buyback program worth HKD 2.5 billion (approximately USD 321 million) to stabilize its market valuation, which has faced significant erosion. This move comes as the firm navigates persistent operational headwinds, including margin compression in its core smartphone business and emerging challenges in its electric vehicle (EV) division.

Several concurrent factors are contributing to the downward pressure on Xiaomi's valuation.

• Smartphone Margin Squeeze: The company's fundamental mobile business is experiencing profitability challenges. For Q3 2025, smartphone revenue declined by 3.1% to CNY 46 billion, despite a slight 0.5% increase in shipments to 43.3 million units. This was driven by a lower average selling price. Furthermore, inflationary pressures, particularly rising memory chip costs, are compressing margins in this highly competitive, volume-driven segment.

• EV Segment Incidents and Competition: Xiaomi's nascent electric vehicle operation, while showing growth, recently faced scrutiny. Two separate fire incidents were reported on January 19th—one at a service center in Haikou and another following a collision on a highway in Kaifeng. Such events can impact consumer confidence. Additionally, the competitive landscape in China's EV market is intensifying rapidly, demanding relentless innovation, competitive pricing, and high product quality.

These challenges explain why the stock continues to trade near its 52-week low, even with the buyback announcement.

Details of the Buyback Initiative

The newly announced automatic repurchase plan, to be executed by an independent broker based on predefined parameters, follows consistent buying activity by the company. Since January 5th, Xiaomi has already spent roughly HKD 2.12 billion on near-daily share repurchases.

The scale of this intervention is a direct reaction to a precipitous drop in market capitalization. From its all-time high of HKD 61.46 in late June 2025, the stock has plummeted by over 40% in roughly seven months, wiping out approximately HKD 560 billion (USD 71.9 billion) in value.

The market's initial reaction to the buyback news was positive, with shares in Hong Kong early trading advancing 2.2% to HKD 36.02, outperforming the Hang Seng Tech Index.

Key Data Points:
* New automatic buyback program: HKD 2.5 billion
* Amount spent since Jan. 5: HKD 2.12 billion
* Share price decline from peak: >40%
* Lost market capitalization: ~HKD 560 billion
* Current 52-week range: HKD 34.25 to HKD 61.45

Analyst Perspectives and Valuation Metrics

Financial institutions have adjusted their outlooks in light of the changing operating environment:

• Goldman Sachs reduced its price target to HKD 53.50, citing increased component and memory costs as a primary concern.
• DBS maintains a more bullish target of HKD 70, viewing the electric vehicle business as a key medium-term growth driver.

The consensus analyst price target sits between HKD 56 and HKD 58, which remains significantly above the current trading range of HKD 35-36. This disparity suggests the market is currently applying a much more cautious valuation than most analyst models.

Based on a current market cap of about HKD 912 billion, the stock trades at a price-to-earnings ratio of 21.89. Trailing twelve-month revenue stands at HKD 449 billion, with net profit of HKD 44 billion.

EV Division Shows Promising Growth

Despite recent setbacks, Xiaomi's electric vehicle and AI segment is demonstrating operational progress. Monthly deliveries reached around 50,000 units by the end of 2025. Notably, the combined EV and AI division reported its first quarterly profit in Q3 2025, earning CNY 700 million.

The upcoming launch of the new SU7 model in April could provide additional momentum. Daiwa analyst Kelvin Lau anticipates strong orders for this next-generation luxury electric sedan. A significant portion of Xiaomi's medium-term growth narrative now hinges on its ability to achieve sustainable scale in the fiercely competitive EV market. The share repurchase program offers at least short-term support for the equity during this pivotal phase.

In summary, Xiaomi is positioned at a crossroads, balancing clear valuation pressures and operational risks against a visibly expanding EV and AI business. Whether the combination of the buyback, rising delivery figures, and the new model launch will translate into meaningful share price relief will likely become clearer with the next quarterly earnings report and the initial sales performance of the SU7.