HONG KONG — Xiaomi Corporation (HKG:1810) saw its shares decline 1.55% to close at HK$26.72 on Friday, as the company revealed it has utilized only a small fraction of its authorized share buyback program. The technology giant spent approximately HK$2.20 billion under its June buyback mandate, leaving roughly HK$17.8 billion — or 89% of the total HK$20 billion authorization — untapped.
The limited buyback activity suggests that Xiaomi's management may be cautious about deploying capital aggressively to support the stock price. Over the past week, the company repurchased 5.56 million shares across three trading sessions, representing just 0.84% of the total weekly trading volume of 660.88 million shares. This modest level of intervention provides only minimal short-term price support.
Buyback Program Details
Since the buyback program began on June 3, Xiaomi has repurchased 89.18 million shares for cancellation, accounting for 0.35% of the total issued shares as of the mandate date. The average purchase price is estimated at HK$24.62, which is 8.5% below Friday's closing price. At the current price level, the remaining buyback capacity would allow the company to acquire approximately 666 million shares, or about 2.6% of total shares outstanding.
If Xiaomi were to complete the entire buyback program and cancel all repurchased shares, it could boost earnings per share by roughly 3%, assuming steady profits and no additional share issuance. However, this projection remains uncertain given current market conditions.
Market Performance
Xiaomi's decline on Friday was nearly in line with the broader Hang Seng TECH Index, which fell 1.47% to 4,629.51. However, over the full week ending July 24, Xiaomi underperformed the tech index by approximately 0.7 percentage points, edging down 0.6% compared to the index's 0.1% gain.
Among peers, Geely Automobile Holdings (HKG:0175) rose 2.92% on Friday and advanced 3.1% for the week, while BYD Company (HKG:1211) remained unchanged on Friday and slipped 0.1% over the week.
Earnings Challenges
The company continues to face a challenging operating environment. First-quarter profit dropped 43%, with adjusted net profit reaching 6.1 billion yuan, missing the analysts' consensus estimate of 6.4 billion yuan. Revenue from smartphones declined 12.5% to 44.3 billion yuan, and the gross margin for handsets decreased to 10.1% from 12.4% a year earlier.
Xiaomi President William Lu described elevated memory expenses as the "new normal," though the company anticipates that cost increases will begin to ease from the third quarter, according to Reuters. Meanwhile, revenue from the electric vehicle segment increased 5.1% to 19 billion yuan, but operating losses from EV, AI, and other new businesses amounted to 3.1 billion yuan.
Risks and Outlook
Several risks could dampen the potential benefit of the buyback program. The HK$20 billion authorization represents a maximum rather than a commitment, and higher component prices, lower profits, or increased spending on electric vehicles could reduce the projected earnings per share gain. The company has not established a price floor for its buyback operations.
Xiaomi's board is scheduled to meet on August 18 to review interim results and discuss any interim dividend. Investors will be watching closely for any updates on the buyback program and the company's financial outlook.
In the broader Chinese economy, the central bank plans to conduct daily overnight reverse repos totaling 600 billion yuan from Wednesday to Friday next week, while the official purchasing managers' index for July is due for release on Friday at 09:30.
