Xiaomi is fairly priced but not attractive at P/E 19; wait for P/E 9-10 to buy.

Now, I was looking at some Asian stocks and you can't help but look at Xiaomi. The company is present in everything; Smartphones, AI-powered Internet of Things, and electric cars, but the stock is down 50%.

Therefore, we should look at it from an investment perspective, but there is also a very interesting story related to it because it is connected to everything; In Asia, electric cars, artificial intelligence, smartphones, our lifestyle, the market, price, risks and returns. So, it's a very interesting story.

If we look at the business side, everything seems fine. They have their place in the world. They were slightly affected by the rising prices of memory for their smartphones. However, they are investing large sums for themselves, 40 billion renminbi, which is equivalent to approximately 6 billion US dollars.

Of course, Xiaomi's market value is $32 billion. The stock is down 50%.

If Elon Musk buys this company, it will be a way for Elon to make a few trillion. He could buy Xiaomi for 40 billion and revalue it to reach 3 trillion.

However, they are also involved in artificial intelligence models and the use of codes. They are doing very well. They are competing with all the other players.

The confirmation is here. With a market value of 30 billion, they are doing well. Other players don't even reach 30 billion in revenue, yet they have market values in the billions.

Embodied intelligence, Xiaomi robots, things like that are highly applicable. We'll see how things turn out. They are expanding, integrating, and increasing the number of stores where they will be able to sell everything to you.

Smartphones are no longer cheap as they have had to raise their prices due to increased memory costs, but they still hold their second, third or fourth position. So, they are still in a good position.

They have succeeded in significantly increasing average selling prices by 25%. This helped a little, but sales are still low. Their global user base is constantly growing. As well as tablets and wearable devices.

But there's more. There are electric cars and artificial intelligence. They are expanding into car delivery.

However, Xiaomi's position is characterized by high competition in every sector of its operations, and they are not Apple, so they cannot impose premium prices. If something is an ordinary commodity, it becomes bad.

Xiaomi, Apple, as value investors, we don't need to own everything all the time. We can choose what we want to own at the right price. So, Apple has a price-to-earnings ratio of 36, and Xiaomi has a ratio of 19.

Yes, it is relatively cheaper, but do I need to own it? No, I can simply wait until the price-to-earnings ratio reaches nine.

That's all. That's the basic story. Xiaomi's stock can rise, and it can fall. However, at a price-to-earnings ratio of 19, let's say fairly priced, it's not a very winning deal.

If we look a little at the revenues, we find the first decline after many years of growth, and the market is now worried. However, net income decreased significantly. They even issued common stock, likely to invest in their move towards artificial intelligence.

Revenue by category is down in smartphones, growing in other things, and stable somewhere. However, net profit has fallen significantly, and this is what we see seeping downwards.

Therefore, assuming other factors remain constant, in another quarter, the price-to-earnings ratio will be 25 and not 19 when the third quarter returns to normal. However, they are repurchasing shares, which is good, but issuing new shares is not.

But Xiaomi is an Asian player. She invests in everything. They will be global competitors. Again, this reflects a lot about the general environment for artificial intelligence, electric vehicles, self-driving vehicles, and even robots.

What is its current price? If you look at DBS Bank's forecasts, they are only predicting growth and more growth, no matter what. So, this is just a year of stagnation, then we'll return to 20% growth.

They have set a price-to-earnings ratio of 25 for their future price target. And then, yes, the stock is cheap, you should buy it, and we continue to celebrate.

This will succeed until it stops succeeding, until a real crisis occurs, an Asian crisis. We haven't seen crises like this in a long time. But when it happens, we will come and look for price-to-earnings ratios of nine.

The current price reflects the current situation. Will the stock be revalued based on growth? Everyone is betting on the growth of artificial intelligence. Where this growth will come from is something we still have to see.

We do not like to invest in "green bananas" (i.e., immature projects). The shift towards graphics processing units. Excellent revenue projections will boost profit margins. Everything will look great.

That's what the analysts say, but it might not happen either. For me, it doesn't really look like the profits are coming yet. It may come, but it may not happen either. And then you will face another reassessment shock, and that is something, trust me, I have learned over the years.

You don't want to be an investor when it comes to Asian stocks.

The main question is, what if growth stops? Then we get to this situation, the price-to-earnings ratio is nine, and it may grow, but it may also not grow due to the enormous competition we have seen now when discussing Xiaomi, which concerns all companies, from Tesla to AI and OpenAI, and everyone, which is very interesting.

But for us as value investors, we will simply watch from the sidelines and wait for price-to-earnings ratios to reach 10. We don't buy promises, we buy real cash flows. Until then, there will be something else for us.