On August 19th, Morgan Stanley released a report indicating that Xiaomi Corporation (01810.HK) posted an adjusted net profit of RMB 6.219 billion for the second quarter. This marks a 43% decline year-on-year, yet it represents a 2% increase quarter-on-quarter. Notably, both the revenue and gross margin from Xiaomi's smartphone segment surpassed Morgan Stanley's projections. In contrast, the revenue generated from its electric vehicle and IoT (Internet of Things) divisions fell marginally below expectations. Xiaomi's management anticipates that storage prices will stabilize in the latter half of the year, a development that could help offset any adverse effects on smartphone gross margins. Looking ahead, Morgan Stanley predicts that Xiaomi's smartphone gross margin will maintain its stability throughout the second half of the year, potentially acting as a favorable catalyst for a stock price revaluation. Consequently, the bank reaffirms its "Overweight" stance on Xiaomi, setting a target price of HKD 32.