(Yicai) Nov. 19 -- Xiaomi's shares fell despite the Chinese tech company reporting a 130 percent leap in net profit in the third quarter, and its automotive business achieving profitability for the first time.

Xiaomi [HKG: 1810] closed down 4.7 percent at HKD38.86 (USD4.99) in Hong Kong today.

Net profit widened 130 percent to CNY12.3 billion (USD1.7 billion) in the three months ended Sept. 30 from a year earlier, the Beijing-based firm said in its third-quarter earnings report yesterday. Adjusted net profit soared 81 percent to CNY11.3 billion, and revenue rose 22 percent to CNY113.1 billion (USD15.9 billion).

Xiaomi Auto delivered 108,796 electric vehicles in the third quarter, with revenue tripling to CNY28.3 billion, accounting for nearly 98 percent of Xiaomi's revenue from innovative businesses. Xiaomi Auto turned profitable for the first time, reporting an operating profit of CNY700 million (USD98.5 million), with a gross profit margin of 25.5 percent.

As of Sept. 30, Xiaomi Auto had established 402 car sales stores in 119 cities in the Chinese mainland, as well as 209 service outlets in 125 cities.

Xiaomi Auto's gross profit margin is expected to remain stable in the fourth quarter, but it will likely decline next year, making it hard for the business to continue this year's strong performance, Xiaomi's President Lu Weibing said during the earnings conference call.

Xiaomi sold 43.3 million smartphones in the third quarter, up only 0.5 percent from a year earlier, growing for the ninth consecutive quarter. However, revenue from this segment fell 3.1 percent to CNY46 billion in the period, mainly because the average selling price of smartphones dropped to CNY1,063 (USD150) from CNY1,102 (USD155).

The decline in the smartphone business was also due to rising memory prices, which typically fluctuate every few years, according to Lu. However, the current cycle is primarily driven by the surge in demand for high-performance computing fueled by artificial intelligence, which has resulted in significant changes, such as prolonged duration, high demand, and insufficient supply.

Memory prices surged suddenly in the first and second quarters of this year, followed by a sharp increase in the third quarter, with expectations of even greater hikes in the fourth quarter.

It is projected that new memory production capacity will not come on stream until 2027. Lu said he is rather pessimistic about the smartphone market next year, claiming that the pressure will be much greater than this year. "Next year, we can expect to see a significant increase in product retail prices," he noted.

In the third quarter, Xiaomi's revenue from the Internet of Things and lifestyle consumer products businesses rose 5.6 percent to CNY27.6 billion from a year earlier, with a gross profit margin of 23.9 percent.

Editor: Futura Costaglione