(Yicai Global) May 27 -- Shares in Xiaomi surged as much as 5 percent today after the Chinese tech giant reported a more than two-and-a-half times increase in profit for the first quarter from the same period last year on a big jump in smartphone sales and widening profit margins.

Xiaomi’s share price [HKG:1810] closed up 3.2 percent at HKD29.05 (USD3.74). Earlier in the day it had reached HKD29.60.

Xiaomi's adjusted net profit for the three months ended March 31 came to CNY6.1 billion (USD954.6 million), according to the firm’s latest earnings report released yesterday. Revenue was up 54.7 percent to CNY76.9 billion (USD12 billion).

The company's gross profit margin expanded to 12.9 percent year on year from 8.1 percent in the same period last year, due to product portfolio upgrading and reduced promotional activities, the report said.

Handset sales jumped 69.1 percent in the first quarter to 49.4 million units, raking in CNY51.5 billion (USD8 billion), the report said. The average price of a mobile phone climbed to CNY1,042 (USD163) from CNY1,009 in the previous quarter.

The Beijing-based firm, which recently announced that it is to enter the new energy vehicle sector, released its first self-developed chip for professional imaging, the Surge C1, in March which it has installed in its first foldable phone, the Xiaomi Mix Fold.

Challenges

Higher chip prices pose challenges for all manufacturers, but it is a normal problem of supply and demand, President Wang Xiang said at the earnings call yesterday. Chip shortages happen every three to four years, only this time it is more serious. But it is not a huge problem for Xiaomi, he added.

The company is facing difficulties in India due to the latest wave of the Covid-19 pandemic, he said. Xiaomi hopes to offset the impact on sales through brick-and-mortar outlets by augmenting its e-commerce business.

Xiaomi spent CNY3 billion (USD470 million) on research and development in the first quarter, up 61 percent year on year. Revenue from Internet of Things and consumer products jumped by 40.5 percent year on year to CNY18.2 billion. Internet service revenue was CNY1.8 billion, down 28.2 percent.

Editor: Kim Taylor