UBS downgrades Xiaomi's rating from "Buy" to "Neutral"

Benefiting from the extension of China's subsidy policy, the target of delivering 300,000 electric vehicles by 2025, and the successful launch of the SU7 Ultra, Xiaomi Group's stock price has risen by 60% from the beginning of 2025 to the present. UBS has downgraded its rating on Xiaomi from "Buy" to "Neutral," raising the target price from HKD 33.50 to HKD 60.00. UBS believes that Xiaomi's stock price has already reflected the growth potential of its core business and electric vehicle (EV) business, with limited upside potential in the future, and the risk-reward balance is tending to be even. Currently, Xiaomi's stock price is HKD 53, and UBS's target price is HKD 60.00, indicating an upside potential of about 15%. Xiaomi's current price-to-earnings ratio (PE) is 40 times, significantly higher than its 5-year average of 22 times, at a historical high. UBS values Xiaomi's core business at a projected PE of 23.8 times for 2026, and the EV business at a projected price-to-sales ratio (P/S) of 2.0 times for 2026. UBS believes that Xiaomi's valuation has already reflected its future growth potential, especially the rapid growth of the EV business. For various core business segments of Xiaomi, UBS has made the following forecasts: Smartphone business: UBS expects Xiaomi's smartphone shipments to maintain high single-digit growth, with the proportion of high-end models (priced above RMB 3,000) increasing from 18% in 2023 to 26% in 2026. Xiaomi's smartphone shipments are expected to reach 191 million units in 2025 and 204 million units in 2026