Xiaomi Shares Receive Dual Credit Rating Boosts

In a significant show of confidence, Xiaomi has secured positive revisions from two major credit rating agencies within days of each other. The moves highlight a strengthened financial and operational outlook for the Chinese technology giant.

The recent upgrades are firmly rooted in the robust third-quarter results Xiaomi disclosed on November 18. The company reported revenue of 113.1 billion RMB, marking a 22% year-over-year increase. Even more impressive was the 81% surge in adjusted net profit, which reached 11.3 billion RMB. Gross margin hit a record high of 22.8% for the period.

A landmark achievement was recorded in the electric vehicle (EV) division, which generated its first-ever operating profit of 700 million RMB. Vehicle deliveries skyrocketed by 173% to nearly 109,000 units. Furthermore, the number of connected devices within Xiaomi's Internet of Things (IoT) ecosystem has now surpassed one billion.

Agencies Highlight Successful Business Diversification

S&P Global revised its outlook on Xiaomi to "Positive," citing the company's successful expansion beyond its core smartphone business. The agency specifically commended the strategic diversification into IoT and electric vehicles, which has improved the firm's overall risk profile.

Following closely, Fitch Ratings upgraded Xiaomi's rating to BBB+ on December 4. In its assessment, Fitch pointed to the company's enhanced EBITDA generation and noted that "the reduction of EV risks is a key rating driver." The agency acknowledged that despite entering the competitive EV market later than rivals, Xiaomi has demonstrated a clear ability to gain customer acceptance in China.

Should investors sell immediately? Or is it worth buying Xiaomi?

A Solid Financial Foundation

Xiaomi's balance sheet provides a strong cushion for its ambitions. Fitch anticipates the company will maintain a net cash position over the coming years. As of the end of September, Xiaomi held liquid assets of 184 billion RMB against total debt of just 28 billion RMB. Annual free cash flow for the 2025-2027 period is projected to exceed 15 billion RMB.

Market researchers now forecast 2025 revenue to reach 470 billion RMB, representing growth of 28.5% over the prior year. The average share price target among analysts stands at 57.90 HKD, while the stock currently trades near 43 HKD.

Challenges and Headwinds Persist

The outlook is not without its pressures. Rising memory chip costs, driven by high demand from AI servers, are compressing margins. Company President Lu Weibing has cautioned that consumers should expect significant smartphone price increases by 2026.

In the key growth market of India, approximately $545 million remains frozen in bank accounts. Xiaomi's market share in the region declined by 3.2 percentage points to 13.4% during the third quarter.

The consecutive rating improvements within a short timeframe signal a growing conviction among credit analysts in Xiaomi's strategic evolution from a smartphone maker to a diversified technology conglomerate.