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Investing.com -- Jefferies started coverage on Xiaomi (OTC:XIACF) with a “Buy” rating saying the company has strong position in consumer electronics and its growing presence in the electric vehicle market.

The brokerage expects Xiaomi’s auto division to become its largest revenue and profit driver by 2028, with a projected net profit compound annual growth rate of 34%.

Xiaomi’s first EV, the SU7, has seen strong demand, with around 140,000 deliveries in 2024 and a seven-month wait time. Jefferies attributes this success to Xiaomi’s expertise in CE, including its supply chain advantages, design capabilities, and consumer-focused marketing.

The firm expects the company’s vehicle deliveries to surge to 1.4 million units by 2028, helping it capture a 7% share of China’s EV market. While currently loss-making, Xiaomi’s auto segment is forecasted to turn profitable by 2026.

Despite a weak global smartphone market, Xiaomi has gained share, increasing its global smartphone shipments at a 13% CAGR since 2016, compared to an industry decline.

The company has expanded in key markets such as Central and Eastern Europe, Latin America, the Middle East, and China. Its high-end smartphone segment has also grown, with its share in China’s premium market rising from 19% in 2021 to 28% in 2024.

Jefferies sees further upside in Xiaomi’s AI and Internet of Things ecosystem, which has over 900 million monthly active users. The firm believes Xiaomi’s ability to leverage this data for AI-driven services is undervalued.

Xiaomi remains Jefferies’ top pick among China’s hardware and auto companies, with a price target based on sum-of-the-parts and discounted cash flow valuation.

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