S&P Global Ratings upgraded the ratings of Xiaomi (HKG:1810) and its guaranteed notes to BBB from BBB-, citing solid performance in its consumer electronics business and a promising start for its electric vehicle (EV) unit, according to a Monday release.

The upgrade stems from Xiaomi's successful EV launch and continued momentum in its smartphone and internet of things (IoT) businesses, S&P said.

The rating agency sees projected EBITDA from these segments to reach between 37 billion yuan and 40 billion annually in 2025 and 2026.

The stable outlook reflects S&P's view of a further solid market position and monetization from core businesses for Xiaomi over the next two years, with robust EBITDA expansion anchored by reduced EV segment losses.

The rating agency expects Xiaomi to keep a large net cash position and robust financial cushion, supported by a recent 38 billion yuan share placement and existing 94 billion yuan net cash position.

S&P forecasts free operating cash flow to narrow to between 20 billion yuan and 24 billion yuan as Xiaomi invests in EV production capacity and R&D, while expecting the EV division's EBITDA losses to decrease.