On March 4, Jefferies Group issued a report indicating that for the majority of smartphone original equipment manufacturers (OEMs) this year, memory chip costs are projected to soar by 3.6 times. In light of this development, the bank forecasts a substantial 55% drop in smartphone sales volume for Xiaomi-W (01810.HK). However, this impact will be partially mitigated by a 31% rise in the average selling price. The decline in sales volume is expected to predominantly affect mid-to-low-end smartphones, with around 60% of Xiaomi's shipments priced below US$150 on average. The bank also predicts a sharp 7-percentage-point decrease in Xiaomi's smartphone gross profit margin this year, reaching a record low of 4%. Furthermore, the bank has revised downward its forecast for Xiaomi's automotive gross profit margin. Consequently, the bank's projections for Xiaomi's revenue and EBIT this year are 16% and 34% lower, respectively, compared to those of its market peers. Based on the sum-of-the-parts valuation approach, the bank has significantly cut Xiaomi's target price by nearly 30%, from HK$43.36 to HK$30.45, while maintaining a "Hold" rating. It also highlights that market expectations for the company are excessively high and that memory prices present a downside risk to profits.