Luxshare Precision Industry_Connecting the new dots_ diversification to non-Apple market

Summary of Luxshare Precision Industry Conference Call Company Overview - Company: Luxshare Precision Industry - Industry: Electric Components & Equipment - Market Cap: Rmb315 billion (approximately US$43.3 billion) [6] - 12-month Rating: Buy - 12-month Price Target: Rmb58.00 (previously Rmb37.00) [6] Key Points Diversification and Growth Strategy - Luxshare's growth has been closely tied to Apple, with 75% of its revenue in 2023 coming from Apple-related products. The company aims to reduce this dependency to 49% by 2027 through diversification into sectors like edge AI, electric vehicles (EV), and high-performance computing [1][10][19]. - The company expects to double its earnings by 2027, driven by new verticals and key customer breakthroughs in consumer electronics, automotive, computing, and communication sectors [1]. Revenue Projections - Communication Sector: Projected to grow at a 43% CAGR from 2025 to 2027, driven by securing tier-1 international clients [2]. - Automotive Sector: Expected to see a CAGR of 40-50% over the same period, aided by synergies from the Leoni acquisition [2]. - Non-Consumer Business Contribution: Anticipated to rise from 12% of revenue in 2023 to 49% by 2030, significantly reducing reliance on Apple [2]. Consumer Electronics and AI - Luxshare has experienced substantial growth since its listing in 2010, with revenue and earnings increasing 229x and 95x, respectively. The company forecasts a 10% long-term revenue CAGR for its consumer electronics segment, driven by edge AI and the acquisition of Wingtech's ODM business [3][30]. - The edge computing market is projected to grow from US$131 billion in 2023 to US$511 billion by 2033, with a CAGR of 15%, indicating strong demand for AI-enabled devices [17][29]. Valuation Insights - Current valuation is seen as attractive, trading at 18x NTM consensus PE, which is below its five-year average of 23x. The market has not fully priced in the potential growth from non-Apple segments [4][12]. - The target valuation is derived from a 25x 2025E PE, implying a PEG of 1.0x, assuming a 25% EPS CAGR from 2026 to 2030 [4]. Recent Developments - Luxshare has expanded its partnerships with major global clients, including NVIDIA, Google, and Cisco, following the resolution of a complaint that previously hindered its growth [11]. - The acquisition of Wingtech's ODM business is expected to enhance Luxshare's offerings in non-Apple consumer electronics, which previously generated Rmb23.7 billion in sales over three years [30][31]. Market Dynamics - The company faces challenges from US tariffs and stagnant smartphone shipment growth, but it is positioned to benefit from emerging markets and technological advancements [4][10]. - The shift in focus from Apple to non-Apple customers is expected to drive long-term growth, with a forecasted 4% sales CAGR for the consumer electronics business from 2025 to 2027 [8][16]. Conclusion Luxshare Precision Industry is strategically diversifying its revenue streams away from Apple, targeting high-growth sectors such as automotive and communication. The company is well-positioned to capitalize on emerging technologies like edge AI, with significant growth expected in the coming years. The current valuation presents an attractive investment opportunity as the market begins to recognize the potential of Luxshare's non-Apple growth.