LUXSHARE-ICT(SZ:002475)2025-08-27 01:12Summary of Luxshare's 2Q25 Results and 3Q25 Guidance Company Overview - Company: Luxshare Precision Industry Co., Ltd. (002475.SZ) - Industry: Electronics manufacturing, specifically focusing on telecom and automotive electronics Key Points from 2Q25 Results - Revenue Performance: - 2Q25 revenue reached Rmb62.7 billion, up 23% YoY and 2% QoQ, exceeding estimates by 4% [3] - Net Income: - Net income for 2Q25 was Rmb3.6 billion, reflecting an 18% QoQ increase and a 23% YoY increase, aligning with company guidance and consensus estimates [3] - Gross Margin: - Gross margin improved to 12.0%, higher than the estimated 11.3%, indicating a shift towards higher-margin products and improved production efficiency [3] - Operating Expenses: - Operating expense ratio increased to 7.4% from 6.6% in 1Q25 due to higher R&D and administrative expenses [3] 3Q25 Guidance - Net Income Projection: - Guidance for 3Q25 net income is projected to grow between 15% to 28% YoY, with a midpoint estimate of Rmb4.5 billion, which is 5% above Bloomberg consensus but 10% below previous estimates [2] - Revenue Expectations: - Revenue for 3Q25 is expected to grow by 12% YoY, with net income projected at Rmb4.7 billion, reflecting a 27% YoY increase [2] Market Position and Growth Drivers - Market Share Gains: - Luxshare is gaining market share in the iPhone segment, supported by upcoming form factor changes that are expected to drive demand [1] - Diversification: - The company's expansion into non-smartphone markets, particularly in telecom and automotive electronics, is a key driver for long-term growth, with revenues in these segments growing by 49% YoY and 82% YoY in 1H25 [1][3] - Production Efficiency: - Enhanced production efficiency is contributing to improved profitability, with expectations for continued improvement in gross margins through 2026-27E [8] Financial Projections and Valuation - Earnings Revisions: - Adjustments to net income estimates for 2025-27E reflect a 2% increase for 2025, with expectations for higher gross margins and increased R&D investments [8] - Target Price: - The target price has been raised to Rmb50.15, based on a 15.4x P/E multiple for 2026E, indicating a 14.7% increase from previous estimates [11][15] Risks and Considerations - Market Demand Risks: - Potential risks include slower-than-expected demand for AirPods and weaker performance in the Apple Watch assembly business [16] - Operational Risks: - Higher-than-expected operating expenses and foreign exchange risks due to significant exposure to US customers (93% of revenues in USD) could negatively impact performance [16] Conclusion - Investment Recommendation: - The outlook for Luxshare remains positive, with a "Buy" rating maintained, supported by strong revenue growth, market share gains, and diversification into high-growth segments [1][11]