Nomura Securities’ research report on Luxshare Precision indicates that the company’s future growth will primarily revolve around edge AI devices and automotive business. The report maintains a “Buy” rating with a target price of 84.3 yuan, believing that with the improvement in Apple’s sales outlook and growth in AI business, the company’s valuation is expected to be reassessed. Luxshare Precision is a leader in AI server copper interconnect technology and plans to enter the global top three in various segments of the data center communication market.
Four Pillars of Business Growth: Comprehensive Layout from Apple to Automotive Electronics
The management has clearly outlined four major revenue growth pillars for the coming years: Apple hardware assembly and components (including edge AI opportunities), non-Apple consumer electronics, automotive components, and a complete AI/communication product line. This layout reflects the company’s strategic determination to transform from a single consumer electronics entity to a diversified technology platform.In the consumer electronics sector, Luxshare expects to launch various edge AI devices by 2026, such as smartphones, headphones, and glasses. The company leverages its high-precision, integrated, and modular manufacturing capabilities to collaborate with platform customers who have device ecosystems and cloud customers with large language model capabilities, shortening the time to market for customer products.Notably, Luxshare has expanded its business scope outside the Apple ecosystem by acquiring the ODM/OEM assets of Wingtech Technology, covering mobile phones, PCs, tablets, etc. According to Frost & Sullivan data, Luxshare’s market share in consumer devices is only 6% in 2024, and 11% in components, indicating significant future growth potential.
Technological Breakthrough: CPC Technology Leading the AI Server Interconnect Revolution
In the communication/AI field, Luxshare has demonstrated its technological ambitions: planning to become a global top three in each sub-category within five years. The company estimates that by 2025, the total market size for copper interconnect, optical interconnect, thermal management, and power in the data center and communication market will reach $26.2 billion, $18.3 billion, $13.6 billion, and $28 billion, respectively.
Luxshare is at the forefront of Co-Packaged Copper (CPC) technology, having demonstrated a 448G CPC based on PAM4 modulation, and may explore extending copper cables to 896G under PAM6 modulation. Management believes that during the industry’s gradual transition to Co-Packaged Optics (CPO), Near-Packaged Optics (NPO) will only be a niche solution, while CPC will be the mainstream choice.In the thermal management field, Luxshare has showcased a full-stack solution from air cooling to liquid cooling (including cold plates and microchannels) to immersion cooling. The company expects microchannel cold plates to enter mass production by 2026, with a unique advantage in copper-diamond composite materials, which have better thermal conductivity than copper and a thermal expansion coefficient similar to silicon.
Automotive Electronics: Aiming to Become a Top Five Tier One Supplier Globally
Luxshare currently has 57 factories in 13 countries worldwide (20 in China, 37 overseas, and 8 under construction). After acquiring automotive wiring harness manufacturer Leoni, the company has established a goal to become one of the top five automotive tier one suppliers globally.
Luxshare’s automotive products include connectors, wiring harnesses, smart controllers, and power systems. The company has fully launched its automotive connector product line (high voltage, low voltage, and high speed) this year and expects to become the largest automotive connector manufacturer in China by 2027.In the smart chassis field, Luxshare estimates the current market size to be 600 billion yuan, and the company is developing steering systems, braking systems, and chassis area controllers, planning to capture a 10% share of the global market through organic and inorganic growth strategies.
Investment Logic: Key Drivers of Valuation Reconstruction
Nomura Securities’ target price of 84.3 yuan is based on a 30 times expected earnings per share of 2.81 yuan for 2026, placing the target price-to-earnings ratio at the mid-to-high end of the 12-48 times trading range since 2021. The current stock price corresponds to an expected price-to-earnings ratio of only 19 times for 2026.Core Investment Logic: Luxshare’s revenue growth in the coming years will primarily be driven by the expansion of edge AI devices and automotive business. The company’s expertise in integration and miniaturization enables monetization through various forms of AI wearable devices, while the integration of Leoni strengthens its automotive product portfolio and collaboration with overseas automotive manufacturers.While Luxshare’s breakthroughs in AI server products are encouraging, the ramp-up of these solutions may take time. The server copper interconnect, as part of Luxshare’s technological foundation, is relatively ready to take on more AI customer projects, but thermal management, optical interconnect, and power product lines may require more differentiation to compete with existing solutions.
Risk Warning
Investors should pay attention to the following risks: slower-than-expected ramp-up of new products from key customers (such as LCP antennas and haptic feedback); weaker-than-expected iPhone sales; and integration risks that may arise from entering new markets through acquisitions.Luxshare Precision is transforming from a consumer electronics manufacturing company to a diversified technology platform, with clear layouts in edge AI, AI servers, and automotive electronics. As various businesses gradually take shape, the company is expected to achieve valuation reconstruction and enter a new growth phase.
