FY23 in-line with better-than-feared 1H24 earnings guidance; Solid outlook ahead

　　立讯精密(002475)

　　Luxshare posted FY23 revenue/NP growth of 8%/20% YoY, largely in-line withpre-announcement of 20-25% YoY, while 1H24E earnings guidance of 20-25%YoY (implying 2Q24E 18%-27% YoY) is above market expectations. We believethe strong 1H24 outlook is mainly driven by 1) datacenter connectivity(optic/copper) products, cooling and power solutions, and 2) auto bizmomentum on stronger NEV and ADAS/AD demand from overseas markets.Looking forward, despite recent macro headwinds and iPhone shipmentweakness, we believe Luxshare is well-positioned to capture opportunities indatacentre connectivity business, automotive connector business, gain share iniPhone/MacBook/iPad/Watch OEM/components and Apple’s multiple productlaunches in 2H24E. We slightly adjusted FY24-25E EPS by -1/-1% to factor inFY23 results. The stock now trades at 14.2x/11.5x FY24/25E P/E, close to 1-SD below 5-yr avg. P/E. Maintain BUY with TP of RMB46.61 based on same24x FY24E P/E.

　　FY23 & 1Q24 mostly in-line. Luxshare’s FY23 revenue/earnings growth of8%/20% YoY was mostly in-line with earlier preannouncement. By segment,CE/computer/auto/communication delivered +10%/-34%/+51%/+13% YoY.Mgmt. highlighted business breakthrough with key customers in datacentreconnectivity products, cooling and power product solutions with potentialclient/order wins. Auto business saw healthy growth momentum backed bystrategic partnerships and solid auto product portfolio. In addition, Luxsharealso announced 1Q24 revenue/earnings growth of 4.9%/22.5% YoY withGPM of 10.7%, above market expectations.

　　Better-than-feared 1H24 earnings guidance; datacenter and autobusiness as key growth drivers. Luxshare pre-announced 1H24Eearnings growth of 20-25% YoY, implying 18%-27% YoY growth in 2Q24E.We believe the solid 2Q24E earnings is driven by 1) accelerated demand indatacentre connectivity, 2) auto business expansion in both domestic andoverseas markets, and 3) GPM recovery and expense controls.

　　Attractive risk/reward at 14.2x/11.5x FY24/25E; Reiterate BUY. Weslightly adjusted FY24-25E EPS to reflect FY23 results. The stock nowtrades at 14.2/11.5x FY24/25E P/E, 1-SD below 5-year hist. avg P/E.Reiterate BUY with TP of RMB 46.61 based on same 24x FY24E P/E.Catalysts include top module/ iPhone share gain, datacenter/auto tier-1business progress and Apple’s multiple new product launches in the comingmonths.