Resilient iPhone demand and optical module ramp support outlook; JPMorgan maintains Overweight on Luxshare Precision

Overview

This report covers Luxshare Precision A. The core view is that the recent share price decline mainly stems from market concerns about Apple price increases and iPhone demand, but those concerns are considered overdone. JPMorgan believes iPhones are not on the price-increase list, and supply chain checks show iPhone sales and premium model mix remain solid. Luxshare Precision's iPhone assembly business should continue to benefit from share gains and efficiency improvements. At the same time, the communications business, especially optical modules, is expected to become a new source of high-margin growth.

Core views

The report's core views include: first, iPhone demand has not weakened as significantly as the market fears, and a higher premium-model mix is favorable for Luxshare Precision; second, profitability in the iPhone assembly JV business has improved meaningfully, with 1Q26 JV revenue up 160% year-on-year; third, the optical module business is expected to ramp from 2H26, driving a 2025-2028 revenue CAGR of 76% for the communications business; fourth, company earnings CAGR for 2025-2028E is projected at 31%, supporting the maintained Overweight rating.

Analysis framework

The analytical framework combines supply chain checks, business-segment growth assessments, earnings forecast revisions, peer valuation comparisons, and forward P/E valuation. The report focuses on evaluating iPhone sales and product mix, assembly margin improvement, the pace of optical module mass production, and the impact of these factors on revenue, net profit, and target price for 2026-2028.

Methodology notes

• Valuation methods12-month rolling forward P/E

  Use 22x 12-month rolling forward P/E to estimate the Jun-27 target price

  The report bases the Rmb97 target price on a 22x 12-month rolling forward P/E, stating that this multiple is in line with the company's historical average.

• Fundamental validationSupply chain checks

  Assess iPhone sales and product mix through supply chain feedback

  The report states that supply chain checks show resilient 2026 iPhone sales and a more premium product mix, supporting a positive view on Luxshare Precision's assembly business and margin outlook.

• Earnings forecastForecast revision

  Raise 2026-2028 earnings forecasts

  The report raises 2026/2027/2028 earnings forecasts by 1%/4%/11%, respectively, mainly reflecting improvement in the iPhone assembly business and potential contribution from optical modules.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Luxshare Precision A-shares (002475.SZ / 002475 CH)

  Core covered name

  Strengths

  Rising iPhone assembly share, margin improvement, business expansion from components to modules, and potential high-margin growth from optical modules.

  Weaknesses

  Near-term share price is highly affected by Apple's product pricing policy and market concerns over downstream demand.

  Comparison

  2026E/2027E P/E is below the peer average listed in the report, while 2025-2027E earnings CAGR is 30%, above the peer average of 24%.

  Risks

  Margin volatility from new projects, weaker smartphone shipments, FX volatility, and slower-than-expected optical module ramp.

• iPhone supply chain

  Primary earnings driver

  Strengths

  Supply chain checks indicate resilient iPhone sales and a more premium product mix, which benefits Luxshare Precision's Pro Max assembly share.

  Weaknesses

  The market is highly sensitive to Apple price increases, rising memory costs, and changes in demand.

  Comparison

  The report believes the market extrapolated price-increase concerns for MacBook and iPad to iPhone demand, causing an excessive share price reaction in Luxshare Precision.

  Risks

  If iPhone sales or the premium model mix fall short of expectations, assembly revenue and margin improvement will be affected.

• Optical modules/communications business

  New growth engine

  Strengths

  800G, 1.6T, and higher-spec optical modules are expected to ship at scale from 2H26, with potential for both revenue growth and margin improvement.

  Weaknesses

  The growth thesis depends on mass-production ramp-up, customer demand, and delivery cadence.

  Comparison

  Compared with the traditional assembly business, optical modules are viewed in the report as a higher-margin incremental business that can enhance valuation.

  Risks

  If optical module mass production, customer onboarding, or order cadence come in below expectations, 2027-2028 earnings contribution may miss forecasts.

Key data

• Current priceRmb68.00As of June 26, 2026.
• Target priceRmb97.00Jun-27 target price; the previous Dec-26 target price was Rmb82.00.
• Adjusted EPS2026E Rmb2.93, 2027E Rmb3.86, 2028E Rmb5.142026E and 2027E are raised by 0.7% and 3.9%, respectively, versus previous forecasts.
• Revenue forecast2026E Rmb419,880mn, 2027E Rmb497,325mn, 2028E Rmb586,348mnCorresponding year-on-year growth rates are 26.3%, 18.4%, and 17.9%, respectively.
• Net profit forecast2026E Rmb21,331mn, 2027E Rmb28,119mn, 2028E Rmb37,448mn2026/2027/2028 net profit forecasts are raised by 1%/4%/11%, respectively, versus prior forecasts.
• Optical module contribution2027E/2028E earnings contribution is expected at 10%/16%The report expects 800G, 1.6T, and higher-spec optical modules to ramp from 2H26.
• Communications business growth2025-2028 revenue CAGR is expected at 76%Optical modules are highlighted in the report as the core growth engine of the communications business.
• Valuation2026E/2027E Adj. P/E at 23.2x/17.6xPeer average 2026E/2027E P/E is 32.8x/26.2x.

Impact & implications

The report interprets the recent pullback as a buying opportunity rather than a sign of fundamental deterioration. If iPhone sales, Pro Max mix, and the optical module ramp materialize as expected, Luxshare Precision's earnings upgrades and valuation rerating potential will strengthen; conversely, if smartphone shipments weaken or margins on new projects come under pressure, the upside logic behind the target price and rating will be challenged.

Risks

• New projects may cause margin volatility.
• Smartphone shipments may weaken.
• FX volatility, especially USD appreciation, may affect earnings.
• Optical module mass production and shipment cadence may fall short of expectations.

What to watch

• Whether Apple further adjusts iPhone pricing strategy and its impact on demand.
• 2026 iPhone sales and the mix of premium models such as Pro Max.
• The magnitude of improvement in JV revenue and margins for Luxshare Precision's iPhone assembly business.
• Mass production and shipment progress of 800G, 1.6T, and higher-spec optical modules from 2H26.
• Whether 2026-2028 earnings forecasts continue to be revised upward.