J.P. Morgan reiterates Overweight on Luxshare Precision and raises target price to Rmb97

Overview

This report is J.P. Morgan's company research on Luxshare Precision. The report notes that Luxshare Precision's share price fell about 9% on the day, significantly underperforming the sector's roughly 2% pullback, mainly due to market concerns that Apple's price increases on some products because of higher storage costs could drag on iPhone demand. J.P. Morgan believes this concern is overdone because iPhone has not been included in the price increase list, and supply chain checks show that 2026 iPhone sales are resilient, while a higher mix of premium models benefits Luxshare Precision's share advantage in Pro Max assembly.

Core views

The core views include: first, the iPhone assembly business will remain the main growth driver, benefiting from continued share gains, improved capacity efficiency, and margin recovery; second, the optical module business will become a new high-margin growth engine, with 800G, 1.6T, and high-spec products expected to ship in volume from 2H26; third, the automotive and communications segments have strong growth momentum, making the company's diversified business portfolio from components to modules more sustainable; fourth, the recent share price pullback provides a buy-on-dips opportunity, and the report reiterates an Overweight rating while extending the target price to Rmb97 for Jun-27.

Analysis framework

The report combines supply chain checks, business segment growth assessments, earnings forecast revisions, and a relative valuation framework for analysis. Valuation uses a 22x 12-month rolling forward P/E, roughly in line with the company's historical average, from which it derives a Jun-27 target price of Rmb97.

Methodology notes

• Valuation methods12-month rolling forward P/E

  Assess target price using a 22x 12-month rolling forward P/E

  J.P. Morgan maintains the 22x valuation multiple unchanged and extends the target price horizon to Jun-27, arriving at a target price of Rmb97.

• Earnings forecastSegment growth and earnings contribution forecast

  Revise earnings based on growth assumptions for iPhone assembly, communications, automotive, and optical module businesses

  The report raises 2026/27/28 earnings forecasts by 1%/4%/11% and expects 2025-2028E earnings CAGR of 31%.

Asset mapping & comparison

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

• Luxshare Precision (002475.SZ)

  Covered target/core recommended stock

  Strengths

  Higher iPhone assembly share, benefits from high exposure to Pro Max models, improved assembly efficiency, growth in communications and automotive businesses, and potential high-profit contribution from optical modules.

  Weaknesses

  Still affected by smartphone demand and the health of Apple's supply chain, with short-term market sentiment relatively sensitive to changes in downstream demand.

  Comparison

  The report notes that since early May the company's share price has underperformed the Shenwan Electronics Index by 41 percentage points, and the current pullback is considered to exceed fundamental risk.

  Risks

  Margin volatility from new projects, weaker smartphone shipments, and FX impact from U.S. dollar appreciation.

• Apple iPhone supply chain

  Key source of demand and earnings driver

  Strengths

  Supply chain checks show that 2026 iPhone sales are resilient, and the premium-model mix is more favorable for Luxshare Precision.

  Weaknesses

  If iPhone demand is below expectations or Apple later adjusts its pricing strategy, orders and market expectations could be affected.

  Comparison

  The report emphasizes that Apple announced price increases for MacBook and iPad, not iPhone, so the market's extrapolation of price-hike concerns to iPhone demand is considered excessive.

  Risks

  Weaker end demand, product pricing changes, and rising component costs.

• Optical module business

  Potential new growth curve

  Strengths

  800G, 1.6T, and high-spec optical modules are expected to ship in volume from 2H26, bringing higher margins and valuation contribution.

  Weaknesses

  There is still uncertainty around the ramp-up pace, customer qualification, capacity scaling, and competitive landscape.

  Comparison

  Compared with the traditional assembly business, optical modules are viewed by the report as having greater potential for margin improvement and valuation expansion.

  Risks

  Delays in mass production, price competition, technology iteration, and customer demand below expectations.

Key data

• Current share priceRmb68.00Price date is 2026-06-26.
• Target priceRmb97.00Jun-27 target price; previous Dec-26 target price was Rmb82.00.
• RatingOverweightThe report reiterates an Overweight rating.
• Valuation multiple22xBased on a 12-month rolling forward P/E, roughly in line with the historical average.
• 2026/27/28 earnings forecast revision+1%/+4%/+11%Mainly reflects resilient iPhone demand and potential upside from optical modules.
• 2025-2028E earnings CAGR31%J.P. Morgan's model forecast for the company's earnings compound growth rate.
• Communications segment revenue CAGR76%The report expects the communications segment revenue CAGR to be 76% for 2025-2028.
• Optical module earnings contribution2027 10% / 2028 16%The report expects optical modules' contribution to company earnings to rise gradually.
• iPhone assembly JV revenue1Q26 YoY +160%The report uses this as evidence of improvement in the iPhone assembly business and margin expansion.
• Relative share price performanceUnderperformed the Shenwan Electronics Index by 41 percentage points since early MayThe report believes market concerns over weak downstream demand are the main reason.

Impact & implications

If the report's view plays out, Luxshare Precision's investment case will expand from a pure consumer electronics cycle recovery to being jointly driven by iPhone share gains, product mix upgrades, growth in automotive and communications, and incremental high-profit contributions from optical modules. The higher target price and upward earnings revisions strengthen the risk-reward appeal after the recent pullback, but realization still depends on iPhone shipments, the pace of optical module mass production, and margin stability.

Risks

• New project launches may lead to margin volatility.
• Smartphone shipments may weaken, especially if iPhone demand comes in below expectations.
• Exchange rate fluctuations, especially U.S. dollar appreciation, may affect company earnings.
• The mass production and volume ramp schedule of the optical module business may fall short of expectations.
• Weak downstream demand or worsening market expectations for Apple's supply chain may continue to pressure valuation.

What to watch

• Actual 2026 iPhone shipments and changes in the premium-model mix.
• Luxshare Precision's market share in assembling premium models such as Pro Max.
• Margins and JV revenue sustainability of the iPhone assembly business.
• Progress of mass shipments for 800G, 1.6T, and high-spec optical modules starting from 2H26.
• Whether communications business revenue growth and optical modules' contribution to 2027/2028 earnings reach 10%/16%.
• The impact of Apple's product pricing strategy and changes in storage costs on end demand.