Core consumer electronics business complemented by incremental growth from AI thermal management and robotics; J.P. Morgan initiates Lingyi iTech-H at Overweight

Overview

The report positions Lingyi iTech-H as an integrated solutions provider with specialized precision manufacturing capabilities. Its core consumer electronics business provides an earnings foundation, while foldable devices, AI server thermal management, robotics, and other AI terminals represent structural growth drivers. J.P. Morgan expects earnings to accelerate in 2H26 and derives an HK$11 target price using a 15x rolling 12-month forward P/E, initiating coverage with an Overweight rating.

Core views

The report first distinguishes the post-listing share-price performance from the company's fundamentals. Lingyi iTech-H listed at HK$10.18 on June 26, 2026, and its share price subsequently fell 39%, underperforming the Hang Seng TECH Index by 46 percentage points; some Hong Kong-listed consumer technology peers also declined by approximately 30% from their peaks during the same period. J.P. Morgan believes this primarily reflects contracting liquidity in the Hong Kong market and declining risk appetite for technology stocks rather than deteriorating business fundamentals. Supply-chain research indicates that demand for Apple products, particularly the iPhone, remained resilient in 1H26, while the schedule for launching high-end new products in 2H26 remained unchanged. With new products entering mass production, higher content value per device, increased customer share, and volume growth at Readore, the report expects the company's earnings growth to shift from a 14% YoY decline in 1H26 to 74% YoY growth in 2H26, providing a share-price catalyst. Consumer electronics remains the earnings foundation. The company provides functional components, structural components, modules, and integrated solutions to major global consumer electronics customers, with products covering smartphone functional components, battery components and modules, display modules, high-power chargers, and thermal management products. According to the company's prospectus, Lingyi ranked third globally by revenue among high-precision intelligent manufacturing platforms for smart electronics in 2025 and ranked first in the high-precision functional components industry for smart electronics. The report believes that long-term customer relationships, precision manufacturing capabilities, and materials technology will help the company increase content value and wallet share in both conventional and foldable models, while improving its product mix and margins through higher-precision, higher-value-added products. The main structural opportunities in the mature smartphone market arise from thermal management upgrades and foldable devices. Lingyi's vapor chamber products include stainless-steel, steel-copper composite, aerospace-grade titanium, and 3D dual-heat-source solutions, and it can supply stainless-steel, titanium-alloy, and carbon-fiber support plates for dual-fold smartphones and foldable tablets. The prospectus expects global smartphone shipments to grow by only 3.3% over 2025-29, while foldable-device shipments are expected to post a 23.2% CAGR over the same period, reaching 69.7 million units by 2029. Based on this, J.P. Morgan believes that the company's expansion beyond general-purpose components into advanced materials and complex modules should enable it to grow faster than the overall low-growth handset market through improvements in product mix and market share. AI servers are a medium-term incremental growth driver emphasized in the report. The prospectus expects global data-center capital expenditure to increase from approximately US$450 billion in 2024 to more than US$3 trillion in 2030; revenue in the high-precision intelligent manufacturing platform market for enterprise servers is expected to increase from US$19.5 billion in 2024 to US$92.3 billion in 2029, representing a 36.2% CAGR over 2025-29. High-power GPUs and higher rack power density are driving liquid cooling to replace conventional air cooling and require higher-voltage, higher-power-density, and modular power supplies: the high-precision thermal management hardware market for enterprise servers is expected to increase from US$7.1 billion in 2025 to US$33.0 billion in 2029, representing a 47.1% CAGR; over the same period, the high-precision power hardware market is expected to grow from US$7.1 billion to US$21.8 billion, representing a 32.4% CAGR. Lingyi already provides liquid-cooling modules, thermal management components, kilowatt-class high-power cabinets, and assembly solutions, and its GPU thermal management module has been used in the AMD Radeon RX9070XT. The acquisition of Readore extends the company from precision components into system-level liquid-cooling solutions. Readore supplies quick-disconnect couplings for server liquid cooling, coolant distribution manifolds, single-phase and phase-change liquid-cooling modules, and server vapor chambers, and is an important supplier to a leading global computing company in North America. Readore generated revenue of approximately RMB836.3 million and a net loss of approximately RMB125 million in 2025. Following completion of the transaction, Lingyi holds approximately 53% of the voting rights, and Readore has been consolidated since February 1, 2026. The report believes the parent company's precision manufacturing capabilities and global production capacity can help Readore increase its market share, while Readore's customers and products fill capability gaps in liquid-cooling plates, quick-disconnect couplings, and manifolds, bringing Lingyi closer to becoming a system-level solutions provider for AI servers. Readore's mass-production ramp-up in 2H26 represents a direct incremental earnings contribution anticipated by the report, while the improvement in its losses and the progress of integration remain key uncertainties. Robotics represents a longer-term growth curve. The prospectus expects global humanoid robot shipments to rise from approximately 8,000 units in 2024 to 500,000 units in 2029, representing a 132.9% CAGR. The high-precision manufacturing platform market for intelligent robots is expected to grow from US$38.1 billion in 2025 to US$67.3 billion in 2029, representing a 15.3% CAGR, while the humanoid robot manufacturing platform market is expected to increase from US$400 million in 2024 to US$11.5 billion in 2029, representing a 97.6% CAGR. Demand for durability, lightweight construction, and high integration will drive continued upgrades in high-precision components such as reducers, controllers, and dexterous hands. Lingyi already collaborates with leading robotics companies in China and overseas, supplying high-precision components, modules, and system assembly services. The report also includes visual devices, AI glasses and XR, automotive, and advanced air mobility within the company's business portfolio, believing that battery systems, thermal management, and fast-charging technologies can generate synergies across different end markets. Earnings forecasts reflect business expansion and structural upgrading. J.P. Morgan expects the company's revenue to increase from RMB51.429 billion in 2025 to RMB63.420 billion in 2026, RMB75.581 billion in 2027, and RMB91.057 billion in 2028. Adjusted net profit is projected at RMB2.288 billion, RMB3.164 billion, RMB4.666 billion, and RMB5.831 billion, respectively, representing an approximately 37% CAGR over 2025-28. Adjusted EPS is expected to increase from RMB0.32 in 2025 to RMB0.39 in 2026, RMB0.57 in 2027, and RMB0.72 in 2028. As high-margin projects enter mass production and the product mix improves, the EBIT margin is expected to rise from 5.9% in 2025 to 8.5% in 2028, the net margin from 4.4% to 6.4%, and ROE from 10.4% to 14.9%. Cash flow is initially expected to be weighed down by working capital and capital expenditure: operating cash flow is projected at RMB731 million in 2026, with free cash flow at negative RMB3.966 billion. Free cash flow is expected to turn positive to RMB3.388 billion in 2027 and RMB7.003 billion in 2028. The valuation framework considers earnings growth, peer comparisons, and differences between the A-share and H-share markets. Lingyi-H currently trades at an approximately 56% price discount to its corresponding A-share stock, while the A-share trades at approximately 22x 2027 P/E or 26x one-year forward P/E under different measurement conventions. A-share upstream consumer electronics component and module companies trade at approximately 14x to 35x 2027 P/E; thermal management company Envicool trades at 35x, robotics company Everwin at 31x, and Jentech, which has greater exposure to AI thermal management and limited competition, at 43x. The overall A/H-share discount narrowed from a peak of 37% in early 2024 to approximately 17% year-to-date in 2026, although Hong Kong valuation discounts for dual-listed technology companies still range from 4% to 68%. The report believes Lingyi-H may continue to trade at a discount due to differences in liquidity and investor risk appetite, but the market may be underestimating the earnings upside from higher content value, increased customer share, AI thermal management, and robotics. The HK$11 target price applies a 15x rolling 12-month forward P/E, representing an approximately 48% discount to the A-share's historical average valuation. The report summary states that this multiple is approximately 10% below the global peer average, while the valuation section states that it is broadly in line with the global peer average. The report's principal downside scenarios include weaker-than-expected demand in key downstream markets, intensified competition in intelligent manufacturing, uncertainty surrounding M&A integration, margin pressure from foreign-exchange movements or raw-material costs, and high customer concentration. These factors could weaken the benefits of higher content value and market-share gains, delay Readore's earnings contribution, and constrain valuation re-rating.

Analysis framework

J.P. Morgan first uses post-listing share-price performance, index performance, and peer performance to determine whether the pullback reflects sentiment and liquidity issues or deteriorating fundamentals, and then combines this with supply-chain research to assess demand from core customers and the mass-production schedule for new products. It subsequently analyzes market opportunities, product capabilities, customer relationships, and revenue transmission across consumer electronics, foldable devices, AI server thermal management, robotics, and new terminals, incorporating these assumptions into revenue, margin, cash flow, and EPS forecasts for 2025-28. Finally, it uses rolling 12-month forward P/E as the valuation basis and determines the target price with reference to global peers, historical A-share valuations, and the A/H-share discount, while testing risks related to demand, competition, M&A, costs, and customer concentration.

Methodology notes

• Valuation methodologyP/E and PEG valuation

  Rolling 12-month forward P/E valuation

  The report calculates a June 2027 target price of HK$11 using a 15x rolling 12-month forward P/E and cross-checks it against global technology hardware peers, historical A-share valuations, and the A/H-market discount.

• Industry/sector analysis frameworkSupply-demand framework

  Analysis of end-market demand and high-precision hardware supply capabilities

  The report compares demand growth for smartphones, foldable devices, AI servers, and humanoid robots, and then assesses whether Lingyi's materials, precision manufacturing, thermal management, and assembly capabilities can capture the incremental demand.

• Industry/sector analysis frameworkUpstream-midstream-downstream value-chain transmission

  Transmission of AI infrastructure capital expenditure into thermal management, power supply, and precision components

  The report believes the expansion of AI training and inference increases data-center investment and server power consumption, thereby raising demand for liquid cooling, power supplies, and high-precision components, which can be converted into orders and earnings through Readore and Lingyi's existing product portfolio.

• Industry/sector analysis frameworkVolume-price decomposition

  Decomposition of shipment volume, content value per device, and customer share

  Given limited growth in overall smartphone volumes, the report mainly explains the possibility of company revenue outpacing the industry through growth in foldable-device shipments, higher content value per device, and increased customer wallet share.

• Cycle and business momentum frameworkBusiness momentum inflection-point analysis

  Earnings growth inflection point between 1H26 and 2H26

  The report contrasts the 14% YoY earnings decline in 1H26 with the projected 74% YoY growth in 2H26 and identifies new-product mass production, thermal management upgrades, and Readore's volume ramp-up as drivers of the inflection point.

• Event-driven strategies and behavioral financeEvent-driven analysis

  Catalysts from new-product mass production, consolidation, and accelerating earnings

  The report identifies the mass production of new products for key customers, the consolidation of Readore since February 2026, and the volume ramp-up of high-margin projects in 2H26 as events that could drive earnings realization and valuation re-rating.

Asset mapping & comparison

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

• Lingyi iTech - H (1688.HK)

  The report's core covered company, with precision manufacturing for consumer electronics as its foundational business and foldable devices, AI server thermal management, and robotics providing incremental growth.

  Strengths

  Integrated capabilities across materials, precision components, modules, and system assembly; stable relationships with major global consumer electronics customers; ranked first globally by 2025 revenue in the high-precision functional components industry for smart electronics; Readore adds server liquid-cooling products and customer resources.

  Weaknesses

  The core consumer electronics business remains exposed to end-market demand, customer concentration, and foreign-exchange movements; Readore remained loss-making in 2025; and Hong Kong market liquidity and risk appetite may also constrain the valuation.

  Comparison

  The H-share trades at an approximately 56% price discount to the corresponding A-share; the report values it at a 15x rolling 12-month forward P/E, representing an approximately 48% discount to the A-share's historical average valuation.

  Risks

  Weaker-than-expected downstream demand, intensified competition in intelligent manufacturing, uncertainty surrounding M&A integration, foreign-exchange and raw-material cost pressures, and high customer concentration.

Key data

• Initiation ratingOverweightJ.P. Morgan initiation of coverage
• Target priceHK$11.00June 2027 target price based on a 15x rolling 12-month forward P/E
• Current priceHK$6.24As of August 21, 2026
• Post-listing share-price performanceDown 39%, underperforming the Hang Seng TECH Index by 46 percentage pointsSince listing on June 26, 2026
• Adjusted net profit forecastRMB3.164 billion/RMB4.666 billion/RMB5.831 billionCorresponding to 2026E/2027E/2028E, respectively
• Earnings CAGR37%2025-28E
• Change in 2026 earnings growth1H -14%, 2H expected +74%YoY growth
• Foldable-device shipments69.7 million units in 2029E23.2% CAGR over 2025-29E, versus 3.3% growth for overall smartphones during the same period
• Global data-center capital expenditureApproximately US$450 billion rising to more than US$3 trillion2024 to 2030E
• Server thermal management hardware marketUS$7.1 billion rising to US$33.0 billion2025E to 2029E, representing a 47.1% CAGR
• Readore's 2025 performanceRevenue of approximately RMB836.3 million and a net loss of approximately RMB125 millionLingyi holds approximately 53% of the voting rights, and Readore has been consolidated since February 1, 2026
• Humanoid robot shipmentsApproximately 8,000 units rising to 500,000 units2024 to 2029E, representing a 132.9% CAGR
• Margin forecastsEBIT margin rising from 5.9% to 8.5%, and net margin rising from 4.4% to 6.4%2025A to 2028E
• Free cash flow forecastNegative RMB3.966 billion/RMB3.388 billion/RMB7.003 billionCorresponding to 2026E/2027E/2028E, respectively

Impact & implications

The report believes Lingyi's core consumer electronics business can provide a relatively stable foundation of orders and earnings, while increasing penetration of foldable devices, higher content value per device, and increased customer share can offset low growth in overall smartphone volumes. The consolidation of Readore brings the company into the faster-growing AI server liquid-cooling segment, while robotics, AI glasses, XR, and advanced air mobility provide long-term optionality. If new products and high-margin projects enter mass production as scheduled in 2H26, earnings growth and improved cash flow should support a valuation re-rating; conversely, demand, integration, or cost pressures could delay both growth and re-rating.

Risks

• Demand in major downstream markets such as smartphones, foldable devices, AI servers, or robotics may be weaker than expected.
• Intensified competition in the intelligent manufacturing industry may reduce market share, pricing, or margins.
• There is uncertainty surrounding the integration, customer synergies, and earnings improvement of acquired businesses such as Readore.
• Foreign-exchange fluctuations and rising raw-material costs may create margin pressure.
• Customer concentration is high, and changes in orders or product schedules from major customers may materially affect performance.

What to watch

• Monitor the mass-production schedule, order resilience, and Lingyi's content value per device for major customers' high-end and foldable new products in 2H26.
• Monitor whether earnings can shift from a 14% YoY decline in 1H26 to 74% YoY growth in 2H26.
• Monitor Readore's mass-production ramp-up, customer share, revenue growth, and loss improvement following consolidation.
• Monitor order conversion for AI server liquid cooling, power supplies, and system-level solutions, as well as the progress of global data-center capital expenditure.
• Monitor commercialization progress in collaborations involving precision robotics components, modules, and system assembly.
• Monitor whether working capital, capital expenditure, and free cash flow can turn positive in 2027 as forecast.
• Monitor whether Lingyi-H's valuation discount to its A-share and global technology hardware peers narrows.