Goldman Sachs Is Positive on Luxshare Precision's Data Center and Automotive Electronics Expansion, Rating Both A- and H-shares Buy

Overview

Luxshare Precision is a provider of precision intelligent manufacturing solutions spanning components, modules, and systems. Its business extends from consumer electronics into communications and data centers, automotive electronics, and emerging products such as AI robotics and XR. Goldman Sachs believes the company's global manufacturing footprint, R&D capabilities, customer diversification, and vertical integration will support growth.

Core views

The investment thesis rests on three key pillars: first, AI server rack cables/connectors, optical modules, liquid cooling, power supplies, and server assembly for Chinese cloud vendors will drive rapid scaling of the data center business; second, automotive electronics expansion will be supported by smart-driving-related head-up displays, domain controllers, display modules, and Leoni synergies; and third, consumer electronics will maintain steady growth, while smartphone ODM and MacBook assembly continue to gain share. Goldman Sachs' net profit forecasts for 2026 and 2027 are respectively 18% and 30% above market consensus.

Analysis framework

The analysis applies top-down end-market growth and share assumptions, combined with forecasts for segment revenue, product mix, gross margin, expense ratios, and automation efficiency. Valuation is based on 2027 P/E, with the target multiple determined by combining earnings growth, operating margin, and comparable-company valuation levels; the H-share target price is derived using an A-H discount.

Methodology notes

• Valuation methodsForward P/E Valuation

  2027 P/E

  A target P/E multiple of 20.8x is applied to projected 2027 net profit for the A-shares, resulting in a 12-month target price of Rmb98.00.

• Valuation methodsGrowth and Margin Correlation Valuation

  Earnings Growth, Operating Margin, and Comparable-company Valuation

  The target multiple is determined based on the relationship among average year-on-year net profit growth for 2027-2028, average operating margin, and forward P/E multiples of comparable companies.

• Cross-market ValuationA-H Discount Method

  13% A-H Discount

  The H-share target price incorporates a 13% discount to the A-shares, referencing the average A-H discount of technology comparables over the past 60 days.

Asset mapping & comparison

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

• 002475.SZ

  Company A-shares

  Strengths

  Growth in data centers and automotive electronics, global manufacturing and R&D capabilities, customer and product diversification, and potential for product mix upgrades.

  Weaknesses

  Consumer electronics exposure remains relatively high, while execution uncertainty exists in scaling data center and automotive electronics businesses.

  Comparison

  Goldman Sachs derives a 20.8x 2027 target P/E from technology comparable valuations and the growth-margin relationship.

  Risks

  Weaker-than-expected consumer electronics demand, higher-than-expected expense ratios, and foreign-exchange pressure from a weaker US dollar.

• 2475.HK

  Company H-shares

  Strengths

  Shares the same fundamental growth thesis as the A-shares and benefits from expansion in data centers and automotive electronics.

  Weaknesses

  Valuation is affected by the A-H price gap, exchange rates, and cross-market liquidity.

  Comparison

  The target price is based on the A-share valuation with a 13% A-H discount, implying 18.1x 2027 P/E.

  Risks

  A wider A-H discount, exchange-rate volatility, and the same operating risks as the A-shares.

Key data

• 2025-2028 Revenue CAGR28%Goldman Sachs forecast, with data centers, automotive electronics, and smartphone ODM as the primary drivers.
• 2025-2028 Net Profit CAGR44%Supported by business expansion, improved product mix, and higher operating efficiency.
• 2028 Data Center Revenue Contribution26%Expected to be 12% in 2026.
• 2028 Automotive Electronics Revenue Contribution14%Goldman Sachs forecast.
• 2025 Global Consumer Electronics PIMS Market Share11.2%According to Frost & Sullivan, Luxshare Precision is the world's second-largest supplier.
• 2025 Global Communications and Data Center PIMS Market Share2.5%According to Frost & Sullivan, the business remains at an early stage of expansion from a low base.
• 2025-2028 Gross Margin11.9%→14.1%Driven by product mix improvement and higher production yields.
• 2027 Target P/E20.8xUsed to calculate the A-share target price.

Impact & implications

If AI server shipments, cloud vendor capital expenditure, and smart-driving penetration materialize as expected, Luxshare Precision's business mix could gradually shift from being consumer-electronics-led toward faster-growing, higher-margin data center and automotive electronics businesses, supporting upward earnings revisions and valuation re-rating. The report's core view also depends on the company continuing to gain share, improve yields, and control expense ratios.

Risks

• Consumer electronics market demand may fall below expectations, potentially weighing on revenue and earnings.
• Expense ratios may decline less than expected, potentially compressing margins.
• With a high proportion of overseas revenue mainly denominated in US dollars, RMB appreciation against the US dollar or US dollar weakness could create negative foreign-exchange effects.
• AI server shipments, company share gains, or Chinese cloud vendor capital expenditure may fall short of expectations.
• Expansion of automotive electronics products, Leoni synergies, and global customer diversification may progress more slowly than expected.

What to watch

• Orders, shipments, and market share trends for AI server rack cables/connectors and server assembly businesses.
• Progress in raising data center revenue contribution toward the 2028 target of 26%.
• Customer expansion in smart driving, wire harnesses, head-up displays, and domain controllers within automotive electronics, as well as Leoni synergies.
• Consumer electronics demand, changes in Apple-related share, and smartphone ODM penetration.
• Whether improvements in gross margin, expense ratios, automation yields, and net profit margin meet expectations.
• The RMB/USD exchange rate and foreign-exchange effects from overseas revenue.