Luxshare Precision Profit Tops Expectations; Positives Priced In; FVE Increased to CNY 40.50

We lift our fair value estimate on Luxshare Precision to CNY 40.50 per share from CNY 37.50 after updating USD/CNY assumptions and factoring in a less drastic drop in profitability after the company showed better-than-expected progress in expanding computer-related offerings. Our fair value estimate corresponds to 24.2 times 2023 P/E. This is lower than the company’s five-year historical average of 31.5 times as the company’s top-line growth should decelerate from over 50% (2012-2021 average) to about 20% in the next five years. We think upside to the stock is modest due to uncertainties in the automotive segment and a share placement pending regulatory approval. We also lower our Morningstar Uncertainty Rating on Luxshare to High from Very High as the company sells more products to Apple and disruptive lockdowns become less likely.