Apple's replacement tide is coming again!
The consumer electronics industry has been in a cold winter for the past two years.
In 2022, global mobile phone sales will decline by 11% year-on-year, and in 2023, it will decline by 4% year-on-year, and the domestic replacement cycle will come to 40 months, and the global replacement cycle will come to 51 months. Behind this data, there is a very strong demand for replacement.
According to IDC's forecast, global smartphone sales will reach 1.197 billion units in 2024, a year-on-year increase of 2.77%, and global smartphone sales will reach 1.303 billion units in 2028.
Apple, the global leader in consumer electronics, launched Apple Intelligence, a personalized intelligence system, at WWDC 2024 on June 11, which will provide a series of AI functions for iPhones and other devices in the future.
The capital market reacted strongly to Apple's move, mainly because of the following two points:
1.AI megatrend of mobile phones
Starting from the second half of 2023, the concept of AI mobile phones will gradually ferment, which is expected to drive the mobile phone industry into a new round of replacement. Moreover, Apple, as the leader of the world's mobile phones, has given up building cars and turned to research AI, which has also made the market's confidence in the wave of AI mobile phone replacement firmer.
2.AI use on function-limited models
Apple said at WWDC that only iPhone 15 pro and iPhone 15 pro max models can support AI features, which will be the key to speeding up the replacement cycle and forcing users to buy phones.
Affected by this, the popularity of Apple industry chain companies such as Lixun Precision, Pengding Holdings, Furong Technology, Goertek, Dongshan Precision, Lingyi Intelligent Manufacturing, Lens Technology, and Crystal Optoelectronics has remained high recently.
Among them, as the "first brother" of the fruit chain and Huawei's gold supplier, Lixun Precision, which has been highly sought after by the capital market in the past two months, has increased its market value by nearly 80 billion.
So, why is Lixun Precision so "popular"?
On the one hand, the performance has grown steadily.
Since its listing, Luxshare Precision has maintained a very strong performance growth trend.
In 2023, Lixun Precision will achieve revenue of 231.905 billion yuan, a year-on-year increase of 8.35%; Net profit exceeded 10 billion yuan for the first time, reaching 10.953 billion yuan, a year-on-year increase of 19.53%.
In the first quarter of 2024, the company achieved revenue of 52.407 billion yuan, a year-on-year increase of 4.93%; The net profit attributable to the parent company was 2.471 billion yuan, a year-on-year increase of 22.45%.
It is worth noting that in recent years, although the consumer electronics industry has been sluggish, the performance of Lixun Precision has been growing very steadily. This provides a solid foundation for the company's subsequent development and competitive position in such a competitive industry.
On the other hand, high profitability.
Return on equity (ROE) = net profit margin x total asset turnover ratio x equity multiplier.
If we disassemble the ROE, we can find that the net profit margin of Luxshare Precision has declined since the expansion of the whole machine and module business in 2016, but the total asset turnover ratio and equity multiplier have increased, driving the company's ROE to increase from 10.3% in 2016 to 25.7% in 2020.
Among them, the total asset turnover ratio increased from 0.85 to 1.55, mainly due to the efficient collaboration of the company's complete machine + module + parts, as well as the deep binding with major customers to bring stronger payment collection ability, and the overall operational efficiency and profit quality were improved.
Since 2019, the ROE of Luxshare Precision has exceeded 20% for 5 consecutive years. For a company that mainly does OEM, this is a very bright data.
In addition, the abundance of cash is also a highlight.
In recent years, Lixun Precision's monetary funds have been continuously improved, and in the first quarter of 2024, it will be as high as 43.113 billion yuan, with strong financial strength.
With abundant cash in hand, Lixun Precision subscribed for 1.2 billion yuan in December last year for Apple's second largest OEM company and Shuo's subsidiary in Kunshan, and after the transaction was completed, the company held 62.5%. Since then, Luxshare Precision has officially become Apple's second largest foundry after Foxconn.
Unlike many fruit chain suppliers who want to de-apple, Luxshare Precision has been seeking a deeper cooperation with Apple.
Since Luxshare Precision entered Apple's supply chain in 2011, its supply products to Apple have gradually developed from parts to modules, and its value is also rising, reflecting the company's superior supply capacity and process capabilities.
The proportion of the company's largest customer in total revenue has increased year by year, from 45% in 2018 to 75.2% in 2023.
In recent years, Apple has been trying to reduce its dependence on Chinese suppliers. However, the market share of Lixun Precision has increased instead of decreasing, which fully demonstrates its irreplaceability.
At present, Luxshare Precision has obtained the new product introduction (NPI) of high-end iPhone 16 models in 2024, breaking Foxconn's absolute control over the NPI link in the past.
In recent years, Lixun Precision is also building a second growth curve and cutting into the automotive and communication tracks.
From the perspective of revenue structure, consumer electronics is the company's core source of income, accounting for about 90%, and communications and automobiles account for about 6% and 4%. Although the proportion of revenue in the communication and automobile business is not large, the future development potential is huge.
1. Communication services
Nvidia, the world's leading AI server, uses about 5,000 copper cables to connect GPUs to its new GB200 server. The key components are high-speed backplane connectors and copper high-speed connectors.
Lixun Precision said in April this year that the company was able to provide a complete set of about 2.09 million yuan for Nvidia GB200 NVL72 single cabinet, including electrical connection (copper cable, connector), optical connection (optical module), power management, heat dissipation and other products.
It is not surprising that Luxshare Precision can cut into the field of AI servers, and the company has always had relevant technology accumulation.
At present, the company participates in the formulation of next-generation high-speed connection standards such as 800G and 1.6T, and some products in subdivided fields such as external high-speed copper cables, cables and connector components, backplane connectors and backplane cables, HSIO, SSIO, etc., have won customer recognition with leading technology, cost advantages and excellent product performance.
2. Automotive business
Lixun Precision established the Automotive Division in 2011, mainly producing automotive wiring harnesses and connectors. In 2023, the revenue of Luxshare's precision automotive business will be 9.252 billion yuan, a year-on-year increase of 50.46%, which is the company's fastest-growing business at present.
Relying on the technical experience accumulated in the consumer electronics business, Luxshare Precision has in-depth cooperation with domestic and foreign leading automobile brand customers to realize cross-border empowerment to the automotive industry, and has formed four major business lines: automotive wiring harness/connector, intelligent cockpit, body electronics, and power management.
The company will deliver more than 10,000 yuan of complex wiring harness bicycles for Smart EVs in 2023, and the value of all products that can be entered will be about 3-40,000 yuan, and the company aims to achieve a scale of 200 billion yuan in the third five years.
Finally, to sum up, Lixun Precision is the leader of the fruit chain, and with the ultra-high proportion of Apple's business, it is expected to directly benefit from the growth of Apple's mobile phone sales in the future. Moreover, the company is also building the second growth curve of AI and automotive business, with huge development potential, which has also attracted 698 institutions to rush to raise funds (first quarter report of 2024).
Of course, investing is a process of tracking, which requires constant attention to the release of orders.