Luxshare's Third-Quarter Margins Disappoint but Supply Chain Constraints Easing; FVE Retained

We retain our fair value estimate on Luxshare at CNY 35.50 in the absence of major change to our model. The worst appears to be over for Luxshare as near-term headwinds in chip supply and COVID-19 restrictions are starting to ease. The stock’s upside seems to be limited by the margin dilution of new iPhone assembly businesses, and our five-year revenue CAGR of 24.7% has factored in future successes in AR/VR, automotive, and datacenters. Potential upside surprises are Luxshare decides to widen its auto component lineup, Apple confirms its VR/AR products, and breakthroughs in noncore electronics businesses like e-cigarettes.