Luxshare To Raise CNY 13.5 Billion in Equity, but May Not Be Enough To Fund EVs; FVE Retained

We leave our fair value estimate of CNY 35.50 and earnings projections intact after Luxshare Precision proposes to raise CNY 13.5 billion in equity. Based on the midday share price (CNY 41.50), we believe the final offer price should be near our fair value estimate. Overall, we view the equity raise to be mildly negative. While we like that this may signify Luxshare is on track to win more share in Apple products, including probable augmented/virtual reality devices, we do not like the small allocation to electric vehicles, or EVs, as it hints further capital raises are needed to quell the massive capital needs in realizing Luxshare’s ambitions to become a major Tier 1 supplier. The raise also has us concerned about Luxshare’s capital allocation.