Lixun Precision: At present, about 3% of the company's products have the right to speak on price, about 20% of the co-created products have price advantages, and other product lines compete in the red sea every day

Lixun Precision Industry Co., Ltd. (hereinafter referred to as "Lixun Precision" or "the Company") announced on May 7 that the company held a performance briefing on May 6. At the meeting, Wang Chunlai, chairman of Lixun Precision, said that everyone understands the truth that "eggs can't be put in one basket". At present, about 3% of the company's products have the right to speak on price, about 20% of the co-created products have a certain price advantage, and other product lines are indeed competing in the red sea every day. Wang Chunlai said that he does not think this is an anomaly, but it does need to continue to improve.

Screenshot of Lixun Precision's announcement

The following are the main contents of the investor relations activities:

Question 1: What is the estimated growth of the company's new energy vehicle parts in 2024?

A: The development of the company's automobile industry segment is as expected, and the overall growth is better than the company's average level.

Question 2: What products does the company currently supply to Apple, what is the overall revenue, and what is the proportion of the company?

A: Based on the spirit of the contract, it is inconvenient for the company to explain the specific customers and products. The company's main products cover consumer electronics, automobiles, communications and other fields, mainly serving leading brand customers at home and abroad.

Question 3: The company and Apple's business account for a relatively high level, is this a risk to the company's future development?

Answer: We have been focusing on the balanced development of the industry, the proportion of high-quality customer business is relatively high, although there are certain challenges, but we believe that on the basis of relying on the market advantages of high-quality customers, accelerate the development of other industries and customer groups, the company's medium and long-term development will be more healthy.

Q4: Are the company's current cash reserves sound?

Answer: The company's cash reserves are planned according to various capital requirements and operational needs, and everything is as planned.

Q5: How many employees are there in all factories at present, is there an increase or a decrease compared to last year, and are there a large number of recruitment plans?

A: As of December 31, 2023, the company had a total of 232,585 employees. The company will continue to strengthen digitalization and automation to improve overall human efficiency.

Question 6: Does the company have any plans to build the company's independent brand and products in the future?

A: First, we will not engage in consumer-facing terminal product sales business, and secondly, we are a supplier serving excellent brand customers in the fields of global consumer electronics, automotive industry, communication industry, etc., providing services from product development, manufacturing to sales, commercial nature including ODM, JDM and OEM, as a solution provider for parts, modules and integrated system products.

Question 7: Will the layout of the Yangtze River Delta region continue?

A: From the current point of view, we still have a surplus in domestic production capacity, and there is no need for expansion in the short term, and we will continue to take root in the technology research and development and manufacturing of the domestic base.

Question 8: Does the company have a large proportion of the domestic market or a large proportion of the foreign market?

Answer: Foreign sales account for a large proportion, and the company's export sales will account for 89.16% in 2023.

Q9: Does the company have a cooperation with NVIDIA?

A: We have indirect and direct services for cloud computing and data center customers, including this customer.

Question 10: Will Lixun Precision increase investment in R&D and expansion of new energy auto parts, so that the company can complete the qualitative take-off again?

Answer: The automobile industry is currently one of the high-quality tracks of Chinese enterprises, the company has invested in the automobile industry as early as ten years ago, and it is still developing rapidly, and we are looking forward to taking off.

Question 11: The company has increased its dividend this year, when will the dividend plan be implemented?

A: According to the relevant regulations, the dividend plan will be implemented within two months after the approval of the general meeting of shareholders.

Question 12: In the last exchange with the organization, it was mentioned that it can provide copper cable, heat dissipation and other solutions for NVIDIA, worth 2.09 million yuan, has it been included in its supplier list?

A: In the field of AI servers, we have been accelerating, and we are looking forward to the current business development, such as the state of our consumer electronics business during 2015~2017 (business cultivation growth period).

Question 13: Does the company have a specific improvement plan for intelligent manufacturing, and will it combine artificial intelligence to improve production lines in the future?

Answer: Luxshare has always been a leader in intelligent manufacturing, and the future will be as always.

Q14: When will the 2023 Annual General Meeting of Shareholders be held?

Answer: For the specific time of the 2023 Annual General Meeting of Shareholders, please pay attention to the notice of the General Meeting of Shareholders disclosed by the Company in the future.

Q15: Does the company have any plans to enter the direction of autonomous driving?

Answer: As a Tier1 manufacturer in the automotive industry, Luxshare cooperates with the R&D, manufacturing, and sales of electronic and electrical related components, as well as autonomous driving and intelligent cockpits, and we are not engaged in ODM business, mainly JDM and OEM business.

Question 16: When will the single-cabinet solution of GB200 NVL72 start to be mass-produced, and how much market share is expected to be obtained?

A: I didn't contribute much this year, and I'm looking forward to growing next year.

Q17: Can I increase the dividend ratio?

A: We attach great importance to the proportion of dividends, and we are improving year by year.

Q18: Is RMB the settlement currency for export sales?

A: The U.S. dollar is the main settlement currency for export channels.

Q19: What are the company's specific plans for sustainability outlook for 2024 or new business development opportunities?

A: Please refer to the company's 2023 annual report for details.

Question 20: Is Luxshare's investment in Chery at the parent company level, and is there any plan to inject it into a listed company in the future?

Answer: The investment in Chery is led by the holding company of Lixun Precision, which is a pure investment behavior of individual shareholders, and there is no plan to inject it into a listed company.

Question 21: Will the 10% decline in iPhone 15 sales have a significant impact on the company's assembly business?

Answer: If the company's quarterly results and half-year performance expectations, the company's business development trend is good.

Question 22: What patents does Lixun Precision have in the field of copper high-speed connection, and what is its position in the industry?

Answer: The company has made rapid technological progress in high-speed electrical connection in recent years, including the layout of technical barriers and patents, and you can search for detailed patents on the Internet, I think we belong to the world's leading position in the industry.

Q23: Does the company have any plans to reduce the proportion of revenue to its largest customers, and what are the specifics?

A: I hope that the business distribution will be healthier in 10 years.

Question 24: In the past two years, the company's operating income and profits have been increasing, but the stock has been falling and falling, Chairman Wang Chun said let the market determine the stock price, the stock price has been like this, how to prove that it is a value investment?

A: Frankly speaking, I (Chairman Wang Chunlai) and our employees also feel aggrieved, and we also look forward to the solid and steady growth of Luxshare to be recognized by more investors, I believe that with the continuous development of our business segments, we will be more pragmatic and attach importance to long-term stable development of Luxshare. Together, we play a positive role.

Question 25: The majority of retail investors are more concerned about the pressure on cash flow after the company cancels the fixed increase, can you give an explanation?

Answer: Regarding the impact of the cancellation of the fixed increase on the future cash flow, the company comprehensively considers the business direction, business scale and endogenous extension demand of the industry in the next five years, and the peak period of capital expenditure has passed, etc., to make a refined calculation of the future cash flow, and the company believes that the cash flow situation in the next five years is good.

Q26: Does the company have any plans to spin off part of its business and list it?

A: There are no plans at this time.

Question 27: Will the 800G optical module business increase this year?

A: There are difficulties this year, and we will strive for better next year.

Question 28: Will the company enter the vehicle installation of new energy vehicles in the future, and will it enter the intelligent cockpit and autonomous driving industry?

A: At present, we are not involved in the planning of the vehicle business. We are engaged in JDM and OEM business in autonomous driving and intelligent cockpits.

Question 29: The company's stock price has been sluggish since the beginning of this year, seriously lagging behind the company's performance and growth expectations, what are the company's plans to improve in this regard?

A: We need to strengthen exchanges with investors, especially with high-quality value investors in the market, so that our value can be fully discovered and exerted.

Question 30: Overseas finance is predicting that Apple will assemble low-end Apple phones in India to cope with the local market, will they be assembled by the company's factories in India and Vietnam?

A: At present, we do not have a business layout plan in India, and we have no new investment plans in Vietnam.

Q31: Will the acquisition of Qorvo's packaging business be a way to better serve its No. 1 customer, and will margins improve as a result?

Answer: At present, the company's extension development is more for the future industrial planning layout, and the short-term profit margin improvement is limited.

Q32: Will the company be able to maintain solid growth and development in the coming years?

A: The company pays attention to short, medium and long-term planning to maintain the company's high-quality long-term development, which has not changed, and the past achievements have proved that we have always been consistent with our words and deeds, as always.

Question 33: Luxshare's share price has been hovering at a low level for three years, but the company's performance and development do not reflect the value of the company, what is the reason? Luxshare is indeed an excellent company, and being able to bind Apple also highlights the company's strength and competitiveness. What specific measures does Mr. Wang have to take to increase the stock price?

A: I feel your care and trust in Luxshare. We are also thinking and reviewing, on the one hand, there is pressure in the general environment, on the other hand, we are not enough to actively communicate with investors, we will strengthen this aspect of work, can not passively think that the wine is not afraid of deep alleys, so as to neglect this aspect of management.

Question 34: Lixun Precision plans to expand production investment in Yancheng in the near future, what is the future development plan?

A: The investment in Yancheng is currently sufficient for the development of the next 2 or 3 years, and there are no new plans for the time being.

Question 35: The company's market value has not matched the company's development for some time, and I think it will definitely be reflected in the future. In the short term, it may also be that the market has not enjoyed the dividends of enterprise development, and the development of enterprises has not given much feedback to investors. If the capital-intensive investment period has passed, you can consider increasing some dividend ratios in the future, so that the market can enjoy the dividends of enterprise development, and it will be easier for minority shareholders to hold shares, so that the market will be easier to find the advantages of our company, which will definitely be better.

A: We are also working in this direction, and at the same time, we need to retain easy cash flow and accumulate resources for possible future extensional development.

Question 36: What is Apple's MR growth expectation?

A: For XR products are valued all over the world, we always serve the best customers, slow work and meticulous work, I believe that the market will gradually become popular in the future.

Q37: Please tell us about your plans for new energy vehicles this year.

A: Our automotive business is developing as expected, with growth better than the company average.

Q38: Why does the company use more USD loans instead of local RMB loans because upstream materials need to be purchased in US dollars?

Answer: The company's loans in Q1 of 2023 and 2024 are mainly RMB, due to the high interest rate of US dollar loans, the proportion of the company's US dollar financing has decreased year by year in recent years, and the proportion of RMB financing has increased.

Question 39:1, the annual report and the first quarterly report show that the performance has increased steadily. Can you look forward to the prospects of the development of the industry and the company's business objectives this year? 2. The 3 billion yuan convertible bonds issued by the company have not yet been converted into shares, how will the next step be to promote the conversion of shares? At present, the premium rate is relatively high, under what circumstances will the transfer price be revised down?

Answer: The company's development this year and the next three or five years, from the efforts we have made in the early stage, can maintain steady growth, the convertible bond part please pay attention to the company's relevant announcements.

Question 40: The company has invested a lot of money and resources in technology research and development and enterprise expansion, what is the return on investment of these projects?

Answer: The company's investment behavior under the rapid growth in the past seems to be correct, and our overall investment return dynamic comparison is also better than that of its peers. After decades of running a business, we feel that difficulties often come with us, but we can't stop developing because of the challenges we may face, we will conduct a comprehensive sand table rehearsal, and choose a relatively safe growth method to make decisions. Most of the time, there are more ways to solve problems than difficulties.

Question 41: Does the company have any plans for mergers and acquisitions in the near future?

A: We have never stopped the pace of extension development, and recently focused on the automobile, communications, medical and other related industries.

Question 42: What will be the proportion of AI servers in the future? In front of the proportion of consumer electronics, can the profits of AI servers make the company's profits increase greatly?

Answer: The R&D investment time and investment in components related to AI servers are longer, the technical threshold is higher than that of consumer electronics, and customers are less sensitive to price, so there is no comparison. However, it can be predicted that Luxshare Technology, as the BG of our communication industry sector, will be an important channel for the company's profit contribution in the future.

Question 43: Have 400G optical modules been shipped in large quantities?

A: Some customers have shipped in batches, and the products of mainstream customers are still being promoted.

Q44: Does the company have in-depth cooperation with Huawei's mobile phone and communication businesses?

A: We have more business cooperation with domestic and foreign leading customers in the consumer electronics and communication sectors.

Question 45: In the past two years, in the capital market, the two super waves of smart cars and AI, investors who hold Luxshare have basically missed out. Industry experts even clearly asserted that it is impossible for Luxshare to win the order for Nvidia GB200! Please tell retail investors more clearly, 1. Regarding GB200, is Luxshare cooperating with NVIDIA in the development of components? 2. Are you confident that it will win the share after mass production?

A: We need to be clear about the following points: (1) our industrial capabilities are not a problem, (2) our opponents are not something that Luxshare cannot challenge, and (3) we and our core team members attach great importance to this business, concentrate resources on business development, and prepare for global manufacturing. For various reasons, we are indeed slow in the AI server business, but it is not that we lack opportunities, so I am not worried, but only more attentive. As for smart cars, we haven't delayed at all, and I think they're performing well and we're continuing to improve.

Question 46: The business of the largest customer accounts for too much, the company has no bargaining power in front of the large customers, and the gross profit margin of this business has been hovering at a low level, is there a risk of further reduction in the gross profit margin?

Answer: "The truth that you can't put all your eggs in one basket" everyone understands. At present, about 3% of our products have the right to speak on price, about 20% of the co-created products have a certain price advantage, and other product lines are indeed competing in the red sea every day. I don't think it's an anomaly, but it does require continuous improvement.

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Review: Sun Shijian