Luxshare Precision reached an agreement of strategic cooperation with Chery Group to form a joint venture to develop an ODM model for auto production
Share of Apple contractor Luxshare Precision (Chinese: 立讯精密, 002475) continued to climb today by 8.28% to CNY 45.37 (USD 7.14) per share, augmenting a surge that began yesterday on news the electronics manufacturer had joined hands with auto giant Chery to build cars.
The rally of the company's stocks comes as Luxshare disclosed on February 11 two transactions worth CNY 11 billion. Lushare said it had purchased a 19.88% stake in Chery Holdings from Qingdao Wudaokou. Separately, it also bought 7.87% of Chery Holdings's and 6.24% of Chery New Energy's equity. The three deals amounted to CNY 10.054 billion.
What's more, the Guangdong-based company also acquired a 74.67% stake in Hong Kong-listed Time Interconnect (1729: HK) for HKD 1.1 billion through its wholly-owned overseas subsidiary.
As per a company announcement, Luxshare and Chery New Energy intend to build a joint venture specializing in the R&D and manufacturing of new energy vehicles (NEV) and providing a cutting-edge R&D design, mass-production platform and export gateway for Luxshare's core auto part business.
The goal, ultimately, is to meet the company's medium-to-long-term goal to become a top-tier supplier of car components, said the statement.
Annual reports filed in recent years by Luxshare show that the company specializes in building special-purpose wiring harnesses and connectors, telematics control units (TCUs) and central gateway modules for NEVs.
The company's 2021 half-year report indicated that interconnected automotive products and precision components accounted for 3.68% of the company's operating income, or about CNY 1.77 billion.
In addition, according to media reports on February 14, Luxshare confirmed while receiving a survey by institutional investors over the weekend that the company won't build cars itself but will collaborate with Chery to develop an ODM model.
Luxshare said the ODM business has been up and running and production will begin in about 12 to 18 months.
Under the ODM model, the new joint venture is expected to not just make cars exclusively for Chery, but also supply its manufacturing capacity to traditional foreign carmakers and domestic NEV brands.
Luxshare had a market capitalization of CNY 320.8 billion as of today.