Broker Name and Date of Report
CGS International Securities, December 3, 2025
Excerpt from CGS International Securities report
Report Summary
- CGS International Securities reiterates an Overweight rating on the China smartphone sector, expecting a multi-year upgrade cycle fueled by AI integration and premiumization trends. High-end smartphone sales are projected to grow 12% in 2026, significantly outpacing overall market growth, driven by generative AI features, the anticipated launch of Apple’s first foldable iPhone, and robust demand for sophisticated handset components.
- The next growth phase is expected to come from expanding automotive and AI-enabled device components, leveraging Chinese manufacturers’ expertise in optics, acoustics, and precision manufacturing. Despite recent sector underperformance due to market rotation and rising memory cost concerns, the report sees this as a buying opportunity and highlights Xiaomi and Lens Technology as top stock picks.
- Robust earnings growth is forecasted for 2025-2027, with component suppliers benefiting from higher average selling prices and margins due to increased AI and foldable smartphone adoption, as well as scaling auto/AI device revenues. The report also profiles leading suppliers including AAC Technologies, Cowell e Holdings, Lens Technology, and Sunny Optical Technology, detailing their financial outlooks, ESG efforts, and revenue drivers.
- Xiaomi is expected to benefit from strong premium phone sales, IoT expansion, and rapid growth in electric vehicle deliveries, while Lens Technology is expected to see significant gains from its exclusive role in Apple foldables and growth in automotive glass.
- Sector valuation is seen as attractive, with the China smartphone sector trading at a discount to fair value (c.15x FY26F P/E vs. 18x target), underpinned by strong earnings momentum and new technology cycles.
Above is an excerpt from a report by CGS International Securities. Clients of CGS International Securities can be the first to access the full report from the CGS International Securities website: https://www.cgsi.com
