It has become a PCB leader, and AI computing power+automotive two-wheel drive has entered a new era of development. The company was founded in 2006 and listed on GEM in 2015. Its main products are double panel, multi-layer board (including HDI), etc.

After years of development, the company's revenue exceeded 1.1 billion US dollars in 2022, ranking 24th among global PCB companies and 5th in domestic investment. The company's acquisition of PSL shares in 23 further strengthened its comprehensive strength to supplement the ability of soft boards. AI computing power and automobiles are the fastest growing sub-industries in the PCB industry. The company serves leading customers in the digital communication and automotive fields, and has a perfect product layout. AI computing power+automotive two-wheel drive companies have entered a new era of development.

Computing power: AI computing power demand has exploded with iterative PCB upgrades, serving leading customers to enjoy development dividends. PCBs play a key role in improving server performance, and AI server PCBs have risen sharply in volume and price. Volume increase: Compared with traditional servers, AI servers have increased demand for incremental PCBs such as GPU modules, OAM acceleration cards, and Switch switching layers; price increase: PCB material upgrades & processing difficulty upgrades (increased HDI penetration rate) have increased value. According to Prismark data, the global server PCB market space is expected to reach 12.49 billion US dollars in 2026, with a CAGR of 9.87% in 2021-2026. In the field of server PCBs, the company has a forward-looking layout, and advantages such as customers, product layout, manufacturing capacity (HDI), overseas layout, etc.: (1) On the customer side, the leading players on both sides of the computing power supply and demand are North American giants, and the company has reached cooperative relationships with leading players Nvidia, AMD, Microsoft, Cisco, etc. (2) In terms of product layout, the company has launched various AI server-related products such as high-end HDI and high-frequency high-speed PCBs. It has achieved certification and industrialization of 5-level 20-layer HDI products, and accelerated the development and certification of the next generation of high-end HDI products (3) ) In terms of manufacturing capacity, AI server materials and processing difficulties have been further upgraded. Demand for AI server HDI has increased. The company is looking ahead to lay out the HDI field. The first HDI factory was put into operation in 2019, and the 14-layer Anylayer HDI board process was laid out in 2023. Currently, in terms of industrialized 5-level 20-layer HDI operations (4) in terms of overseas production capacity layout, the company will lay out production capacity in Thailand and Vietnam in March 2024, which is expected to fully enjoy the dividends of the industry's development.

Automotive: The automotive PCB business of electrified intelligent drive companies is on the rise. The trend of electrification and intelligence is driving the growth of the automotive PCB market. According to Trendforce, the automotive PCB market is expected to grow from 9.2 billion US dollars to 145 billion US dollars from 2022 to 2026, with a CAGR of 12% in 4 years. The company is the world's largest TOP2 PCB supplier for electric vehicle customers, and sales are growing year by year; as of 2023, the company has introduced a number of world-class automotive tier 1 customers (such as Bosch, Aptiv, Continental, Harman, etc.); currently its products are widely used in safety parts PCBs for components such as ECU, BMS, IPB, EPS, Airbag, Inverter, OBC, and braking systems, and also supplies automotive lighting, intelligent driving ADAS, and autonomous driving computation Blocks (multi-stage HDI), body control modules (1st level HDI), and PCBs for tri-electric systems in new energy vehicles.

Supplementing the soft board's ability to grow further opens up room. In December 2023, the company completed the acquisition of 100% of PSL's shares and indirectly held 100% of MFSS and its subsidiaries. MFS's products cover soft board, hard board, and soft and hard board. The downstream covers the three industries with the highest added value of automobiles, medical care, and industry. Weisheng's business is expected to have synergy with the company's existing business and quickly implement overseas production capacity and global strategic layout.

Profit forecast and investment suggestions: AI computing power+automobiles drive a new round of growth in the PCB industry. The company is a domestic PCB leader, and serving leading customers in the digital and automotive fields is expected to benefit deeply from this round of industry development. We estimate that the company's net profit for 24-26 will be 1,235/15.87/1,889 billion yuan. Referring to comparable companies Shanghai Electric Power Co., Ltd., Shennan Circuit, and Shiyun Circuit, we will give the company a 24-year 26X target PE with a target price of 37 yuan, giving it a “strong push” rating.

Risk warning: AI computing power and demand for automobiles fell short of expectations, the competitive landscape deteriorated, and raw materials rose sharply.