[Event]: The company released 2024Q1, achieving revenue of 4.423 billion yuan, +17.77%, and +4.36% month-on-month; realized net profit of 392 million yuan, +58.25% year-on-year, and +47.92% month-on-month.

Both the copper-clad board and PCB business have improved: CCL business (excluding the impact of Shengyi Electronics): 2024Q1 revenue of 3,539 million yuan, +17.44% year over month, +5.42% month on month; net profit of 387 million yuan, +57.90% year on month, +45.84% month on month; gross profit margin 21.91%, up 1.80 percentage points year over year. PCB business (Shengyi Electronics): 2024Q1's revenue was 885 million yuan, +19.12% year over month, +0.31% month on month, net profit of 26.45 million yuan, turning a loss into a profit year on month. The gross profit margin was 18.88%, up 0.63 percentage points year over year.

Multiple factors drive the increase in profitability: The main reason for the company's outstanding performance in the first quarter of 2024: PCBs and end customer consumption inventories have basically bottomed out, and demand for new energy vehicles, home appliances, TVs, etc. has begun to drive a gradual recovery in operating rates, leading to an increase in revenue and gross margin. When the production capacity is full, the company can choose orders, continuously optimize the product structure, and the gross margin improves significantly. The 2024Q1 gross profit margin was 21.30%, up 1.56 percentage points year over year and 2.92 percentage points month over month. Coupled with the consolidated subsidiary Shengyi Electronics, as demand improved, performance turned losses into upward momentum.

Maintaining its leading level of research and development and forward-looking research direction: The company has developed a full range of high-speed products with different dielectric losses, high-frequency products with different dielectric application requirements and multiple technology routes, and has achieved a variety of batch applications. At the same time, in terms of copper-clad plate technology for packaging, the company's products have been used in batches in the fields of card packaging/LED/memory chips, etc., and have also broken through key core technologies. The development and application of higher-end AP/CPU/GPU/AI products represented by FC-CSP/FC-BGA packages is expected to bring about a double restoration of valuation performance.

Investment advice: We expect the company to achieve operating income of 183.52/200.00/21.977 billion yuan and net profit to mother of 16.12/18.64/2,268 billion yuan in 2024-2026. The corresponding PE was 24.62/21.29/17.49 times, respectively, maintaining the “gain” rating.

Risk warning: downstream demand weakens; new product development falls short of expectations; geopolitical risks.