Matters:
On July 3, 2024, the company announced its 2024 semi-annual performance forecast: the company is expected to achieve net profit of 0.275-0.315 billion yuan (YOY 40.34-60.75%), median 0.295 billion yuan (YOY 50.54%); after deducting non-net profit of 0.27-0.31 billion yuan (YOY 40.30-61.08%), median value of 0.29 billion yuan (YOY 50.69%).
24Q2 expects to achieve net profit of 0.166-0.206 billion yuan (YOY 37.61-70.69%), with a median value of 0.186 billion yuan (YOY 54.15%, QOQ 71.66%), net profit excluding non-attributable net profit of 0.162-0.202 billion yuan (YOY 36.77-70.63%), and a median value of 0.182 billion yuan (YOY 53.70%, QOQ 67.37%).
Commentary:
Strong order demand, product structure optimization, and exchange rates affected 24H1 profit growth. 24H1 achieved net profit of 0.275-0.315 billion yuan (YOY 40.34-60.75%). The high performance increase was mainly due to (1) the overall recovery of the electronics industry, the company closely followed market demand, and sufficient orders. Coupled with the accelerated release of production capacity in convertible bond raising projects, the overall capacity utilization rate increased, driving performance growth (2) The company continued to promote the development of emerging businesses such as automobiles, digital communication, and wind storage. Continuous optimization of the product structure led to an increase in gross margin (3) The company mainly has overseas business, and the settlement currency is mostly US dollars. The decline in the exchange rate of RMB against the US dollar in the first half of 2024 generated exchange gains.
The automobile & digital communication business is two-wheel drive, and the company can be expected to grow. The long-term development trend of new energy vehicles has been determined. Electrification and intelligence have led to an increase in the share of automotive electronics and a sharp rise in the volume and price of automotive PCBs. The company set up the automotive PCB business in 2010 and established partnerships with leading customers including Tesla, Volkswagen, BMW, Luminar, and HL-Klemove (Korea Autonomous Driving Solution Provider). The company's automotive business has a significant first-mover advantage. The application and development of artificial intelligence content automatic generation technology represented by ChatGPT is inseparable from huge computing power support, and the demand for high computing power places higher demands on the material, number of layers, and processing technology of PCBs. According to Prismark's forecast, the output value of server/storage PCBs reached US$14.201 billion in 2027, and the compound growth rate reached 7.6% in 2027, ranking first in the growth rate of major downstream application areas. In new fields such as AI, the company has carried out technical exchanges and new product verification with some domestic and foreign first-tier brand customers. Among them, high-multi-layer ultra-low loss server PCBs in cloud data centers have achieved mass production of 24-layer ultra-low loss servers and 5G communication PCBs, 28-layer products also have manufacturing capacity, and have applied precision HDI and traditional high-multilayer mixing technology, ultra-accurate inter-layer alignment deviation control technology, high-precision backdrilling technology, high-frequency signal characteristics, and loss control technology.
Profit forecasting and investment advice. The company has high-quality texture and has maintained steady growth over a long period of time. The company has broad development prospects in the context of the development of the automotive & digital communication PCB industry. We predict that the company's net profit for 2024-2026 will be 0.613/0.7/0.823 billion yuan. Referring to the valuation situation of comparable company Shanghai Electric Power Co., Ltd., Shennan Circuit, etc., we will give the company a price-earnings ratio of 25 times in 2024, with a target price of 23.5 yuan (original value of 22 yuan), maintaining a “strong” rating.
Risk warning: raw material prices rise, exchange rate fluctuations, downstream demand falls short of expectations.