The company announced a forecast increase in performance in its mid-year report. It is expected that 24H1 will achieve a 62% to 71% year-on-year increase in net profit of 0.9-0.95 billion and a 70-80% year-on-year increase of 0.88-0.93 billion after deducting non-return income. Looking at Q2 alone, net profit to mother was 0.508-0.558 billion, the median range +73.5% month-on-month +35.9%, deducted non-return 0.494-0.544 billion, and the median range was +82.8% month-on-month +34.5%. Based on the company's recent situation, the reviews are as follows:

The Q2 profit exceeded market expectations, confirming our previous predictions. Q2 Profit increased month-on-month, mainly due to the year-on-year increase in the company's copper-clad plate production and sales volume, the reduction in unit manufacturing costs, and the optimization of the sales structure, which led to a year-on-year increase in revenue and gross margin of copper clad products, as well as a year-on-year increase in other revenue and increased profits by enjoying the value-added tax input tax credit policy; at the same time, benefiting from a significant increase in the net profit of the subsidiary Shengyi Electronics.

In the short term, the company's operating rate continues to remain at a high level, and the combination of customer structure optimization+product upgrade promotes continuous restoration of profitability. According to our close follow-up and understanding, the downstream PCB demand boom is expected to continue. The company's current operating rate remains at a high level, production capacity is tight, and the company's market strategy continues. The product structure will continue to be optimized, and profitability will be steadily improved with quality. In addition, the Q2 price increases for the company's products have been implemented by downstream customers one after another, and the company's gross margin will continue to maintain an upward upward trend.

Looking ahead to 24/25, the CCL industry will enter an upward channel. The high-end of the company's products will continue to make new progress and breakthroughs, and we are firmly optimistic about the long-term opportunities driven by the Shengyi Technology Cycle+ Growth. We believe that the CCL sector has now entered an upward channel, and the profit side of the industry will continue to improve. In terms of high-end products, the company's M7/M8 materials have been certified by overseas N customers and domestic H customers, and are expected to gradually be launched in the second half of the year and next year, and domestic computing power demand is expected to continue this year. The company has card position advantages in the domestic core customer supply chain; the penetration rate of traditional EGS server platforms is rapidly increasing, and demand for M6 materials continues to be released to drive high-end product structure upgrades; ABF carrier board base film (SIF film) has been verified by major domestic customers. It is currently progressing well and is expected to usher in batch shipments this year. Moreover, the company has obvious card position advantages in high-end products such as automobile boards, digital communication boards, and Weitong boards, and is expected to continue to gain strength, bringing additional growth momentum. Furthermore, Shengyi Electronics has gradually broken through leading overseas cloud vendor customers in the digital communication field, obtained large AI orders, and continued to release new production capacity, which is expected to contribute flexibly to Shengyi Technology.

Maintain a “Highly Recommended” investment rating. We believe that the high-end upgrade of the company's products is expected to continue to be realized, and there is potential to exceed expectations in the medium to long term. We have revised 24-26 revenue of 19.32/22.8/26.22 billion, net profit to mother of 2.03/2.62/3.19 billion, corresponding EPS of 0.85/1.10/1.35 yuan, corresponding to the current stock price PE of 24.4/18.9/15.5 times, and PB of 3.3/2.9/2.6 times. We are optimistic about the company's product matrix, management capabilities and medium- to long-term business development space, and maintain a “Highly Recommended” rating.

Risk warning: raw material prices fluctuate, industry competition intensifies, demand falls short of expectations, technology upgrades fall short of expectations.