Incident: Shengyi Technology expects to achieve net profit of 0.9-0.95 billion yuan in 2024H1, an increase of 62%-71% over the previous year; net profit after deducting non-return to mother of 0.88-0.93 billion yuan, an increase of 70%-80% over the previous year. Shengyi Electronics expects to achieve revenue of 1.87-2.2 billion yuan in 2024H1, an increase of 18.13%-38.97%; achieve net profit of 93.5-110 million yuan, an increase of 83.9287-100.4287 million yuan over the previous year; and net profit of 85 million yuan after deducting non-return to mother to 100 million yuan, an increase of 82.3805-97.3805 million yuan over the previous year.

The revenue and gross margin of the copper-clad plate business continued to rise: when downstream demand boosted the operating rate, the company's copper-clad plate production and sales increased year-on-year, and unit manufacturing costs declined; the company successfully transmitted upward pressure on raw materials to downstream customers and optimized the sales structure, resulting in a year-on-year increase in revenue and gross margin for copper clad products; and the performance contribution and tax benefits of the subsidiary Shengyi Electronics increased profits. 2024Q2 achieved net profit of 0.508-0.558 billion yuan in a single quarter, up 65.37%-81.65% year on year, up 29.54%-42.29% month on month; net profit without return to mother of 0.494-0.544 billion yuan, up 73.97%-91.57% year on year, up 28.00%-40.95% month on month.

PCB business servers+automobiles have made a good contribution: Shengyi Electronics continues to optimize the product structure and actively improve the product business regional layout. As the market demand for high-rise, high-precision, high-density and high-reliability multi-layer printed circuit boards grows, its production, sales, and operating income all increased year-on-year, driving a significant increase in net profit. 2024Q2 Shengyi Electronics achieved revenue of 0.985-1.315 billion yuan, up 17.25-56.51% year on year and 11.39-48.70% month on month; net profit to mother of 67.05-83.55 million yuan, an increase of 40.6-57.1 million yuan; net profit after deducting non-return to mother of 60.73-75.73 million yuan, an increase of 36.46-51.46 million yuan over the previous month.

Investment advice: Looking ahead to the later stages, Shengyi Technology's main copper-clad plate business is expected to continue. The company cooperates with downstream PCB customers to innovate and develop products on the AI training side, network side, and end side, bringing more opportunities for the company's future development. Shengyi Electronics got rid of the pressure of previous price competition on the communication base station side and gained significant room for growth in the fields of AI servers, traditional servers, and automobiles. We increased the company's 2024-2026 revenue by 19.546/22.996/26.41 billion yuan, and net profit to mother by 2.027/2.561/3.235 billion yuan. The corresponding PE was 27.03/21.40/16.94 times, respectively, maintaining the “gain” rating.

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