Report summary:

Super large typesetting and digital construction, operation and profitability have improved significantly. Oshcon integrates R&D, production and sales. In recent years, the company has stepped up R&D and market development efforts for high-value-added products. Consumer products continue to decline in revenue, and the share of server and automotive electronics revenue continues to rise. The company is steadily advancing the construction of informatization and has achieved digital transformation of the entire process from procurement to production, quality and sales. Thanks to efficient management strategies, the company's operating capacity and profitability are ahead of peers and are expected to continue to improve.

AI is injecting new energy into servers and PCs. The deepening application of AI in various fields has brought new growth impetus. In the server sector, AI server shipments are growing rapidly, and the corresponding PCB stand-alone value has increased significantly. The company began to lay out the server field in 2015, and entered the INTEL and AMD next-generation server supplier invitation directory in 2022. The production process reached more than 36 levels, and formed a rich customer matrix of chip factories+brand factories+white brand manufacturers, and has the ability to supply high-end servers at home and abroad. In the PC sector, the AIPC market as a whole is currently in the transition from AI Ready to AI On. AIPC penetration is steadily increasing. The company is developing research and development around various HDI technologies and through-hole production involved in AI PC development, and has achieved mass production and steady supply.

Automotive electronics are driving the price of PCBs to soar, and the company's product matrix is constantly being enriched. Intelligent automotive electrification will lead to an increase in automotive electronics content and an increase in PCB usage area and value. Automotive electronics is the core track of the company's development. The company is gradually expanding from traditional automotive consumer electronics to safety products to products such as ECUs and VCUs for new energy vehicles. The proportion of thick copper inverter products has increased, and the semi-soft board manufacturing technology developed has been applied to vehicle steering controllers in batches. It is at the leading level in China. It has received orders from well-known domestic and foreign customers, and is expected to open up incremental space for automotive electronics.

Strategic cooperation with Japanese PCB giant Meiko Electronics to accelerate overseas high-end layout. The company has signed a “Cooperation Intent Agreement” with Japan's Meiko Electronics, which is expected to promote the efficient layout of the company's business in the downstream field, accelerate the promotion and application of the company's existing products in the fields of AI servers, AIPC, communication and network equipment, automotive electronics, etc., and continuously enhance the company's overall competitiveness and market position. Currently, the company has two major production bases in Hunan and Guangdong, and plans four specialized chemical plants. The Guangdong base is more digitized and has a cost advantage. Mass production is imminent at the company's base in Thailand, laying the foundation for the company to obtain overseas orders and move towards globalization.

Give it a “buy” rating. We expect the company to achieve net profit of 0.61/0.759/0.956 billion yuan respectively in 2024/2025/2026, corresponding to PE 13/11/9 times. Considering the steady recovery of the company's traditional business, strategic cooperation with Japan Meiko Electronics will accelerate the expansion of overseas customer resources. It is expected to enter a period of rapid growth and give a “buy” rating.

Risk warning: downstream demand falls short of expectations, industry competition intensifies