Incidents:

On August 16, the company released its 2024 semi-annual report. During the reporting period, the company achieved operating income of 4.855 billion yuan, an increase of 32.29% over the previous year; realized net profit of 0.459 billion yuan, an increase of 33.23% over the previous year; net profit after deducting non-return to mother was 0.462 billion yuan, an increase of 31.00%.

Lay out the emerging field of AI and keep up with future technology and product trends. Since 2024, downstream PCB application fields such as AI servers, digital economy, and smart cars have grown rapidly, and demand for high-end HDI, high-speed and high-frequency PCB products is strong. The company closely follows market trends, preemptively lays out fields such as artificial intelligence, new energy vehicles, data centers, etc., and participates in cutting-edge technology research and development in advance. The semi-annual report revealed that the company upgraded technology for products such as AI servers, AI computing power, optical transmission switches, etc., completed equipment optimization and transformation of high-multi-layer precision HDI 5.0mm and high-multi-layer PCB8.0mm thick plates, and built large aperture blind hole filling capabilities and ultra-thin core board capabilities, laying a solid foundation for later research and development. In addition, the company's high-end AI data center computing power products 5-tier, 6-tier HDI and 28-tier acceleration card products (step gold finger) have successfully entered mass production, and 1.6T optical modules have entered small-scale mass production.

Increase investment in R&D, and new products have achieved great results

The semi-annual report revealed that in the first half of 2024, the company invested 0.198 billion yuan in R&D. The company insists on implementing the “three major strategies” of high technology, high quality and high quality, and conducts research and development on technologies in many high-end fields. Among them, AI computing power, AI server products, next-generation transmission PCIe 6.0 protocol and chip Oakstream platform technology; 800G/1.6T optical transmission in single-channel 112G & 224G transmission technology on optical modules and switches; next-generation 6G communication technology; and L3/L4 level autonomous driving technology have been successfully developed, and new product development results have been fruitful. In addition, the company also has R&D and manufacturing capabilities for 70-layer high-precision circuit boards, 28-layer eighth-order HDI circuit boards, 14-layer high-precision HDI any-stage interconnect boards, 12-layer high-precision board RigidFlex, and 10-layer high-precision FPC/FPCA (line width 25um); the company has the highest market share of high-density multi-layer VGA (video card) PCBs and HDI small-pitch LEDPCBs in the world; shipments of automotive display FPC and FPCBA reached 0.3 million units. The company's position in the industry continues to improve, and its core competitiveness is being strengthened.

Accelerate the construction of overseas bases, and highlight the benefits of synergy

In order to build global supply capacity and meet overseas delivery needs, the company accelerated the strategic layout of overseas manufacturing bases. The announcement revealed that the company announced that it will invest in a new production base in Vietnam to produce high-multi-layer printed circuit boards and HDI; in August 2024, the company plans to acquire 100% of APCB's shares. Through the layout of the Thai production base, it will strongly drive the growth of the company's domestic factory order demand. In the first half of 2024, the company fully empowered MFS Group, and the synergy benefits were highlighted. MFS Group's revenue increased 13% year on year and net profit increased 104% year on year, helping the company achieve growth in the first half of the year.

Investment advice:

We expect the company's revenue from 2024 to 2026 to be 11.072 billion yuan, 14.837 billion yuan, 19.287 billion yuan, and net profit to mother of 1.221 billion yuan, 2.004 billion yuan, and 2.739 billion yuan, respectively. We will give 24 times 30 times PE, corresponding to a six-month target price of 42.44 yuan, and maintain a “buy-A” investment rating.

Risk warning:

Industry demand falls short of expectations; new product development and introduction falls short of expectations; market competition intensifies.