Matters:
On August 22, 2024, the company released its 2024 semi-annual report: in the first half of 2024, it achieved revenue of 2.396 billion yuan (YOY + 11.38%), gross profit margin 22.76% (YOY +5.15pct), net profit to mother 0.303 billion yuan (YOY +54.49%), after deducting non-net profit of 0.298 billion yuan (YOY +54.97%), net profit attributable to mother was above the median value of the performance forecast.
Q2 achieved revenue of 1.302 billion yuan (YOY +14.65%, QOQ +19.09%), gross profit margin of 24.67% (YOY +8.33pct, QOQ +4.19pct), net profit of 0.194 billion yuan (YOY +60.54%, QOQ +78.78%), net profit of 0.19 billion yuan (YOY +60.69%, QOQ +74.97%).
Commentary:
Strong order demand, product structure optimization, and exchange rates affected 24H1 profit growth. 24H1 achieved net profit of 0.303 billion yuan (YOY +54.49%). 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 focused on overseas business, and the settlement currency was mostly US dollars. RMB A fall in the exchange rate against the US dollar generates 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 14.201 billion US dollars in 2027, and the compound growth rate reached 7.6% in 2022 - 2027, ranking first in the growth rate in 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-line brand customers. It has achieved mass production of 28-layer AI server circuit boards, 24-layer ultra-low loss servers, and 5G communication PCBs. It has applied ultra-low loss material mixing technology, ultra-accurate interlayer alignment deviation control technology, high-precision backdrilling technology, and high-speed signal control technology in PCB production.
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 forecast the company's net profit for 2024-2026 to 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., the company was given a price-earnings ratio of 25 times in 2024, with a target price of 23.5 yuan, maintaining a “strong” rating.
Risk warning: raw material prices rise, exchange rate fluctuations, downstream demand falls short of expectations.