The company announced its mid-year report of 24, with H1 revenue of 9.63 billion +22.2% YoY, net profit of 0.93 billion +68.0% YoY after deducting non-return of 0.91 billion, +75.7% YoY, gross profit margin 21.6% yoy +2.3 pcts, net profit margin 10.2% yoy +3.2pcts, and a period expense ratio of 10.7% yoy -0.8pcts. Based on the company's recent situation, the reviews are as follows:

Q2 profit is at the upper limit of the previous forecast. Single Q2, revenue 5.21 billion +26.2% month-on-month +17.7%, net profit to mother 0.54 billion +75.9% month-on-month +37.8%, net profit margin of 0.52 billion +35.4% month-on-month +35.4%, gross profit margin 21.8% yoy +2.9pcts month-on-month +0.5pct, net profit margin 11.0% yoy +3.6pcts month-on-month +1.9pcts, period expense ratio 10.4% yoy -0.6pcts month-on-month. The high year-on-month increase in Q2 profit was mainly due to the year-on-year increase in the company's copper-clad plate production and sales, and the decline in unit manufacturing costs. Facing the sharp rise in copper prices since late March, the company continued to optimize the product structure and adjust product prices to balance customer order demand and profit, resulting in a year-on-year increase in CCL product revenue and gross margin, as well as enjoying the value-added tax input tax credit policy to increase other revenue, which contributed to the increase in profit; at the same time, benefiting from the significant increase in net profit of the subsidiary Shengyi Electronics.

24H1 business structure: CCL and adhesive sheet revenue +20.7% YoY, gross profit margin 21.7% YoY +2.0pcts, CCL production/sales 68.74/70.1 million square meters, +23.3%/+27.6% YoY, adhesive sheet production/sales 90.37/90.62 million square meters, +15.5%/+14.8% YoY; PCB business revenue 1.88 billion +23.5% YoY, gross profit margin 15.9% Compared to +1.6 pcts, production/sales volume is 0.69/0.71 million square meters, +19.7%/+21.3% year-on-year.

The company's operations have gone through short-term fluctuations in the copper-clad plate industry. Although downstream PCB customers have had some inventory adjustments since July due to fluctuating demand and falling copper prices, the market is worried that the copper clad plate industry will face price pressure in the future.

However, according to our tracking, although Shengyi's order volume declined sequentially in July, the company maintained a high operating rate through order structure optimization, and the overall price remained stable. The company's August orders have gradually returned to normal. With the recent steady recovery in copper prices, such as a further increase in demand and order volume in September, the company's business performance for the third and fourth quarter is expected to continue its performance in the second quarter.

Looking forward to the future, the company continues to make new progress and breakthroughs in high-end products, and is firmly optimistic about the long-term growth logic of Shengyi Technology. 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 server EGS platforms is rapidly increasing, and demand for M6 materials continues to be released to drive high-end product structure upgrades; in addition, the North American A customer project has also progressed well; ABF carrier board base film (SIF film) has cooperated with major domestic customers and is currently progressing well. 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 high-end product upgrades of the company are expected to continue to be realized, and there is potential to exceed expectations in the medium to long term. Considering factors such as future equity incentive costs and short-term industry demand fluctuations, our latest forecast 24-26 revenue is 19.32/22.8/26.22 billion, net profit to mother is 1.94/2.54/3.1 billion, corresponding EPS is 0.80/1.04/1.28 yuan, corresponding to the current PE price of 22.2/17.0/13.9 times, and PB is 2.9/2.5/2.2 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.