Shengyi Tech announced 3Q24 results. Revenue was RMB5.1bn, up 14.5% YoY but down 1.7% QoQ, in-line with Bloomberg consensus. GPM was 22.9%, up 1.1ppts from 2Q24, benefitting from favourable product mix and lowered material costs. NP was RMB440mn, up 27.8% YoY but down 18.6% QoQ. NPM lowered to 8.6% (vs. 10.4% in 2Q24). Bottom line missed Bloomberg consensus by 26%, mainly due to SBC cost of RMB150mn (~2.9% of revenue). Looking forward, we expect Shengyi's revenue to grow at 20%/16% YoY in 2024/25E, with improved margin at 22.1%/23.6%. Maintain BUY with adjusted TP at RMB28.75 (vs. prev. RMB26.41), reflecting rollover 25.5x 2025E P/E, which is closed to its 3-yr historical forward P/E.
PCB sales grew on strong AI demand. GPM recovered both YoY and QoQ. 3Q24 PCB revenue was RMB1.2bn, up 49.3% YoY and 10.8% QoQ. The growth was mainly driven by a significant rise (20.9% YoY in 9M24) in server revenue (42.5% of PCB sales). Overseas market outperformed with 32.1% YoY sales increase. GPM recovered to 24.9% from 20.4%/14.2% in 3Q23/2Q24, mainly on favourable revenue mix. NPM rose to 7.5% vs. - 3.4%/6.4% in 3Q23/2Q24. We raise our projection for PCB sales by 5%/1% for 2024/25E, on quicker-than-expected ramp-up of related products for AI server market. We expect the segment to grow at 35%/20% in 2024/25E.
CCL revenue was up YoY but down QoQ (est. 5-6% lower), likely on weaker-than-expected demand in non-AI market, which suppresses ASP recovery. Margin slid sequentially, as copper price remained at its highs (avg. price in 3Q24: ~US$9.9k/t). But Shengyi managed to offset partial impact of material cost headwinds with pre-procurement activities. However, this led to an 8% QoQ increase (RMB365mn) in inventory. We cut our forecasts for CCL sales by 8%/6% for 2024/25E, on slower-than- expected market recovery. We expect the segment to grow at 14%/15% in 2024/25E.
Maintain BUY with adjusted TP at RMB28.75. We slightly revised down our sales/NP estimates by 4%/6% for 2025E. New TP is based on 25.5x rollover 2025E P/E, which is close to its 3-yr historical forward P/E. Potential risks include copper price volatility and weaker-than-expected demand recovery.
