Incidents:

The company announced results for the third quarter of 2024. In the first three quarters of 2024, revenue was 7.698 billion yuan, up 34.02% year on year; net profit to mother was 0.765 billion yuan, up 30.54% year on year. Among them, the company achieved operating income of 2.842 billion yuan in the third quarter, up 37.07% year on year, up 15.36% month on month; net profit to mother was 0.306 billion yuan, up 26.70% year on year and 22.52% month on month.

Comment:

Demand for AI computing power is growing rapidly, and the forward-looking layout continues to contribute to performance elasticity. AI servers and high-speed network systems are being implemented at an accelerated pace, and the demand for computing power is driving the structural demand for large, high-speed multi-layer PCBs and advanced HDI. The company anticipates and deeply lays out AI computing power requirements, gives full play to its technical advantages, and accurately grasps future product trends through in-depth cooperation with top domestic and foreign customers to participate in customer product pre-research and development. The company actively targets the technical capability transformation of products such as AI servers, AI computing power, optical transmission switches, etc., and completed equipment optimization and transformation of high-multi-layer precision HDI 5.0mm and high-multi-layer PCB 8.0mm thick boards, and the construction of large aperture blind hole filling capabilities and ultra-thin core board capabilities, laying a solid foundation for the development of next-generation AI servers, computing power, and communication products. The company has deep cooperation with many of the world's top customers in the field of switches and AI servers. Currently, the company's high-end AI data center computing power products 5- and 6-tier HDI and layer 28 acceleration card products have successfully entered mass production, and 1.6T optical modules have entered small-scale mass production. With the release of high-end products in the fields of AI computing power, artificial intelligence, new energy vehicles, data centers, etc., it continues to contribute to the company's performance flexibility.

Continue to implement overseas strategies and deeply bind leading downstream customers. The company is actively promoting a global strategy, including plans to invest no more than 0.26 billion US dollars to build high-precision PCB and HDI projects in Vietnam, and to acquire 100% of Thailand's Jingyi Electronics shares through its subsidiaries Singapore Shenghong and PSL to enhance overseas production capacity. The company empowered MFS Group in all aspects. The MFS Group's revenue and net profit both achieved rapid growth, and MFS Group's outstanding performance helped the company achieve growth in performance. The company also plans to acquire APCB for no more than 0.28 billion yuan as the company's production base in Thailand, strengthen the company's global production capacity supply capacity, enhance the company's ability to quickly meet the overseas delivery needs of core customers and customer stickiness, and deeply bind leading downstream customers.

Profit forecast and investment rating: We expect the company to achieve net profit to mother of 1.228/1.769/2.068 billion yuan in 2024/2025/2026, respectively, corresponding PE of 32/22/19 times, respectively. This is the first coverage, giving a “buy” rating.

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