Incidents:

On October 28, the company released its report for the third quarter of 2024. During the reporting period, the company achieved operating income of 7.698 billion yuan, an increase of 34.02% over the previous year; realized net profit of 0.765 billion yuan, an increase of 30.54% year on year; achieved operating income of 2.842 billion yuan in the third quarter, an increase of 37.07% year on year, and net profit to mother of 0.306 billion yuan, an increase of 26.70% year on year.

Lay out the emerging field of AI, and record high revenue and profit in a single quarter

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 followed market trends, pioneered the layout of artificial intelligence, new energy vehicles, data centers, etc., and participated in cutting-edge technology research and development in advance. The three-quarter report revealed that during the reporting period, the company achieved operating income of 7.698 billion yuan, an increase of 34.02% over the previous year; achieved net profit of 0.765 billion yuan, an increase of 30.54% year on year; achieved operating income of 2.842 billion yuan in the third quarter, an increase of 37.07% year on year. Net profit to mother was 0.306 billion yuan, a year-on-year increase of 0.306 billion yuan. 26.70%

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

The semi-annual report revealed that the company successfully implemented research and development in fields such as AI computing power, next-generation PCIe6.0 protocol and chip OakStream platform technology for AI server products; 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, and new product development results were 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 LED PCBs 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 strengthen its core competitiveness.

Simultaneous promotion overseas to enhance service for overseas customers

The company is speeding up 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 will be 1.221 billion yuan, 2.004 billion yuan, and 2.739 billion yuan respectively. We will give 38 times PE over 24 years, corresponding to a target price of 53.76 yuan for six months, 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.