Incidents:

The company announced results for the third quarter of 2024. The first three quarters of 2024 achieved operating income of 2.449 billion yuan, up 7.60% year on year; net profit to mother was 0.21 billion yuan, up 76.81% year on year, and net profit after deducting non-return to mother was 0.163 billion yuan, up 87.51% year on year. Among them, the company achieved operating income of 0.871 billion yuan in the third quarter, up 5.19% year on year and 7.74% month on month; net profit to mother was 0.06 billion yuan, down 14.76% year on year and 17.20% month on month.

Comment:

Deeply binding leading customers is expected to benefit from the expansion of high-end categories. The company has been deeply involved in the consumer electronics field for 20 years. Its main products include high-density interconnect boards, multi-layer boards (2-56 layers), hard-and-soft boards, and other personalized PCBs, which are widely used in various fields such as mobile smart terminals, 5G wireless communication base stations, and smart vehicle products. Benefiting from the recovery of the industry, the company's revenue grew steadily. The company has maintained good cooperative relationships with leading domestic mobile phone customers for a long time, and PCB products are widely used in communication equipment and communication terminal products. The company has been deeply involved in the smartphone field for many years, and has rich technical reserves and customer resources. In the AI wave, mobile phone motherboards all face greater challenges in line width, spacing, and integration of internal components. Compared with ordinary multi-layer boards, HDI boards are lighter and more compact, and are more suitable for mobile phone chips and various devices, and the demand for HDI boards in companies is expected to increase. AI servers place higher demands on signal transmission, etc., the module board area has increased, and the HDI board area has increased. Furthermore, the 800G optical module market has broad prospects, and the company is expected to fully benefit.

Forward-looking layout products have successfully broken through, and actively promoted capacity expansion to open up room for long-term growth. The company has established long-term in-depth cooperation with leading companies in the domestic communications industry to simultaneously launch multiple 5G motherboard and antenna board PCB R&D projects; other special processes such as Cavity, UHD, Step Gold Finger, and high-end optical modules have all been mass-produced to help customers bring design, cost and production cycle advantages in developing N+1 and N+2 generation products; companies in the switch sector already have 400G and 800G technology and mass production capabilities. In terms of production capacity, the company currently has 4 factories in operation. The company continues to carry out technical reforms to improve the technical level of the existing plants. The technical reform of the domestic F3 factory, MSAP production line, and investment in F7 Phase II HDI have all been completed, and the share of high-end HDI production capacity is steadily increasing. Overseas investment has been made to build the Fangzheng Technology (Thailand) intelligent manufacturing base project, and all tasks are progressing in an orderly manner according to the plan.

Profit forecast and investment rating: We expect the company to achieve net profit of 0.28/0.371/0.46 billion yuan in 2024/2025/2026, respectively, and the corresponding PE is 61/46/37 times, respectively, giving a “buy” rating.

Risk warning: downstream demand falls short of expectations, industry competition intensifies, raw material prices fluctuate