Key points of investment

The release of new machines drives steady growth in performance

Benefiting from the increase in operating rates driven by the release of new machines from major customers, the company's performance has achieved steady growth despite short-term exchange rate fluctuations. 24Q1-Q3, the company's revenue was 23.49 billion yuan, up 14.8% year on year; net profit to mother was 1.97 billion yuan, up 7.1% year on year. For 24Q3, revenue was 10.36 billion yuan, up 16.1% year on year, up 60.1% month on month; net profit to mother was 1.19 billion yuan, up 15.3% year on year, up 314.7% month on month.

Keep up with the AI wave and focus on high-end products

With the continuous evolution of end-side AI functions and technology, future PCB products will be upgraded to high-end products such as high quality, low loss, high heat dissipation, and fine circuits. The company always insists on developing high-end products. The PCB products produced can have a minimum aperture of 0.025mm and a minimum line width of 0.020mm. High-bandwidth miniature antenna modules, lidar module boards, low-orbit satellite high-end communication antenna module boards, new folding screen module boards, BLU/RGB high-end products, 5G mmw high-end antenna modules, 800G optical modules, high-speed computing AI motherboards, ultra-thin smart computer motherboards, etc., have achieved the development of high-end PCB products and process capabilities, and already have industrialization capabilities. In the next-generation information and communication industry, the company continues to expand its in-depth product development direction in the fields of artificial intelligence+ such as AI PC/Aiphone/AI servers, 5G millimeter-wave network communication and low-orbit satellites, high-speed cloud storage and computing, new energy vehicles and new energy storage, robot sensing, virtual helmet devices, large screen folding and miniature displays.

Expand high-quality production capacity to increase market share

The company takes full advantage of its technology and scale to further increase its market share in high-end PCB products.

In response to the production capacity demand for high-end HDI and SLP products brought about by AI-related products, the company accelerated the production expansion project for high-end HDI and SLP printed circuit boards in Huai'an's three parks. As of the first phase of the 24H1 project, the second phase of construction is being accelerated. It is expected that after completion, it will further increase the company's market share in the field of high-end HDI and SLP products; promote cooperation between Huai'an Park and major domestic and foreign server manufacturers. A number of new customers have successively entered the certification, testing and sample stages; speeding up the Thai park construction process to target the bidding The direction is top-tier server products.

Profit forecasting and valuation

The company's revenue for 2024-2026 is estimated to be 34.42/39.6/44.95 billion yuan, with a year-on-year growth rate of 7.3%/15.1%/13.5%; net profit to mother is 3.49/4.53/5.09 billion yuan, with a year-on-year growth rate of 6.0%/30.0%/12.3%. The current stock price corresponds to PE 25.0/19.2/17.1 times, and EPS of 1.50/1.95/2.19 yuan. Considering that 2024 is the first year of development of AI PCs and AI phones, it is expected to set off a new wave of innovation as technology matures in the future, speeding up the switching cycle and boosting sales growth. As the world's largest PCB manufacturer, the company is deeply involved in technology and products, lean production skills, and always maintains cooperation with world-class customers. In the future, with the overall restoration of downstream demand, combined with AI end-side innovation, the release of supporting production capacity in places such as Huai'an and Thailand, and a further increase in market share, etc., the company is expected to become stronger and maintain the “gain” rating.

Risk warning

Downstream and core customer demand falls short of expectations, raw material price and exchange rate fluctuations, and geopolitics risks.