Deeply involved in the industry for many years, a leading enterprise in the domestic PCB industry. Qiangda Circuit has been deeply involved in the PCB industry for 20 years, focusing on high-end models and small-batch PCB companies. Its products mainly include high-end PCB products with special processes or materials such as high-multi-layer boards, HDI boards, thick copper plates, etc., which are widely used in industrial control, communication equipment, automotive electronics and consumer electronics.

Downstream applications are flourishing, and emerging fields drive the growth of the industry. 1) In 2023, global PCB output fell by about 15%. After several quarters of inventory removal, the PCB industry gradually entered a steady recovery stage. Combined with the rise of emerging applications such as AI PCs, AI servers, and AI phones, the PCB industry gradually entered the recovery stage. 2) In 2023, the share of Chinese models and small-batch boards in China's total domestic PCB output value increased by 1.02 pct. According to the share of global models and small batches of 15% to 20%, in the future, as electronic products diversify and high-end, and superposition the production capacity of medium and high-end PCBs to shift to China, we expect the share of Chinese models and small-batch boards to gradually approach the global level. 3) Industrial control is the main application area of the company's products, contributing 63.46% of revenue in 2023. We believe that the industrial industry is at the end of inventory removal, and it is expected that 24H2 will enter a recovery phase, driving demand for related PCB usage. 4) The communications industry and consumer electronics are other important application areas for the company, accounting for 15% and 10% of the company's revenue in 2023. By 2025, China will still need to build 0.263 million 5G base stations, and the wave of AI-driven mobile phone and PC switching will continue to drive demand for related PCBs.

Technical advantages have penetrated many high-quality customers, expanded production and optimized product structure. The company's main PCB manufacturing process has reached the mainstream level of the industry, and the product can reach up to 50 layers, which is at the leading level in the industry. The company covers high-quality customers such as Huaxing Yuanchuang, Dafu Technology, Fineline, ICAPE, and Wurth. In addition, the company raised 0.531 billion yuan through the IPO to build the Nantong plant, with an estimated total production capacity of about 0.96 million square meters, including 0.72 million square meters of multi-layer boards and 0.24 million square meters of HDI boards. Meanwhile, the second phase of the Jiangxi factory project, which started in 2022, is expected to be put into operation in 2024, with an estimated production capacity of about 0.29 million square meters. After the Nantong plant and Jiangxi Phase II are all delivered, the company's total production capacity can reach about 1.75 million square meters.

Investment advice and profit forecasting

We expect the company's revenue in 2024-2026 to be 0.785/0.879/1.009 billion yuan, with net profit of 0.102/0.114/0.129 billion yuan, corresponding EPS of 1.36/1.52/1.71 yuan/share. Considering that the company is a leading domestic model and small-batch board company, the company's model product process will reach the limit target, enter the industrial chain of many high-quality customers with technical advantages, and combine fund-raising projects with the release of production capacity in the second phase of the Jiangxi factory, which will break the production capacity bottleneck. Covered for the first time, giving a “holding” rating.

Risk warning

Upward risks: the company's production capacity is climbing faster, raw material prices are falling, downstream demand is picking up at an accelerated pace Downward risks: the progress of fund-raising projects falls short of expectations, raw material prices are rising, and downstream demand fluctuates