2024Q1's performance improved significantly year on month, and the industry's upward cycle is expected to begin, maintaining the “buy” rating of 2024Q1, achieving revenue of 4.423 billion yuan, +17.77% year over month; net profit to mother of 392 million yuan, +57.92% month on month; net profit of 386 million yuan, +65.65% year on month, and +54.91% month on month; gross profit margin 21.30%, +1.56pcts year on month, +2.92pcts month on month. We maintain our 2024-2026 performance expectations. We expect net profit to be 16.31/20.47/2,415 billion yuan for 2024-2026, corresponding EPS of 0.69/0.87/1.02 yuan. The current stock price is 26.8/21.3/18.1 times. The company is a domestic CCL leading enterprise focusing on high-end fields such as high-speed CCL, AI servers, and packaging substrates. The future volume of high-end products will help the performance grow rapidly and maintain the “buy” rating.

Product structure continues to be optimized to drive steady growth in performance

Copper-clad plate: The company's production and sales volume of copper-clad plate products increased, production capacity was at full capacity, product structure was further optimized, and revenue growth led to an increase in the company's net profit. PCB: The subsidiary Shengyi Electronics turned a loss into a profit in 2024Q1, mainly due to its continuous optimization of the PCB product structure and active improvement of the product business regional layout. As the server market's demand for high-multi-layer PCBs increased, the company's production, sales, and operating income all increased over the same period in 2023, driving the company's net profit growth and achieving profit.

High-end high-speed products continue to break through, and emerging downstream sectors contribute to the incremental demand side: According to Prismark's forecast, the global PCB output value in 2024 will be US$72.9 billion, +5% over the same period last year. Looking at the breakdown, AI servers are expected to maintain high growth; EV and ADAS-related demand for new energy vehicles is still strong; after a two-year downward cycle of inventory removal, demand is expected to gradually increase as consumer confidence gradually recovers; and innovative technologies such as 5G, the Internet of Things, and edge computing will bring new growth impetus. Product side: The company has stepped up efforts to promote market certification. High-end high-speed products have been certified by world-renowned terminal AI servers and have achieved major breakthroughs in the AI GPU field; substrate materials have been used in large quantities in Wire Bond packaging substrate products, and have also been developed and applied in higher-end AP, CPU, GPU and other products represented by FC-CSP and FC-BGA packages. Production capacity side: The company's Songshan Lake Branch 5 and Changshu Phase II have successfully completed production, Jiangxi Phase II construction has officially started, and overseas factories have completed important tasks such as land purchases.

Risk warning: downstream demand falls short of expectations; capacity release falls short of expectations; technology development falls short of expectations