The company, which has been deeply involved in printed circuit boards for 40 years and has created a leading position in the industry, has been deeply involved in the field of electronic interconnection since its establishment in 1984. After 40 years of development, it has formed a “3-in-1” model with three main businesses: printed circuit boards, electronic assembly, and packaging substrates. As a leading enterprise in the electronic circuit industry in China, the company occupies a leading position in the field of packaging substrates, and is also a characteristic enterprise in electronic assembly. The company was recognized as a key high-tech enterprise under the National Torch Program. It is the first national technological innovation demonstration enterprise in the electronic circuit industry, has a national enterprise technology center, and serves as the chairman unit of the China Electronic Circuit Industry Association (CPCA) and the chairman unit of the Standards Committee. The company is in a leading position in global wireless base station RF power amplifier PCB supply, domestic packaging substrate supply, domestic processor chip packaging substrate supply, and electronic assembly manufacturing. According to the Prismark report for the fourth quarter of 2023, the company ranked 8th among global printed circuit board manufacturers. Although the output value of the global PCB industry declined in 2023, the industry is expected to maintain steady growth in the long run.
Collaborative development of digital PCB and packaging substrate advantage sectors
① PCB side: Against the backdrop of a slowdown in demand in the global communications industry and a decrease in capital expenditure in 2023, the company effectively addressed challenges through product structure optimization and cost control strategies, maintained a stable share of overseas customer orders in the communications field, and achieved contrarian growth in the data center and automotive electronics sector. In the automotive sector in particular, the company seized the growth opportunities of new energy and ADAS technology, and orders increased by more than 50% year over year. Furthermore, the PCB business has enhanced cost competitiveness through refinement of process and platform management, digitalization, and improvement of process capabilities, providing a solid foundation for the company's continuous development and market adaptability.
② In terms of packaging substrates: The company has made significant breakthroughs in technical capabilities. FC-CSP products have reached industry-leading levels in MSAP and ETS process samples, and RF products have been successfully introduced into some high-end product lines. The 14 layer and below products in the FC-BGA product line already have mass production capabilities, and some customers have completed sample delivery certification and entered the production line verification stage; products above level 14 have also initiated sample delivery certification procedures.
In terms of project construction, the Wuxi Substrate Phase II plant is continuously improving production capacity and speeding up customer certification and product introduction. It is particularly noteworthy that the first phase of the Guangzhou packaging substrate project was successfully put into operation in the fourth quarter of 2023 and production capacity began to climb. This progress is significant for the company's future growth.
Profit was under pressure in '23, and 24Q1 performance increased year-on-year
In 2023, local geopolitical conflicts were frequent around the world, economic performance differentiation among economies intensified, and the macroeconomic situation became more complex and varied. According to recent World Bank research, global GDP growth declined further to 2.6% in 2023, down 0.5 percentage points from 2022. The electronics industry is affected by the macroeconomic downturn compounded by downstream companies' inventory removal, putting pressure on overall demand. The company effectively addresses challenges through measures such as product structure optimization, operational efficiency improvement, and cost control. As demand for digital communication servers and automotive electronics grew, the company achieved significant growth in 24Q1. Operating revenue and net profit to mother increased by 42.24% and 83.88%, respectively.
Investment advice
As a high-quality supplier in the domestic PCB field, the company's digital communication server, automotive, and packaging board products are expected to bring about rapid growth in performance. We expect revenue forecasts for 2024-2026 to be 167.19, 19.038, and 23.236 billion yuan; corresponding EPS forecasts are 3.34, 4.03, and 5.22 yuan, respectively, corresponding to the closing price of 92.2 yuan on May 21, and price-earnings ratios of 27.62, 22.91, and 17.66 times, covered for the first time, giving a “gain” rating.
Risk warning
Downstream market demand fell short of expectations, and ABF package substrate verification progress fell short of expectations.