Incidents:
The company released its 2024 semi-annual report. 24H1 achieved operating income of 2.396 billion yuan, an increase of 11.38% year on year; realized net profit of 0.303 billion yuan, an increase of 54.49% year on year; realized net profit deducted from non-mother 0.298 billion yuan, an increase of 54.97% year on year.
Deeply involved in the field of new energy vehicles and expanding emerging industries such as artificial intelligence. In the first half of 2024, the PCB industry experienced a recovery after adjustments in 2023. The company's products in the field of automotive electronics dominated, and the NEV electronics business grew rapidly.
New energy vehicles use several times more PCBs than traditional cars, and the development of autonomous driving and intelligent connectivity technology has further increased the demand for high-frequency high-speed PCBs. Canalys predicts that the NEV market will grow at around 27% in 2024, and Prismark expects automotive electronics production to reach $35.4 billion by 2028, with a compound growth rate of 4.7% in 2023-2028. While consolidating its existing business, the company is actively expanding the PCB business in new fields such as artificial intelligence, low-altitude flight, wind power, photovoltaics and energy storage, and has made good progress.
Demand for AI server computing power has surged, opening up new opportunities for PCB industry growth. AI content generation technology represented by ChatGPT requires a large amount of computing power, which places higher demands on the material, number of layers, and processes of PCBs. AI server PCBs usually have 20-28 layers. Using ultra-low loss materials, their value is higher than traditional servers. IDC predicts that the global AI server market will be $21.1 billion in 2023 and is expected to grow to $31.79 billion by 2025, with a CAGR of 22.7%. Prismark predicts that the production value of server/storage electronics systems will reach $30.4 billion by 2028, with a compound growth rate of 8.7% in 2023-2028. The interim report revealed that the company already has the ability to produce high-multi-layer and HDI hard boards. It has achieved mass production of products such as circuit boards for 28-layer AI servers and 5-level HDI, and has applied many high-end technologies in the production of high-layer PCBs. It has become the main supplier of AI server PCBs to leading customers in the international technology industry, and is actively expanding cooperation with other leading AI server customers.
Domestic and foreign markets are being developed together, and two-wheel drive promotes growth
The interim report revealed that the company successfully developed leading overseas low-altitude flight companies (mainly developing electric vertical take-off and landing aircraft eVTOL) and Panasonic Energy (Panasonic Energy), and joined the AMD supply chain to achieve mass production of products from customers such as Amazon and Samsung, and plans to invest in a new factory in Thailand. In the domestic market, the company uses its experience in the field of new energy vehicle PCBs to strengthen cooperation with domestic automobile brands, achieve intelligent driving and mass production of products related to new energy vehicles, and deepen cooperation with GAC Group and Great Wall Motor Group. The interim report revealed that the company raised capital by issuing shares to specific targets, totaling 1.793 billion yuan and a net amount of 1.777 billion yuan, and will invest in Heshan Shimao Electronic Technology Co., Ltd.'s 3 million square meter circuit board construction project (phase II), Guangdong Shiyun Circuit Technology Co., Ltd.'s multi-layer board technology upgrade project and supplementary liquidity to optimize product structure, enhance the level of production intelligence and automation, and seize emerging business market opportunities such as new energy vehicles and artificial intelligence.
Investment advice:
We expect the company's revenue from 2024 to 2026 to be 5.4 billion yuan, 6.345 billion yuan, and 7.456 billion yuan, respectively, and net profit to mother will be 0.646 billion yuan, 0.824 billion yuan, and 0.948 billion yuan respectively. We will be given 23 times PE for 24 years, corresponding to a target price of 21.84 yuan for six months, maintaining a “buy-A” investment rating.
Risk warning:
Downstream demand falls short of expectations; industry competition risk; raw material price fluctuation risk; exchange rate risk.