Net profit from 1H24 increased 63% year-on-year, and downstream demand was strong. At 1H24, the company achieved revenue of 5.867 billion yuan (YoY +18.26%) and net profit of 0.657 billion yuan (YoY +62.56%), of which hard board and soft board account for 70% and 30% of revenue, respectively. Corresponds to a single quarter's 2Q24 revenue of 3.125 billion yuan (YoY +19.25%, QoQ +13.93%), net profit of 0.339 billion yuan (YoY +76.03%, QoQ +6.53%), and gross profit margin of 23.48% (YoY +0.44pct, QoQ -1.13pct). The company continued its year-on-year high growth in 1Q24, mainly due to: 1) recovery in downstream demand, intensive delivery of targeted projects, and a month-on-month increase in the company's utilization rate; 2) the company's high-end products have made breakthrough progress and the gradual introduction of key customers.

Many product technology breakthroughs have been made in the digital communication field, and product upgrades have opened up room for growth. In the field of general servers, the company has achieved stable mass production of high-speed PCBs on the EGS/Genoa platform, and has made major breakthroughs in product technology such as the Birch stream platform. Compared with the EGS/Genoa platform, the Birch stream platform requires increased signal transmission rate, data transmission loss, and wiring density. In the field of AI servers, the company successfully pioneered the application products of soft board and hard and soft board in data centers, and achieved major breakthroughs in products such as high-end HDI and high-multi-layer PTFE boards. In the field of high-speed communication, the company achieved batch shipment of products such as 800G optical modules and high-end HDI communication modules, and made major technological breakthroughs in 112G switching and routing PCBs. With the subsequent introduction of leading domestic and foreign customers, the company is expected to receive more high-margin orders.

The construction of key projects is promoted in an orderly manner, and the release of high-end production capacity is expected to enhance the company's profitability. Currently, the company has 12 factories in China, five major production bases in Shenzhen, Guangdong, Guangdong Longchuan, Jiangxi Jishui, Zhuhai Jinwan, and Zhuhai. Zhuhai Jingwang is the implementing entity of the HLC and HDI (including SLP) projects. It is a lighthouse factory for the company's high-tech and high-value-added products. 1H24 has made new breakthroughs in high-end product development for customers, and the output value has steadily increased; Jiangxi Jingwang Phase III has been successfully put into operation; Xinfeng's high-multi-layer circuit board production project is progressing steadily, and is committed to building a high-multi-layer circuit board R&D and production base with a high degree of automation intelligence, high production efficiency, and outstanding cost advantages; the Thai production base construction project has gradually completed land purchases and subsidiary capital increases, etc. construction.

Investment advice: Maintain an “better than the market” rating.

The profit forecast was lowered. Net profit to mother is expected to be 1.25/1.51/1.77 billion yuan in 2024-2026 (1.577/1.826 billion yuan 24-25 years ago), with a year-on-year growth rate of 33.9%/20.3%/17.1%. The current stock price corresponds to PE 18/15/13x. We are optimistic about the company's excellent management capabilities, as well as the advantages of card slots in the automotive sector and the potential to release high-end digital communication products, and maintain the “superior to the market” rating.

Risk warning: Production capacity expansion falls short of expectations; downstream demand falls short of expectations; new product expansion falls short of expectations.