Soft 1H23 numbers suggest no immediate turnaround

（以下内容从招银国际《Soft 1H23 numbers suggest no immediate turnaround》研报附件原文摘录）
深南电路(002916)
The worldwide PCB market experienced a significant decline of 20% YoYin 1H23, mainly due to falling demand for electronics products under globalmacroeconomic pressure. This is in line with our previous prediction that “weexpect the global PCB market will persistently encounter macroeconomicchallenges due to weakened consumer demand and the ongoing destockingcycle among downstream industries.” (link) Shennan Circuit (002916 CH), apure PCB manufacturer, is not immune to the market weakness. MaintainHOLD, with lowered TP of RMB72.
PCB segment (nearly 2/3 of total revenue) remains weak, with marginerosion in a declining market. Segment revenue dropped by 12.4% YoYand 11.6% QoQ to RMB3.9bn in 1H23. The gross margin declined by1.49ppts to 25.9% compared to 1H22. Weakening demand in domestic andoverseas telecom markets and delay in upgrade for Eagle stream platformdragged the segment sales. The contribution of the Company’s AI serverrelated PCB products was not meaningful, suggesting Shennan is not yet akey beneficiary from the current AI boom. Auto PCB was the only spotlight,with 40% YoY growth in orders due to a low base.
Substrate segment was dealt a heavy blow with a significant 39.9% YoYdrop in revenue, as downstream manufacturers continued destocking.Although the Company actively ventured into new projects and cultivatednew customer relationships, ASP erosion was particularly severe forpackage substrate. GPM was 18.8% in 1H23 vs. 30.3% and 23.1% in1H22/2H22, affected by market down cycle and rising costs of new factories.
The Company reported a 13.5% YoY decline in revenue to RMB6.0bn anda substantial 37.02% YoY drop in net profit to RMB474mn in 1H23. GPMwas lowered to 22.9% vs. 26.5% and 24.6% in 1H22/2H22. The Company’s1H23 results were below our estimates, which were already lower thanconsensus. We cut FY23/24E revenue and NP by 14%/14% and 29%/24%,as we think the business will continue to be affected by industry downcycleand a near-term turnaround may not be imminent. Maintain HOLD, withlowered TP of RMB72, based on 25x rollover 2024E P/E. We keep thesame P/E multiple of 25x, which is over 1SD below 5-year historical avg., asthe market is waiting for a clear sign of demand recovery