Expect Shengyi to enter Nvidia supply chain in 2024

（以下内容从招银国际《Expect Shengyi to enter Nvidia supply chain in 2024》研报附件原文摘录）
生益科技(600183)
We have noticed several news outlets reporting that Shengyi Tech’s latest ultra-low (UL) loss CCL product (Synamic9GN) has been certified by Nvidia and is expected to begin the next testing phase soon. Entering Nvidia’s supply chain not only is a validation of the company’s R&D capabilities, but also suggests the company is likely to see continued margin expansion as high-end products typically yield a higher margin. Our positive outlook for the company is further bolstered by its extensive market reach and the potential for the CCL sector to recover more quickly than the PCB sector in 2024. Maintain BUY with an unchanged TP at RMB20.39.
Based on our checks, Shengyi Tech’s UL loss CCL product (Synamic9GN) has indeed been certified by Nvidia. This is a major breakthrough for the company as high-end products imply higher margins,benefitting Shengyi Tech’s future financial performance. Also, we speculate Nvidia may incorporate this UL loss CCL in its upcoming AI chips (see Figure.1 for Nvidia’s tech roadmap). Additionally, sufficing Nvidia’s certifications may also imply the company’s product can meet the requirements from other chip designers, such as AMD and Intel.
Shengyi Tech is expanding its operations beyond China. The company made plans to invest as much as RMB1.4bn (~US$196mn) in Thailand to establish a new plant to respond more flexibly to rising global demand in July 2023. Coincidentally, Nvidia has also recently stressed the strategic significance of the Southeast Asia region as the US tech ban on China seems to be escalating further (link). We believe Southeast Asia has become not only an alternative manufacturing and logistics hub for many global tech giants but also a market with considerable untapped potential.
We see this update as a positive catalyst for the company. Demand for the new generation of CCL products could boost the company’s top and bottom lines in the coming years. Maintain BUY with an unchanged TP at RMB20.39.