Embracing AI and moving on to a new growth trajectory

（以下内容从招银国际《Embracing AI and moving on to a new growth trajectory》研报附件原文摘录）
生益科技(600183)
Shengyi Tech released its preliminary FY24 earnings. The company expects itsNP to rise by 46.0-54.6% YoY to RMB1.7bn-1.8bn. Mid-point NP of RMB1.75bn(+50.3% YoY) is lower than Bloomberg consensus/our estimate by 6.1%/3.3%.Our forecast of RMB1.8bn is at the high-end of the range. We are optimistic aboutShengyi Tech, as the company benefits from growing AI-related demand,particularly through its ultra-low-loss CCL products used in AI supply chain.Maintain BUY with TP adjusted to RMB34.5, corresponding to 30.6x 2025EP/E (prev. TP: RMB28.75) as we think the sector is 1) embarking upon anupcycle, and 2) the company’s CCL products are expected to be used inNvidia’s upcoming AI accelerators in 2025. .
Shengyi Tech has climbed out of the trough with revenue improvement(from both CCL and PCB, with higher growth from PCB) and net marginexpansion (up +1.8ppts) in 2024. By segment, in the preliminary results, 1)CCL/Pregreg’s NP is estimated to be RMB1,421mn, up 19.5% YoY, drivenby higher production and sales volume, favourable product mix, as well asbetter GPM. 2) PCB’s (~20% rev. contribution) NP is estimated to beRMB329mn (mid-point of Shengyi Electronics’ revenue estimate), vs. net lossof RMB25mn in 2023. The turnaround in bottom-line is driven by increasingdemand for multilayer PCB.
Despite sequential net profit decline in 4Q24, we think Shengyi Tech iswell-positioned to enjoy the significant upside as dollar value of PCBused in upgraded datacenter (new GPUs, cooling tech, high-densityinterconnect, etc) has increased substantially. Mid-point 4Q24 NP isestimated to be RMB378mn, up 43% YoY and down 14% QoQ. NPM isestimated to be ~7.4% vs. 8.6%/6.3% in 3Q24/4Q23. By segment, 1)CCL/Pregreg’s NP is estimated to be ~RMB235mn, down 14% YoY and down33% QoQ. We believe it is likely due to weaker-than-expected demand innon-AI market (e.g., consumer electronics), which has suppressed ASPrecovery. Meanwhile, copper price remained at its highs (avg. price in 3Q24:~US$9.9k/t). 2) PCB’s NP is estimated to be RMB142mn, up 57% QoQ (vs.4Q23 was net loss of RMB7mn). We think it is a continuation of 9M24 growthmomentum driven by rising contribution (20.9% YoY in 9M24) from serverrevenue (42.5% of PCB sales). (report)
Maintain BUY. We like Shengyi Tech given 1) products adopted in AImarket (Ultra Low-loss and Extreme Low-loss CCL products), 2) leadingmarket position (No.2 with 12% market share of the global CCL market in2023 per Prismark). We maintain our NP growth forecast for 2025 at 51%YoY. We believe the sector is on the way of an upcycle plus AI theme. NewTP is RMB34.5, based on 1SD above 5-year hist. avg, corresponding to30.6x 2025E P/E. Potential risks include US-China tariff escalation, rising USinterest rates, exchange rates fluctuation, etc.