Shengyi Tech released its preliminary FY24 earnings. The company expects its NP 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 about Shengyi 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 2025E P/E (prev. TP: RMB28.75) as we think the sector is 1) embarking upon an upcycle, and 2) the company’s CCL products are expected to be used in Nvidia’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 margin expansion (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, driven by higher production and sales volume, favourable product mix, as well as better GPM. 2) PCB’s (~20% rev. contribution) NP is estimated to be RMB329mn (mid-point of Shengyi Electronics’ revenue estimate), vs. net loss of RMB25mn in 2023. The turnaround in bottom-line is driven by increasing demand for multilayer PCB.

Despite sequential net profit decline in 4Q24, we think Shengyi Tech is well-positioned to enjoy the significant upside as dollar value of PCB used in upgraded datacenter (new GPUs, cooling tech, high-density interconnect, etc) has increased substantially. Mid-point 4Q24 NP is

estimated to be RMB378mn, up 43% YoY and down 14% QoQ. NPM is estimated 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 down 33% QoQ. We believe it is likely due to weaker-than-expected demand in non-AI market (e.g., consumer electronics), which has suppressed ASP recovery. 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 growth momentum driven by rising contribution (20.9% YoY in 9M24) from server revenue (42.5% of PCB sales). (report)

Maintain BUY. We like Shengyi Tech given 1) products adopted in AI

market (Ultra Low-loss and Extreme Low-loss CCL products), 2) leading market position (No.2 with 12% market share of the global CCL market in 2023 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. New

TP is RMB34.5, based on 1SD above 5-year hist. avg, corresponding to 30.6x 2025E P/E. Potential risks include US-China tariff escalation, rising US interest rates, exchange rates fluctuation, etc.