Company Profile

Olympic Circuit Technology Co Ltd is a China-based company principally involved in the research, development, manufacture and sales of different sorts of printed circuit boards (PCBs).

The Company's products mainly include high multi-layer rigid boards, high-precision interconnect (HDI) boards, flexible printed circuits (FPC), rigid-flex boards (including HDI) and metal substrates. The Company's products are used in automotive electronics, high-end consumer electronics, computer and related equipment, industrial control, communication and medical equipment fields.

The Company distributes its products both within domestic market and to overseas market.(Source:Reuters)

Event

Olympic Circuit Technology Co Ltd (the company) announced its third-quarter financial results of 2023.

In the first three quarters of 2023, the company reported revenue/ net income attributable to shareholders at CNY 3.349 billion/ CNY 374 million, a year-on-year increase of 0.18%/ 25.6%, with Q3 seeing CNY 1.198 billion /CNY 178 million, 5.01%/ 8.42% higher than it was a year ago.

Comments

Thanks to the recovery in demand, its revenue improved both from a year earlier and from a quarter earlier.

Its revenue in Q3 increased by 5.01% from a year earlier and by 5.48% from a quarter prior, mainly thanks to the elevated utilization rates pushed by steady recovery in terminal demand.

Among fields using its products, automotive electronics took the most market shares. Meanwhile, the company also vigorously expanded its PCB businesses in wind power, PV and energy storage.

Its profitability improved with its better product mix.

The gross margin in the first three quarters of 2023 stood at 20.09%, up 3.72 percentage points (pps) from the same period of last year, with Q3 alone at 24.53%, 5.61pps higher than it was a year ago and 8.19pps higher than that in Q2, showing its profitability remarkably improved.

We attributed the growth to 1) lifted utilization in Q3; 2) continuous improvements in its product mix, as the proportion of products with high added value raised, pushing up the average prices.

In the first three quarters of 2023, the selling/ administrative/ R&D expense rate　went down by 0.11pps/ 0.04pps/ 0.19pps from a year ago, and in Q3 alone, the selling and administrative expense rates inched down by 0.1pps and 1.32pps from a year prior, respectively, while the R&D expense rate crept up by 0.3pps from the same period last year.

Additionally, Q3 also saw exchange gains which helped boost the company’s profits.

The company reported its net operating cash flow at CNY 935 million in the first nine months, showing its excellent operation quality.

As the demand for automotive PCB continued to grow, the development of new energy and digital communication helped expand its headroom.

The company is one of core suppliers of Tesla, providing key components for electric vehicles, and at the meantime, the company also provides products to new energy vehicle brands such as BMW, Volks Wagen, Posche, Chrysler, Benz and Xiaopeng, having achieved massive production of 24-layer rigid boards, 5-level HDI, 60z-copper multiple-layer boards, multiple-layer flexible boards and multiple-layer HDI rigid-flex boards.

Meanwhile, the company is also vigorously expanding its PCB business in wind power, PV and energy storage.

Along with the price hikes of conventional energy abroad and the deepened impacts of dual carbon strategy in China, the demand is expected to lift in the future.

In addition, the company has significantly developed technologies and products in growing markets such as IoT, cloud computing and optical communications. It has achieved massive production of 24-layer extra-low consumption servers and PCB for 5G communication, and also boasted capabilities in manufacturing 28-layer products.

Earnings forecast and investment recommendation

We moderately revise our earlier earnings forecasts and estimate its net income attributable to shareholders at CNY 525 million, CNY 620 million, and CNY 731 million in 2023, 2024, and 2025, respectively, implying a P/E ratio to 16.0x, 13.5x, and 11.5x, based on the closing price on October 23, 2023. Maintain “Outperform”.

Potential risks

Declines in sales volume of automobiles; slower-than-expected penetration of new　energy vehicles; slower expansion of production capacity