20250314-招银国际-深南电路-002916.SZ-Solid_FY24_results__Upgrade_to_BUY_being_key_beneficiary_in_domestic_localization_5页_993kb

Shennan Circuit (002916 CH) Summary

Core Content

Shennan Circuit (002916 CH) reported strong FY24 results, with revenue increasing by 32.4% YoY to RMB17.9bn, slightly above the initial estimate but 2% below Bloomberg consensus. Net profit rose 34.3% YoY to RMB1.9bn, aligning with the estimate but underperforming Bloomberg. Gross margin improved to 24.8% in FY24 from 23.4% in FY23, reflecting stronger demand recovery but offset by new factory ramp-up costs.

The company has been upgraded to BUY, with a new target price (TP) of RMB146.81 (up from RMB115), implying a net profit CAGR of 28.5% and a PEG of 1.1x for 2024–2026. This upgrade is based on the company's strong performance during the sectoral downcycle and its position to benefit from the ongoing domestic localization trend in China, especially in the PCB and FC-BGA substrate markets.

Key Financial Highlights

Revenue Growth

• FY23A: RMB13,526 million
• FY24A: RMB17,907 million (+32.4% YoY)
• FY25E: RMB21,551 million (+20.3% YoY)
• FY26E: RMB24,838 million (+15.3% YoY)
• FY27E: RMB28,208 million (+13.6% YoY)

Net Profit Growth

• FY23A: RMB1,398.1 million
• FY24A: RMB1,877.6 million (+34.3% YoY)
• FY25E: RMB2,429.5 million (+29.4% YoY)
• FY26E: RMB3,102.2 million (+27.7% YoY)
• FY27E: RMB3,713.6 million (+19.7% YoY)

Gross Margin

• FY23A: 23.4%
• FY24A: 24.8%
• FY25E: 25.1%
• FY26E: 25.9%
• FY27E: 26.2%
• Improvement: Gradual increase due to higher capacity utilization and better product mix, though margin pressure from new factory ramp-up and rising material costs.

EPS (Reported)

• FY23A: RMB2.72
• FY24A: RMB3.66
• FY25E: RMB4.74
• FY26E: RMB6.05
• FY27E: RMB7.24

P/E Ratio

• FY23A: 47.1
• FY24A: 35.0
• FY25E: 27.0
• FY26E: 21.2
• FY27E: 17.7
• Trend: P/E ratio is expected to decline as earnings growth outpaces price increases.

Segment Performance

PCB Sales

• FY24A: RMB10.5bn (+30% YoY)
• Drivers: Robust demand in data centers (+20% YoY) and automotive (~14% of total sales)
• GPM: Improved to 31.6% from 26.6% in FY23
• FY25E: Expected to grow by 25% YoY
• GPM Forecast: Stable at ~31% in FY25E

PCBA Segment

• FY24A: Grew by 33.2% YoY
• GPM: Stable at 14.4%
• FY25E: Expected to grow by 25% YoY

Substrate Sales

• FY24A: RMB3.2bn (+37.5% YoY)
• Growth Weighted to 1H24: Due to inventory restocking
• GPM: Dropped to 18.2% from 23.9% in FY23, due to capacity ramp-up and rising material costs (especially gold)
• FY25E: Expected to grow by 18% YoY, with higher growth in memory products
• GPM Forecast: Modestly rise to 19.5%

Key Drivers of Future Growth

1. Higher Utilization: Expected to reach ~90% in 1Q25
2. DC/Al Revenue Growth: Increased due to domestic cloud companies boosting capex budgets
3. Auto PCB Growth: Faster penetration of high-end autonomous driving systems
4. FC-BGA Substrate Line: Capacity addition to support growth in PCB and substrate markets

Analysts and Contact

• Lily YANG, Ph.D: (852) 3916 3716 | lilyyang@cmbi.com.hk
• Kevin ZHANG: (852) 3761 8727 | kevinzhang@cmbi.com.hk
• Jiahao Jiang: (852) 3916 3739 | JiangJiahao@cmbi.com.hk

Stock Data

• Market Cap: RMB65,651.2 million
• Average 3-Month Turnover: RMB1,241.5 million
• 52-Week High/Low: RMB160.55 / RMB83.01
• Total Issued Shares: 512.9 million

Shareholding Structure

• AVIC International Holdings Ltd: 64.0%
• E Fund Management: 7.1%

Share Performance

Financial Summary

Income Statement

• Revenue: Increasing steadily with 32.4% YoY growth in FY24
• Gross Profit: Grew by 40.3% YoY in FY24, with 25.1% in FY25E
• Operating Profit: Increased to RMB2,306 million in FY24
• Net Profit: Rose to RMB1,878 million in FY24, with RMB3,714 million in FY27E
• EPS: Expected to grow from RMB3.66 to RMB7.24 by FY27E

Balance Sheet

• Total Assets: Expected to grow to RMB34,839 million by FY27E
• Cash & Equivalents: Projected to increase to RMB6,047 million by FY27E
• Current Ratio: Improved from 1.3 in FY23A to 2.3 in FY27E

Cash Flow

• Net Cash from Operations: Expected to grow from RMB2,214 million in FY24 to RMB4,147 million in FY27E
• Net Cash from Investing: Projected to decrease from RMB-1,925 million in FY24 to RMB-1,541 million in FY27E
• Net Cash from Financing: Expected to decrease from RMB-389 million in FY24 to RMB-1,081 million in FY27E

Valuation

• Target Price (TP): RMB146.81 (up from RMB115)
• New TP based on: 5-year average historical forward PE of 31.0x
• P/E Band and Chart: Provided for reference, indicating a downward trend in valuation multiples

Earnings Revisions

Analyst Certification

• The analyst certifies that the views expressed in this report accurately reflect personal opinions and that no compensation is tied to the report's content.
• The analyst and associates have not traded in the stock covered in the last 30 days and will not do so within 3 business days of the report's release.
• The analyst has no financial interest in the listed companies covered.

CMBIGM Ratings

• BUY: Potential return of over 15% over next 12 months
• HOLD: Potential return of +15% to -10%
• SELL: Potential loss of over 10%
• NOT RATED: Not rated by CMBIGM
• OUTPERFORM: Industry expected to outperform the market
• MARKET-PERFORM: Industry expected to perform in line with the market
• UNDERPERFORM: Industry expected to underperform the market

Important Disclosures

• The report is for informational purposes only and not tailored to individual investors.
• Past performance does not guarantee future results.
• The value of investments is uncertain and may fluctuate.
• CMBIGM is not liable for any losses or damages resulting from reliance on the report.
• The report may not be reproduced or distributed without prior consent.

Legal and Distribution Notes

• UK Recipients: Report is only for persons within Article 19(5) or Article 49(2) of the Financial Promotion Order.
• US Recipients: Report is for "major US institutional investors" only; not for general distribution.
• Singapore Recipients: Distributed by CMBISG, an Exempt Financial Adviser regulated by MAS.