20230922-招银国际-深南电路-002916.SZ-Soft_1H23_numbers_suggest_no_immediate_turnaround_6页_1mb

Financial Report Summary: Shennan Circuit (002916 CH)

This report provides an analysis of Shennan Circuit's performance and outlook as of September 22, 2023, based on CMB International Global Markets' equity research. The key findings focus on recent financial results, market conditions, and recommendations.

Market and Company Overview

• The global printed circuit board (PCB) market experienced a 20% year-over-year decline in 2023 due to macroeconomic pressures, including weakened consumer demand and ongoing destocking by downstream industries.
• Shennan Circuit, a pure-play PCB manufacturer, is affected by this market weakness. The company's H1 2023 results showed a revenue decline of 13.5% year-over-year to RMB 6.0 billion and a net profit drop of 37.02% to RMB 474 million, owing to a compressed gross margin of 22.9%.
• Despite the challenging environment, auto PCB orders grew by 40% year-over-year due to a low base, though AI-related PCB contributions were insignificant.

Segment Performance

• PCB Segment: Revenue fell 12.4% year-over-year and 11.6% quarter-over-quarter to RMB 3.9 billion. The margin eroded as demand weakened in telecom markets and delays in projects like the Eaglestream platform impacted sales.
• Substrate Segment: Revenue dropped sharply by 39.9% year-over-year, with gross margin falling to 18.8% amid continued destocking by customers and rising costs from new factory investments.

Financial Highlights

• Estimated financials for 2023-2025 were revised downward: revenue for 2023 is lowered by 14% to RMB 12.69 billion, with net profit declining 29%.
• Target price reduced from RMB 96.60 to RMB 72 (a 9.7% downside). The recommendation remains HOLD, based on a 25x 2024 earnings multiple, below the historical average to account for the prolonged downcycle and lack of imminent turnaround.

Recommendation and Outlook

• Maintain HOLD due to persistent industry pressures, with no clear signs of demand recovery.
• The company's auto PCB segment is a potential bright spot, but overall, the business is expected to continue facing challenges in the near term.

Additional support or customization requests can be addressed for more details.