20260316-招银国际-深南电路-002916.SZ-AI-led_PCB_growth_with_substrate_upside_ahead_5页_745kb

Shennan Circuit (002916 CH) Summary

Core Content

Shennan Circuit (SCC) has demonstrated strong financial performance in FY25, driven by AI-led growth in its PCB business and improving conditions in its substrate segment. The company's revenue grew by 32% YoY to RMB23.6bn, slightly above the forecast and in line with the Bloomberg Benchmark Group (BBG) consensus. Gross margin (GPM) improved to 28.3%, surpassing both the BBG consensus and the prior estimate, while net profit surged by 75% YoY to RMB3.3bn, slightly below BBG consensus but ahead of the forecast.

In the fourth quarter of FY25, revenue increased by 42% YoY and 9% QoQ, while net profit rose by 144% YoY but declined by 1.6% QoQ. The QoQ decline in GPM was attributed to depreciation from new facilities and higher raw material costs. The company's PCB business, which accounts for a significant portion of its revenue, saw a 37% YoY growth with a GPM of 35.5%. AI data centers contributed approximately 25% to PCB revenue, while telecom accounted for 40%, with high utilization across most facilities.

Main Points

• PCB Business Growth:

  • Revenue grew by 37% YoY in FY25 to RMB23.6bn.
  • GPM reached 35.5% in FY25, reflecting improved product mix and cost efficiency.
  • AI infrastructure and data center demand are key drivers of PCB growth.
  • 4Q GPM slightly softened due to ramp-up costs and lower-margin PCBA.

• Substrate Business Improvement:

  • Substrate revenue grew by 31% YoY in FY25 to RMB10.2bn.
  • GPM improved to 22.6% from 18.2% in FY24, supported by tight supply and rising domestic demand for ABF/FC-BGA.
  • BT demand remains robust with long order visibility.
  • Guangzhou BT facility operated at high utilization, while ABF/FC-BGA substrates are still in early ramp stages.

• Financial Performance:

  • Net profit in FY25 reached RMB3.3bn, with a YoY growth of 75%.
  • EPS (Reported) rose to RMB4.91, with a P/E ratio of 51.0.
  • ROE increased to 20.6% in FY25, indicating improved profitability.

Key Information

• Target Price (TP): RMB288.00 (previous TP: RMB235.00)
• Price Performance:
  • 12-month absolute return: 30.1%
  • 12-month relative return: 19.2%
• Market Cap: RMB166,838.5 million
• Shareholding Structure:
  • AVIC International Holdings Ltd: 64.0%
  • HKSCC: 3.3%
• Earnings Outlook:
  • Revenue is projected to grow steadily through FY28E, with a blended peer average P/E of 33x for FY26E and 24x for FY27E.
  • CMBIGM estimates suggest a higher growth trajectory than previous expectations, with a 11% increase in FY26E revenue and a 41% increase in net profit.

Analyst Recommendations

• Rating: BUY
• Reasoning: Strong PCB growth, improving substrate business, and long-term demand for high-end substrates support the positive outlook.
• Valuation: Based on a blended peer average of both PCB and substrate players, with a target price of RMB288.

Forward P/E and Valuation

• Forward P/E:
  • FY26E: 33.1x
  • FY27E: 24.4x
  • FY28E: 19.2x
• Valuation Band: Reflects the company's expected performance relative to the market.

Financial Highlights

• Gross Margin: Improved from 24.8% in FY24 to 28.3% in FY25, with expectations of stabilization in the future.
• Net Margin: Increased from 13.0% in FY24 to 18.1% in FY25.
• Operating Margin: Rose from 12.9% in FY24 to 17.1% in FY25.
• ROE: Improved from 13.5% in FY24 to 20.6% in FY25.

Cash Flow and Liquidity

• Net Cash from Operations: RMB3,827 million in FY25.
• Current Ratio: Maintained at around 1.4, indicating strong liquidity.
• Capital Expenditure: Increased in FY25, with continued investment expected in the future.

Risks and Disclaimers

• The report contains forward-looking statements and is subject to market risks.
• CMBIGM does not provide personalized investment advice.
• The value of investments may fluctuate and is not guaranteed.
• The report is intended for specific investors and may not be distributed to others without consent.

Conclusion

SCC is positioned to benefit from sustained demand in AI infrastructure and the gradual ramp-up of its high-end substrate business. The company's financial performance has shown strong growth, with improved margins and a robust balance sheet. The analyst maintains a BUY rating with an adjusted target price of RMB288, reflecting confidence in its future performance and growth potential.