20220817-招银国际-生益科技-600183.SH-1H22_results_miss__Maintain_HOLD_4页_1012kb

Shengyi Tech (600183 CH) Summary

Core Content

Shengyi Tech (600183 CH) is a company in the China technology sector, with a focus on Printed Circuit Board (PCB) and Composite Core Layer (CCL) businesses. The company's recent performance and future outlook are analyzed in this equity research update.

1H22 Results

• Revenue: RMB4,607 million, down 13.5% YoY.
• Net Profit to Shareholders: RMB453 million, down 47.9% YoY.
• Gross Margin: 23.2%, a slight decrease from 23.6% in 1Q22.
• Reasons for Miss:
  • Weak demand from consumer markets.
  • ASP pressure due to aggressive price wars among peers.
  • Significant increase in energy costs.

CCL Business

• Sales Decline: 18.3% YoY and 4.4% QoQ in 2Q22, compared to 4.0% YoY and -4.8% QoQ in 1Q22.
• Gross Margin: 22.7% in 1H22, down from 25.7% in 2H21 and 29.3% in 1H21.
• Challenges:
  • 2Q22 is expected to be the weakest quarter for CCL.
  • Market demand for CCL is still in a slow recovery phase, especially in consumer markets.

PCB Business

• Sales Growth: 14.2% YoY and 9.1% QoQ in 2Q22, compared to 7.2% YoY and -12.2% QoY in 1Q22.
• Gross Margin: 21.2% in 1H22, down from 16.5% in 2H21 and 18.8% in 1H21.
• Performance Drivers:
  • Strong demand from the auto market.
  • Capacity ramp-up in the auto sector.
  • Easing margin pressure.
• Market Outlook: Prismark forecasts PCB market to grow 4.2% YoY in 2022, after a significant 24.1% growth in 2021.

Target Price and Rating

• Maintain HOLD.
• Target Price (TP): RMB19.2, adjusted from previous TP of RMB19.0.
• Current Price: RMB17.44.
• Potential Upside: +10.1% from current price to TP.

Financial Summary

Earnings Summary (YE 31 Dec)

Key Ratios

Shareholding Structure

Stock Performance

• Market Cap. (RMB mn): 40,507
• Avg. 3mths t/o (RMB mn): 221
• 52W High/Low (RMB): 27.7 / 15.03
• Total Issued Shares (mn): 2,322.7

Share Performance (3mths)

Key Risks

• Worse-than-expected global economy.
• Continuous ASP pressure.
• Increasing manufacturing costs, particularly energy costs.

Analysts

• Lily Yang, Ph.D. (852) 3916 3716 / lilyyang@cmbi.com.hk
• Alex Ng (852) 3900 0881 / alexng@cmbi.com.hk
• Lana Lin (852) 3761 8912 / lanalin@cmbi.com.hk

CMBIGM Ratings

• BUY: Potential return of over 15% over next 12 months.

• HOLD: Potential return of +15% to -10% over next 12 months.

• SELL: Potential loss of over 10% over next 12 months.

• NOT RATED: Not rated by CMBIGM.

• OUTPERFORM: Industry expected to outperform the relevant broad market benchmark.

• MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark.

• UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark.

Auditor

• GP CPAs

Recent Reports

1. Headwinds to persist into 1H22; Maintain HOLD – 31 Mar 2022
2. Weaker 4Q21 with limited pricing upside in 2022; D/G to HOLD – 27 Jan 2022

Conclusion

Shengyi Tech's 1H22 performance was below expectations due to weak consumer demand, aggressive price competition, and rising energy costs. While the CCL segment is under pressure, the PCB business is expected to continue outperforming, driven by growth in the auto sector. The company's target price has been adjusted to RMB19.2, with a HOLD rating. The financial performance shows a decline in revenue and net profit for 2022, but the company is expected to see some recovery in 2023 and 2024. Key risks include economic downturns, continued price pressure, and rising costs.