Summary of Key Points from the Conference Call Industry Overview - **Industry**: China PCB (Printed Circuit Board) Sector - **Key Focus**: AI demand and its impact on PCB design and production Core Insights 1. **AI Demand**: AI remains the most significant driver of demand in the PCB sector, particularly for High Density Interconnect (HDI) and High Layer Count (HLC) PCBs, with strong order visibility extending into Q3 and Q425 [2][3] 2. **Midplane Adoption**: Discussions indicate a potential shift towards midplane designs replacing copper cables in future AI systems, with clearer visibility expected by Q425 [2] 3. **Material Trends**: M9-grade high-speed Copper Clad Laminate (CCL) is anticipated for midplane PCBs, while interest in PTFE is declining due to its thermal expansion issues and processing challenges [2] 4. **Capacity Expansion**: Chinese PCB manufacturers are experiencing extended lead times for critical equipment due to aggressive capacity expansions, which are on schedule as orders were placed in advance [2] Company-Specific Insights Shennan 1. **Growth Drivers**: AI has significantly contributed to Shennan's growth in both data and wire communication sectors [3] 2. **Capacity Management**: Shennan is cautious about capacity expansion, resolving bottlenecks through technology upgrades and planning new capacity in Nantong and Thailand for late 2026 [3] 3. **Order Visibility**: Demand from domestic memory customers has kept order visibility strong, although there are concerns about potential double bookings due to raw material shortages [3] Dongshan 1. **Earnings Pressure**: Dongshan anticipates pressure on earnings for 2025 due to limited growth in smartphone FPC content and losses from a disposal of a non-profitable LED business [4] 2. **Consolidation Benefits**: The upcoming consolidation with Source Photonics and GMD is expected to enhance profitability through debt restructuring and operational synergies, with benefits starting in 2026 [4] Victory Giant (VGT) 1. **Capacity Expansion**: VGT is aggressively expanding its capacity, adding 15,000 sqm/month for HDI and 50,000 sqm/month for HLC in Huizhou and Thailand [5] 2. **Demand-Driven Growth**: The expansion is backed by demand from a major North American AI customer for next-gen PCB designs [5] Risks and Considerations 1. **Global AI Deployment**: Risks include slower-than-expected AI deployment both globally and in China, which could impact demand [7] 2. **CAPEX Plans**: Weaker-than-expected capital expenditure plans from hyperscalers for data centers and servers could pose risks [7] 3. **Tariffs and Regulations**: Higher tariffs affecting consumer electronics and potential tightening of environmental regulations in China are additional risks [7] Valuation and Risk Statements - **Shennan**: Valuation based on a sum-of-the-parts method, with risks including slower server demand and pricing pressures [8] - **Dongshan**: Valuation based on target PE multiples, with risks from ASP cuts and iPhone procurement challenges [8] This summary encapsulates the key points discussed in the conference call, highlighting the dynamics within the China PCB sector, company-specific developments, and associated risks.

Core Viewpoint - The company, Shenzhen South Circuit Technology Co., Ltd. (深南电路), reported strong performance in its PCB and packaging substrate businesses due to increased demand from computing power upgrades and the automotive electronics market [1] Group 1: Business Performance - The overall capacity utilization rate of the PCB business remained relatively high in the first half of the year [1] - The packaging substrate business saw a significant month-on-month increase in capacity utilization due to a recovery in the storage market [1] - The company's comprehensive capacity utilization is still at a relatively high level [1] Group 2: Project Developments - The first phase of the Guangzhou packaging substrate project is set to connect in the fourth quarter of 2023, with continuous improvements in product line capabilities [1] - The company is steadily ramping up production capacity and has secured bulk orders for BT and some FC-BGA products, although it is still in the capacity ramp-up phase [1] - The losses at Guangzhou Guangxin are expected to narrow on a quarter-on-quarter basis by the first half of 2025 [1] Group 3: Investment and Production - The total investment in the Thailand factory amounts to 1.274 billion RMB (approximately 127.4 million USD), and it has commenced trial production [1]

Core Viewpoint - The company, ShenNan Circuit (002916.SZ), reported strong performance in the first half of the year, driven by demand in the computing power upgrade and automotive electronics market, leading to high capacity utilization in its PCB business [1] Group 1: Business Performance - The overall capacity utilization rate of the PCB business remains relatively high due to increased demand [1] - The packaging substrate business has seen a significant increase in capacity utilization month-on-month due to the recovery in storage market demand [1] - The company's comprehensive capacity utilization is still at a relatively high level [1] Group 2: Project Developments - The first phase of the Guangzhou packaging substrate project is set to connect in the fourth quarter of 2023, with continuous improvement in product line capabilities [1] - The company is steadily ramping up production capacity and has secured bulk orders for BT and some FC-BGA products, although it is still in the capacity ramp-up phase [1] - The focus remains on capacity building and market development, with a reduction in losses for Guangzhou Guangxin expected in the first half of 2025 [1] Group 3: Investment and Production - The total investment in the Thailand factory amounts to 1.274 billion RMB (approximately 127.4 million USD), and it has commenced trial production [1]

Financial Performance - The company achieved total revenue of 10.453 billion RMB in the first half of 2025, a year-on-year increase of 25.63% [2] - Net profit attributable to shareholders was 1.360 billion RMB, up 37.75% year-on-year [2] - PCB business revenue reached 6.274 billion RMB, growing 29.21% year-on-year, accounting for 60.02% of total revenue [2] - The gross margin for PCB business was 34.42%, an increase of 3.05 percentage points year-on-year [2] - The packaging substrate business generated 1.740 billion RMB in revenue, a 9.03% increase, with a gross margin of 15.15%, down 10.31 percentage points [5] - Electronic assembly business revenue was 1.478 billion RMB, up 22.06%, with a gross margin of 14.98%, an increase of 0.34 percentage points [2] Market Trends and Strategies - The company is focusing on three growth opportunities: AI computing power upgrades, recovery in the storage market, and electric vehicle intelligence [2] - PCB products are primarily applied in communication devices, data centers, and automotive electronics [3][4] - The company is expanding its PCB business in the automotive electronics sector, targeting both domestic and overseas Tier 1 customers [4] Production Capacity and Utilization - Overall capacity utilization for PCB business is at a relatively high level due to increased demand from AI and automotive electronics [6] - The packaging substrate business has seen a significant increase in capacity utilization due to the recovery in the storage market [6] - The Guangzhou packaging substrate project is in the ramp-up phase, with ongoing improvements in production capacity [7] Investment and Expansion - The total investment in the Thailand factory is 1.274 billion RMB, which is now in trial production [8] - The factory will enhance the company's capabilities in high-layer and HDI PCB technologies, facilitating expansion into international markets [8] - The company is also expanding production capacity through technological upgrades and new projects in Nantong and Thailand [9] Raw Material Costs - Key raw materials include copper-clad laminates, semi-cured sheets, copper foil, and gold salt, with prices affected by commodity market fluctuations [10] - The company is monitoring raw material price changes and maintaining communication with suppliers and customers [10] Technology and Innovation - The company has HDI technology capabilities, which are applied in high-end products across various sectors including communication and automotive electronics [11] - The demand for PCB products related to AI computing power is increasing, driven by the need for high-performance and high-speed networks [12]

Market Performance - The large fund concept sector increased by 2.8% on September 5, with Baiwei Storage leading the gains [1] - The Shanghai Composite Index closed at 3812.51, up 1.24%, while the Shenzhen Component Index closed at 12590.56, up 3.89% [1] Individual Stock Performance - Baiwei Storage (688525) closed at 71.66, with a rise of 12.89% and a trading volume of 304,500 shares, amounting to a transaction value of 2.11 billion [1] - Shenzhen South Circuit (002916) closed at 182.25, up 7.97%, with a trading volume of 157,000 shares and a transaction value of 2.75 billion [1] - Jingrui Electronic Materials (300655) closed at 13.20, up 7.76%, with a trading volume of 1,564,100 shares and a transaction value of 2.00 billion [1] - Jiangbolong (301308) closed at 93.59, up 7.72%, with a trading volume of 110,480 shares and a transaction value of 0.95 billion [1] - Other notable stocks include Saiwei Electronics (300456) up 6.87%, Sanan Optoelectronics (600703) up 6.67%, and Guoxin Technology (688262) up 5.66% [1] Fund Flow Analysis - The large fund concept sector saw a net inflow of 83.92 million from institutional investors, while retail investors contributed a net inflow of 620 million [1] - Notable net inflows from individual stocks include Sanan Optoelectronics with 17.8 million and Jingrui Electronic Materials with 13.7 million [2] - Conversely, retail investors showed significant outflows in several stocks, including Baiwei Storage with a net outflow of 127 million and Jingrui Electronic Materials with a net outflow of 94.4 million [2]

Market Overview - On September 3, the component sector rose by 0.16% compared to the previous trading day, with Shengyi Electronics leading the gains [1] - The Shanghai Composite Index closed at 3813.56, down 1.16%, while the Shenzhen Component Index closed at 12472.0, down 0.65% [1] Top Gainers in the Component Sector - Shengyi Electronics (688183) closed at 82.18, up 5.09% with a trading volume of 223,100 shares and a transaction value of 1.803 billion [1] - Fangzheng Technology (600601) closed at 9.12, up 3.52% with a trading volume of 4.2105 million shares and a transaction value of 3.720 billion [1] - Jianghai Shares (002484) closed at 34.08, up 3.34% with a trading volume of 840,700 shares and a transaction value of 2.843 billion [1] - Other notable gainers include ShenNan Circuit (002916), Shengyi Technology (600183), and Shunluo Electronics (002138) with respective gains of 3.20%, 3.01%, and 2.44% [1] Top Losers in the Component Sector - Xunjiexing (688655) closed at 22.47, down 7.15% with a trading volume of 58,500 shares and a transaction value of 135 million [2] - Jin'an Guoji (002636) closed at 12.40, down 5.42% with a trading volume of 322,600 shares and a transaction value of 408 million [2] - Benchuan Intelligent (300964) closed at 44.44, down 4.74% with a trading volume of 29,500 shares and a transaction value of 134 million [2] - Other significant decliners include Wanyuantong (920060) and Zhongjing Electronics (002579) with declines of 4.48% and 4.47% respectively [2] Capital Flow Analysis - The component sector experienced a net outflow of 961 million from institutional investors and 216 million from retail investors, while retail investors saw a net inflow of 1.177 billion [2][3] - Notable net inflows from retail investors were observed in stocks like Sihui Fushi (300852) with 21.59 million and Jianghai Shares (002484) with 72.02 million [3] - Conversely, significant net outflows from institutional investors were noted in stocks such as Fangzheng Technology (600601) and ShenNan Circuit (002916) [3]

Summary of Key Points Core Viewpoint - On September 2, a total of 33 target price adjustments were made by brokerages for listed companies, with notable increases in target prices for Zhongcai International, Zhucheng Technology, and Guangyun Technology, reflecting significant potential upside in their respective sectors [1][2]. Group 1: Target Price Increases - Zhongcai International received a target price increase of 43.65%, with a new target price of 13.00 yuan [2]. - Zhucheng Technology's target price was raised by 41.51%, now set at 75.00 yuan [2]. - Guangyun Technology saw a target price increase of 35.72%, with a new target price of 22.00 yuan [2]. Group 2: Brokerage Recommendations - A total of 35 listed companies received brokerage recommendations on September 2, with notable mentions including Datang Power and China General Nuclear Power, each receiving one recommendation [3]. - Guangyun Technology's rating was upgraded from "Hold" to "Increase" by CITIC Securities [5]. Group 3: Rating Adjustments - One company, Yihua Tong, had its rating downgraded from "Buy" to "Hold" by Changjiang Securities [6]. - The only company receiving a new coverage rating was Chifeng Gold, which was rated "Buy" by CITIC Securities [7].

Summary of Conference Call Notes Industry Overview - **Industry**: China PCB Sector - **Key Focus**: AI demand and its impact on PCB (Printed Circuit Board) and CCL (Copper Clad Laminate) sectors Core Insights 1. **AI Demand**: AI remains the most significant driver of demand in the PCB sector, particularly for High Density Interconnect (HDI) and High Layer Count (HLC) PCBs, with strong order visibility extending into Q3 and Q425 [2][3] 2. **Midplane Adoption**: Discussions indicate a potential shift towards midplane designs replacing copper cables in future AI systems, with clearer visibility expected by Q425 [2] 3. **Material Preferences**: M9-grade high-speed CCL is anticipated for midplane PCBs, while interest in PTFE is declining due to its thermal expansion issues and processing challenges [2] 4. **Capacity Expansion**: Chinese PCB manufacturers are experiencing extended lead times for critical equipment due to aggressive capacity expansions, which are reportedly on schedule as orders were placed in advance [2] Company-Specific Insights Shennan Circuit 1. **Growth Drivers**: AI has significantly contributed to Shennan's growth in 1H25, particularly in data and wire communication sectors [3] 2. **Capacity Management**: Shennan is cautious about capacity expansion, having resolved bottlenecks in drilling and electroplating, with new capacity expected to come online in late 2026 [3] 3. **Order Visibility**: Demand for BT substrates from domestic memory customers is strong, but Shennan is conservative about the sustainability of BT orders into 2026 due to potential double bookings [3] Dongshan 1. **Earnings Pressure**: Dongshan anticipates pressure on earnings for 2025 due to limited growth in smartphone FPC content and losses from a disposal of a loss-making LED business [4] 2. **Consolidation Benefits**: The consolidation of Source Photonics and GMD is expected to enhance profitability through debt restructuring and operational synergies, with benefits starting in 2026 [4] Victory Giant (VGT) 1. **Capacity Expansion**: VGT is aggressively expanding capacity with plans for 15k sqm/month HDI and 50k sqm/month HLC in Huizhou and Thailand, driven by demand from a major North American AI customer [5] 2. **Production Utilization**: Current capacity is fully allocated, but production utilization may be slightly affected as the company transitions to next-gen products [5] Risks and Considerations 1. **Global AI Deployment**: Risks include slower-than-expected AI deployment both globally and in China, which could impact demand [7] 2. **CAPEX Plans**: Weaker-than-expected capital expenditure plans from hyperscalers for IDCs and servers could pose risks to the PCB sector [7] 3. **Tariffs and Regulations**: Higher-than-expected tariffs and tightening environmental regulations in China could adversely affect demand for consumer electronics and automobiles [7] Valuation and Risk Statements - **Shennan Circuit**: Valuation based on sum-of-the-parts method; risks include slower server demand and pricing pressures [8] - **Dongshan**: Valuation based on target PE multiple; risks include ASP cuts and iPhone procurement challenges [8] Conclusion The China PCB sector is poised for growth driven by AI demand, with specific companies like Shennan and Dongshan navigating challenges and opportunities through strategic capacity management and consolidation efforts. However, external risks related to global deployment of AI and regulatory changes remain critical factors to monitor.

New Stock Issuance - Fushun Special Steel (600399) has a tender offer period from August 12, 2025, to September 10, 2025[1] - KaiPu Cloud (688228) reported severe abnormal fluctuations on August 30, 2025[1] - Xinhua Jin (600735) announced on August 30, 2025, regarding its stock activities[1] Trading Alerts - JiShi Media (601929) issued a notice on August 30, 2025, regarding trading activities[1] - XianDao Intelligent (300450) and DeChuang Environmental (603177) both reported updates on September 2, 2025[1] - Huahai Pharmaceutical (600521) and *ST HuiCheng (002168) also provided trading updates on September 2, 2025[1] Abnormal Fluctuations - Several companies, including Changjiang Materials (001296) and WanBangDe (002082), reported abnormal fluctuations on August 28, 2025[3] - Longjing Technology (301396) and Jinli Yongci (300748) also noted significant trading irregularities on August 27, 2025[3] - The report includes multiple links to announcements regarding trading activities and fluctuations for various companies[3]

Core Insights - The report from China Merchants Securities indicates that Shenzhen South Circuit's revenue growth accelerated in the second quarter, with improved profit margins, particularly in the core PCB business [1] - The second quarter revenue reached 5.7 billion RMB, marking a historical high, with year-on-year and quarter-on-quarter growth of 30% and 19% respectively, exceeding Bloomberg consensus estimates by 6% [1] - Net profit amounted to 869 million RMB, reflecting year-on-year and quarter-on-quarter increases of 43% and 77%, surpassing Bloomberg consensus estimates by 41% [1] Company Performance - The company's production capacity continues to expand due to the Thai production line, Nantong Phase IV project, and ongoing factory upgrades [1] - Research and development investment remains stable at 6%-7% of sales, which will help consolidate the company's competitive advantage and support long-term growth [1] Investment Outlook - The target price has been raised to 235 RMB [1] - Given the company's strategic positioning in high-growth areas such as AI servers, data centers, and automotive electronics, a "buy" rating is maintained [1]