Core Viewpoint - The report from Ping An Securities indicates that Shenzhen South Circuit's net profit attributable to shareholders for the first half of 2025 is expected to reach 1.36 billion yuan, representing a year-on-year increase of 37.75% driven by increased downstream demand from AI [1] Group 1: Financial Performance - The net profit for the first half of 2025 is projected at 1.36 billion yuan, showing a significant year-on-year growth of 37.75% [1] - The growth in performance is primarily attributed to the surge in demand for AI-related products, particularly in the PCB business [1] Group 2: Operational Efficiency - The overall capacity utilization rate of the PCB business is at a relatively high level, with the company implementing various operational management enhancements [1] - Strategies include improving raw material utilization, guiding customer design in advance, optimizing energy management, and enhancing efficiency in bottleneck processes [1] Group 3: Project Development - The company is actively advancing the construction of its factory in Thailand and the fourth phase project in Nantong, which will support future business expansion [1] - The acceleration of infrastructure construction for computing power has led to a significant increase in orders, which is a core driver of growth in the PCB business [1] Group 4: Long-term Outlook - The company is expected to benefit from the localization of semiconductor substrates in the long term [1] - Given the current valuation of the company, Ping An Securities maintains a "recommended" rating for the stock [1]

Core Viewpoint - The company reported strong financial performance in the first half of 2025, driven by increased demand in the AI sector and effective operational management strategies [2][3] Financial Performance - In the first half of 2025, the company achieved revenue of 10.453 billion yuan, representing a year-on-year growth of 25.63% [2][3] - The net profit attributable to shareholders was 1.360 billion yuan, reflecting a year-on-year increase of 37.75% [2][3] - Overall gross margin and net margin for the first half of 2025 were 26.28% (up 0.08 percentage points YoY) and 13.02% (up 1.16 percentage points YoY) respectively [2] Business Segments - **PCB Business**: Generated revenue of 6.274 billion yuan, a year-on-year increase of 29.21%, accounting for 60.02% of total revenue; gross margin was 34.42%, up 3.05 percentage points YoY [2] - **IC Substrate Business**: Revenue reached 1.740 billion yuan, a growth of 9.03%, making up 16.64% of total revenue; gross margin was 15.15%, down 10.31 percentage points YoY [2] - **Electronic Assembly Business**: Achieved revenue of 1.478 billion yuan, a year-on-year increase of 22.06%, representing 14.14% of total revenue; gross margin was 14.98%, up 0.34 percentage points YoY [2] Cost Management - The company maintained effective cost control with sales expense ratio at 1.64% (YoY stable), management expense ratio at 4.27% (up 0.53 percentage points YoY), R&D expense ratio at 6.43% (down 1.25 percentage points YoY), and financial expense ratio at 0.2% (up 0.3 percentage points YoY) [2] Market Trends - The company benefited from the accelerated construction of computing power infrastructure and the release of demand for AI acceleration cards, which significantly boosted orders in the PCB business [2] - The domestic and international major cloud service providers continued to increase capital expenditures, particularly in AI computing power investments, driving demand for AI servers and related products [2] Investment Outlook - The company is expected to see a slight upward adjustment in profit forecasts, with projected net profits for 2025-2027 at 2.856 billion yuan, 3.815 billion yuan, and 4.762 billion yuan respectively, corresponding to P/E ratios of 40, 30, and 24 times [3] - The company is positioned to benefit from the domestic substitution in the semiconductor substrate market, maintaining a "recommended" rating based on current valuations [3]

Investment Rating - The report maintains a "Buy" rating for the company [1][5] Core Views - The company has demonstrated steady revenue growth in the first half of 2025, with a year-on-year increase of 25.63% in revenue and a 37.75% increase in net profit attributable to shareholders [8] - The report highlights the ongoing optimization of AI-driven structures and the recovery of substrate demand alongside the growth in storage market conditions [3][5] Financial Summary - The company is projected to achieve revenues of RMB 21.33 billion, RMB 25.58 billion, and RMB 31.21 billion for the years 2025, 2026, and 2027 respectively, with corresponding net profits of RMB 2.85 billion, RMB 3.74 billion, and RMB 4.46 billion [5][7] - The earnings per share (EPS) are expected to be RMB 4.28, RMB 5.60, and RMB 6.69 for 2025, 2026, and 2027 respectively, with price-to-earnings (P/E) ratios of 39.6, 30.3, and 25.3 [5][7] - The company’s PCB business has seen a revenue increase of 29.21% year-on-year, driven by demand in the communication, data center, and automotive electronics sectors [8] Market Performance - The company’s stock has outperformed the Shenzhen Composite Index, with a relative performance of 17.7% year-to-date [2] - The total market capitalization of the company is approximately RMB 113.01 billion [2]

Group 1 - A total of 44 companies were investigated by funds on August 27, with significant interest in Yinlun Co., Ltd. (002126), Shennan Circuit Co., Ltd. (002916), and Dongfang Tantalum Industry Co., Ltd. (000962) [1] - Among the companies investigated, 36 funds participated in the research of Yinlun Co., Ltd., while Shennan Circuit Co., Ltd. and Dongfang Tantalum Industry Co., Ltd. attracted 33 and 25 funds respectively [1] - The companies under investigation are distributed across 17 industries, with the electronics, machinery equipment, and automotive sectors having the highest representation, each with 6 stocks [1] Group 2 - In terms of market performance, 20 stocks among the investigated companies increased in value over the past five days, with the highest gainers being Zhangyuan Tungsten Industry Co., Ltd. (002378) at 46.67%, Zhongji Xuchuang (300308) at 21.40%, and Dongtian Micro (301183) at 21.20% [2] - Conversely, 24 stocks experienced declines, with the largest drops seen in Weiman Sealing (301161) at -17.67%, Boji Medical (300404) at -11.65%, and Xiangxin Technology (002965) at -10.22% [2] - Among the companies investigated, 44 have released their semi-annual reports, with the highest net profit growth reported by Zhite New Materials (300986) at 906.32% and Tongfei Co., Ltd. (300990) at 466.71% [2] Group 3 - The total market capitalization of the investigated companies includes 3 with a market cap exceeding 500 billion, and 2 exceeding 1 trillion, such as Zhongji Xuchuang (300308) and Wens Foodstuff Group Co., Ltd. (300498) [1] - There are 22 companies with a market cap below 100 billion, including Hengda New Materials (301469), Tengya Precision (301125), and Ruijia Technology (002066) [1]

Group 1 - PCB concept stocks experienced significant gains, with ShenNan Circuit rising over 8% to reach a historical high [1] - International Composites hit the daily limit, indicating strong market interest [1] - Other notable gainers included Chipbond, Dongshan Precision, Mingyang Circuit, Honghe Technology, and Dazhu CNC, all showing substantial increases [1]

Investment Rating - The report maintains a "Recommended" investment rating for the company, with a current stock price of 169.5 CNY [1]. Core Insights - The company reported a significant increase in performance driven by AI, achieving a revenue of 10.453 billion CNY in the first half of 2025, representing a year-over-year growth of 25.63%, and a net profit attributable to shareholders of 1.36 billion CNY, up 37.75% year-over-year [5][6]. - The overall gross margin and net margin for the first half of 2025 were 26.28% (up 0.08 percentage points YoY) and 13.02% (up 1.16 percentage points YoY), respectively [6]. - The PCB business saw a revenue of 6.274 billion CNY, a 29.21% increase year-over-year, accounting for 60.02% of total revenue, with a gross margin of 34.42% (up 3.05 percentage points YoY) [6]. - The IC substrate business generated 1.740 billion CNY in revenue, a 9.03% increase year-over-year, while the electronic assembly business achieved 1.478 billion CNY, up 22.06% year-over-year [6]. - The company is actively advancing the construction of new projects in Thailand and Nantong, which will support future business expansion [6]. Financial Summary - The company’s revenue is projected to grow from 13.526 billion CNY in 2023 to 35.537 billion CNY by 2027, with a compound annual growth rate (CAGR) of approximately 25% [8]. - Net profit is expected to increase from 1.398 billion CNY in 2023 to 4.762 billion CNY in 2027, reflecting a strong growth trajectory [8]. - The gross margin is anticipated to improve from 23.4% in 2023 to 27.0% by 2027, while the net margin is expected to rise from 10.3% to 13.4% over the same period [8]. - The company’s return on equity (ROE) is projected to increase from 10.6% in 2023 to 21.6% by 2027 [8]. Business Segmentation - The PCB segment is the largest contributor to revenue, followed by the IC substrate and electronic assembly segments, indicating a diversified business model [6][10]. - The company is focusing on enhancing its capabilities in the IC substrate business, particularly in high-end DRAM products and processor chip applications, which are expected to drive future growth [10]. Investment Recommendation - Based on the latest financial results and capacity expansion progress, the profit forecast for the company has been slightly upgraded, with expected net profits of 2.856 billion CNY, 3.815 billion CNY, and 4.762 billion CNY for 2025, 2026, and 2027, respectively [10]. - The company is expected to benefit from the domestic substitution of semiconductor substrates, and the current valuation supports a "Recommended" rating [10].

Core Viewpoint - The recent investor relations activity of Shenzhen Sannuo Circuit Co., Ltd. attracted over a hundred institutions, focusing on the company's operational performance, business segment development, and capacity construction [1] Group 1: Financial Performance - In the first half of 2025, the company achieved total revenue of 10.453 billion yuan, a year-on-year increase of 29.21%, and a net profit attributable to shareholders of 1.360 billion yuan, up 37.75% year-on-year [2] - The growth was driven by opportunities in AI computing power upgrades, a recovery in the storage market, and the growth of electric and intelligent vehicles [2] Group 2: Business Segments - The PCB business generated revenue of 6.274 billion yuan in the first half of 2025, reflecting a year-on-year growth of 29.21%, with a gross margin of 34.42%, an increase of 3.05 percentage points [2] - The packaging substrate business reported revenue of 1.740 billion yuan, a year-on-year increase of 9.03%, but with a gross margin of 15.15%, down 10.31 percentage points due to product structure adjustments and initial cost increases [2] Group 3: Capacity and Projects - The first phase of the Guangzhou packaging substrate project is set to begin mass production in Q4 2023, with ongoing development for higher-layer products [3] - The Thailand project, with a total investment of 1.274 billion yuan, has commenced trial production and will enhance the company's capabilities in high-layer and HDI PCB technologies [3] - The overall capacity utilization rate remains high, driven by demand in AI computing and automotive electronics, while the packaging substrate business has seen a significant increase in utilization due to growth in the storage sector [3] Group 4: Research and Development - In the first half of 2025, the company invested approximately 672 million yuan in R&D, accounting for 6.43% of revenue, with various projects progressing smoothly [3] - New capacity construction for PCB is expected to come online in Q4 2023, alongside ongoing technological upgrades to existing facilities [3]

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Core Insights - The company reported a total revenue of 10.453 billion yuan for the first half of the year, representing a year-on-year increase of 25.63% [1] - Net profit reached 1.36 billion yuan, up 37.75% year-on-year, while the net profit excluding non-recurring items was 1.265 billion yuan, reflecting a growth of 39.98% [1] - The printed circuit board (PCB) segment was the main driver of revenue growth, achieving a revenue of 6.274 billion yuan, which is a 29.21% increase year-on-year [1] PCB Industry Outlook - According to Prismark's Q1 2025 report, the global PCB market (including packaging substrates) is expected to grow by 7.6% year-on-year in 2025, with 18-layer and above multilayer boards projected to grow by 41.7% due to strong demand from AI servers and high-speed network communications [1] - The HDI market is anticipated to grow by 12.9%, driven by increased applications in AI computing and automotive electronics [1] Business Segment Performance - The company's wireless and wired communication product orders have significantly increased due to the recovery of the global communication market [3] - In the data center sector, demand for AI computing has boosted orders for AI servers and related products, leading to a notable increase in orders for AI accelerator cards [3] - The automotive electronics segment has seen a 34.5% year-on-year increase in global new energy vehicle sales, contributing to rapid growth in orders related to automotive electronics and ADAS [3] Packaging Substrate Business - The packaging substrate segment achieved a revenue of 1.740 billion yuan, a year-on-year increase of 9.03% [4] - The global semiconductor industry has seen sales growth driven by computing-related chips, with significant increases in storage-related packaging substrate orders [4] - The gross margin for this segment decreased by 10.31 percentage points to 15.15% due to capacity ramp-up challenges and rising raw material prices [4] Electronic Assembly Business - The electronic assembly segment reported a revenue of 1.478 billion yuan, reflecting a year-on-year growth of 22.06% [4] - The gross margin for this segment increased by 0.34 percentage points to 14.98% [4] - The company is focusing on the growing demand in data centers and automotive electronics, enhancing customer collaboration and optimizing supply chain management [4] R&D and Global Expansion - The company increased its R&D investment to 6.43% of revenue, focusing on next-generation communication, data centers, and automotive electronics PCB technology [5] - The company has made progress in its overseas expansion, with the Thai factory construction ongoing and key projects in Guangzhou and Taixing on schedule [5] - The Guangzhou packaging substrate project is 72.06% complete, while the Taixing high-density PCB manufacturing project is 60.09% complete, supporting future capacity release and business growth [5]

Market Overview - In 2024, the overall packaging market is expected to grow by 16% year-on-year to reach $105.5 billion, with the advanced packaging market growing by 20.6% to $51.3 billion, accounting for nearly 50% of the total [2][14]. - By 2030, the overall packaging market is projected to reach $160.9 billion, with advanced packaging expected to grow to $91.1 billion, resulting in a compound annual growth rate (CAGR) of 10% from 2024 to 2039 [2][14]. - The high-end market share is anticipated to increase from 8% in 2023 to 33% by 2029, driven by the demand from generative AI, edge computing, and intelligent driving ADAS [2][16]. Need for Advanced Packaging - The end of Moore's Law for advanced processes marks the beginning of the packaging Moore's Law, focusing on achieving higher performance at lower costs through system-level packaging techniques [3][30]. - The increasing demand for diverse functionalities leads to more frequent interactions between functional devices, necessitating efficient high-speed interconnections between chips to enhance overall system performance [3][30]. Need for Panel-Level Packaging (PLP) - PLP technology offers higher cost-effectiveness, greater design flexibility, and superior thermal and electrical performance, with significant potential to replace traditional packaging methods [4][42]. - The traditional packaging market is projected to reach $54.2 billion in 2024 and $69.8 billion by 2030, indicating a broad space for PLP to replace existing solutions [4][42]. - The wafer-level packaging market is expected to be $2.1 billion in 2024, with the FO/2.5D organic interposer market at $1.8 billion, potentially reaching $8.4 billion by 2030 [4][42]. Importance of Substrates in High-End Markets - Packaging substrates play a crucial role in signal transmission, heat dissipation, protection, and functional integration, with low-loss transmission being a key property [5][36]. - The increasing I/O density requirements driven by trends in mobile devices, 5G, data centers, and high-performance computing necessitate advancements in substrate technology to meet higher resolution demands [5][36]. COWOP and Substrate-Less Concepts - The Chip on Wafer on PCB (COWOP) concept blurs the definitions between PCB and substrate, focusing on transferring substrate functions to PCB while maintaining compatibility with existing technologies [6][36]. - Current PCB wiring density and I/O density are insufficient to match interposer requirements, necessitating the development of materials that can achieve high-density I/O [6][36]. Related Companies - Key players in the packaging substrate and materials sector include companies like Unimicron, BOE, and Corning, which are diversifying their businesses to capture opportunities in PLP and glass substrate applications [45].