Avary Holding(SZ:002938) Soochow Securities·2024-11-29 10:11Investment Rating - The report gives a "Buy" rating for the company, marking its first coverage [1]. Core Views - The company, Pengding Holdings, is positioned to benefit from the AI phone trend, with expectations of entering a new growth cycle in the flexible printed circuit (FPC) segment [1]. - The company experienced a short-term performance decline in 2023 due to industry factors, but is projected to see significant revenue and profit growth in 2024 as overseas clients ramp up orders [1]. - The FPC segment is expected to see a rise in both volume and price due to advancements in AI technology, which will enhance the company's market share in the supply chain of major clients [1]. Summary by Sections 1. PCB Leading Manufacturer, Short-term Profit Pressure - Pengding Holdings is a leading PCB manufacturer with a diverse product line including FPC, SMA, SLP, HDI, Mini LED, and more, serving various sectors such as communication electronics and AI servers [1][71]. - The company faced a revenue drop to 32.1 billion yuan in 2023, a decrease of 11% year-on-year, and a net profit drop to 3.3 billion yuan, down 34% year-on-year [1][77]. 2. Flexible Printed Circuit (FPC) Layout and Growth - FPC is favored in the consumer electronics market due to its lightweight and flexible characteristics, making it suitable for compact devices [1][94]. - The growth of FPC has occurred in two phases: the first driven by the increase in smartphone penetration, and the second by the rising value of FPC in smartphones due to added features [1][102]. 3. Apple's Influence on FPC Development - Apple has been a key driver in the FPC market, continuously increasing the unit value of FPC in its devices, with the number of FPC units in iPhones growing from 10 in iPhone 4 to 30 in iPhone 12 [1][107]. - The company maintains a significant market share in Apple's supply chain, estimated at around 33% from 2016 to 2019 [1][112]. 4. Advantages from Early Entry and Shareholder Support - The company benefits from stable production yields and a strong order base, supported by its major shareholder, Foxconn, which provides a vast customer network [1][115]. - The FPC industry has high entry barriers due to the need for significant capital investment and technological expertise, which favors established players like Pengding [1][122]. 5. Profit Forecast and Valuation - The report forecasts net profits for 2024, 2025, and 2026 to be 3.5 billion, 4.1 billion, and 4.7 billion yuan respectively, with corresponding P/E ratios of 20, 17, and 15 times [1].