生益科技：Embracing AI and moving on to a new growth trajectory

Investment Rating - The report maintains a "BUY" rating for Shengyi Tech with a target price adjusted to RMB34.50, reflecting a potential upside of 15.2% from the current price of RMB29.96 [1][3]. Core Insights - Shengyi Tech is expected to see a net profit increase of 46.0-54.6% year-on-year for FY24, with a midpoint estimate of RMB1.75 billion, which is lower than both Bloomberg consensus and the report's previous estimates [1]. - The company is well-positioned to benefit from the growing demand for AI-related products, particularly its ultra-low-loss CCL products, which are anticipated to be utilized in Nvidia's upcoming AI accelerators in 2025 [1][8]. - The report highlights a sector upcycle and the company's leading market position, being the second-largest player in the global CCL market with a 12% market share in 2023 [8]. Financial Summary - Revenue for FY24 is projected at RMB19.84 billion, representing a 19.6% year-on-year growth, with further growth expected in FY25 and FY26 [2][12]. - Net profit for FY24 is estimated at RMB1.81 billion, a significant increase of 55.4% year-on-year, with continued growth forecasted for the following years [2][12]. - The gross margin is expected to improve from 19.2% in FY23 to 22.1% in FY24, indicating better profitability [2][12]. Segment Performance - The preliminary results indicate that the CCL/Pregreg segment's net profit is estimated to be RMB1.42 billion, up 19.5% year-on-year, driven by higher production and sales volume [8]. - The PCB segment is expected to show a turnaround with an estimated net profit of RMB329 million, compared to a net loss of RMB25 million in 2023, driven by increasing demand for multilayer PCBs [8]. Market Position and Growth Potential - Shengyi Tech's products are increasingly adopted in the AI market, particularly its Ultra Low-loss and Extreme Low-loss CCL products [8]. - The company is expected to maintain a net profit growth forecast of 51% year-on-year for 2025, supported by the AI theme and sector upcycle [8].