Shanghai Securities·2025-06-27 09:05Investment Rating - The report maintains an "Overweight" rating for the communication industry [5] Core Insights - PCB demand continues to improve, leading to enhanced profitability in the sector. The recovery trend in PCB is driven by sustained demand from the computing and automotive electronics markets, with manufacturers operating at high capacity utilization rates. The supply side is shifting towards high-speed and high-end production due to the accelerated evolution of AI technology, increasing the demand for large, high-layer, high-frequency, high-density interconnect (HDI), and high-heat dissipation PCB products. Additionally, rising upstream material prices may lead to price increases for some companies. Capacity expansion is underway, with ShenNan Circuit progressing on its Nantong Phase IV project and a total investment of 1.274 billion RMB for its Thailand factory. Victory Technology reports a full order book, indicating a favorable outlook for the PCB sub-industry driven by robust capital expenditure guidance from North American cloud providers [3][15][16]. - The demand for 800G optical modules is expected to grow significantly, with the release of 1.6T modules contributing to margin improvements. Demand is rising as North American CSP customers show strong interest, and equipment vendors are providing computing and cloud data services to government and enterprise clients, leading to increased demand for optical modules. The strong demand from computing rental operators is anticipated to drive substantial growth in 800G next year. The 1.6T optical modules have already started shipping in Q2, with expectations for increased shipments in the second half of the year, and the profit margins for 1.6T are projected to be higher than those for 800G. The upcoming earnings season presents an opportunity for investors to position themselves ahead of performance validation or better outcomes [3][16]. Summary by Sections Market Review - The communication sector index increased by 1.43%, ranking third among 30 primary industries. The sub-sectors of communication equipment and telecom operations saw increases of 2.11% and 1.69%, respectively, while value-added services and communication engineering services experienced declines of -3.63% and -5.45% [10][11]. Recommendations - Companies to watch in the PCB sector include Victory Technology, ShenNan Circuit, and Huadian Electronics. In the optical module sector, recommended companies are Zhongji Xuchuang, Xinyi Sheng, Tianfu Communication, Changguang Huaxin, Bochuang Technology, Shijia Photon, Taicheng Light, and Yuanjie Technology [4][16].