Summary of Shengyi Technology (600183 CH) Research Report Company Overview - **Company**: Shengyi Technology - **Industry**: Electronic Equipment & Instruments - **Current Share Price**: CNY 29.37 - **Target Price**: CNY 36.70 (previously CNY 28.20) [5][13] - **Market Capitalization**: CNY 71,350 million (approximately USD 9,870 million) [7] Key Insights and Arguments Market Performance - Shengyi's share price has increased approximately 18% since January 16, 2025, outperforming the CSI300 index which rose by 4% [2] - The rise is attributed to higher demand for high-speed, ultra-low loss copper clad laminates (CCLs) and printed circuit boards (PCBs), particularly from data center customers [2] Growth Drivers 1. **New Addressable Market with PTFE CCL**: - Anticipation of Nvidia's announcement regarding the Rubin NVL288 at GTC 2025, which is expected to adopt PTFE CCL for high-frequency orthogonal backplanes [3][21] - Estimated additional addressable market for Shengyi from PTFE CCL could reach RMB 1.7 billion in 2026-27 [3] 2. **Market Share Expansion in M8 CCLs**: - Shengyi's M8 CCL has passed Nvidia's qualification, positioning the company to capture market share from global leaders [4] - Revenue from GB200/300 is projected to reach RMB 107 million, RMB 644 million, and RMB 1,306 million from 2025 to 2027 [4] Financial Projections - **Earnings Estimates**: - EPS for 2025 is estimated at RMB 0.98, with a CAGR of 31% from 2024 to 2026 [5][8] - Revenue projections for 2025, 2026, and 2027 are RMB 24,299 million, RMB 28,712 million, and RMB 32,068 million respectively [14] Valuation Metrics - Target PE ratio adjusted to 35.7x based on revised EPS estimates [5] - Implied upside of approximately 25% from the current share price [5] Important but Overlooked Content - **Risks**: - Potential slower growth in the PCB business could negatively impact estimates [46] - Inability to manage raw material costs effectively may affect profitability [46] - Intense competition in the electronic equipment sector poses a risk to market share and growth [46] - **Sensitivity Analysis**: - A sensitivity analysis indicates that a 5 percentage point increase in CCL gross margin could lead to a 44% increase in 2025 net profit estimates [43] - **Market Dynamics**: - The introduction of innovative architectures like orthogonal backplanes is expected to enhance performance and reduce installation complexity, driving demand for PTFE materials [21][30] Conclusion - Shengyi Technology is positioned for significant growth driven by new product developments and market expansions, particularly in the context of Nvidia's upcoming technologies. The financial outlook remains positive, with substantial upside potential reflected in the revised target price. However, the company must navigate industry risks and competition effectively to realize these projections.