Summary of Shenghong Technology Conference Call Company Overview - Shenghong Technology ranks 21st globally and 4th in mainland China in the PCB market, focusing on high-end PCB products, benefiting from the growing demand in the AI sector, with expectations to improve its ranking by 2025 [2][3][4] Core Insights and Arguments - The PCB industry has a wide range of downstream applications, including communications, industrial control, aerospace, and consumer electronics such as mobile phones and PCs. The server and automotive electronics sectors are expected to be growth highlights in the coming years, driving continuous upgrades in the PCB industry, particularly in high-frequency, high-speed, and compact designs [2][5][6] - The demand for high-value PCBs is driven by the increasing computational power requirements in AI, leading to rapid growth in the server market. Key PCB components used in servers include backplanes, LCP motherboards, Ethernet cards, and storage cards, which require high layer counts, high aspect ratios, high density, and high transmission rates [2][6] - The development of 5G communications imposes higher frequency, layer, and speed requirements on communication devices, with increased investments related to AI driving up the demand for supporting PCBs. The market for campus switches is expected to exceed $95 billion in sales over the next five years [2][6] Industry Dynamics - The global PCB market is estimated to be around $70-80 billion, with communications accounting for 32%, computers for 24%, consumer electronics for 15%, automotive electronics for 11%, and servers for 10%. The server and automotive electronics sectors are anticipated to be the main growth drivers for the PCB industry [5][6] - The automotive industry is experiencing a significant increase in PCB demand, particularly in the electric vehicle sector, which requires more advanced PCBs for systems like VCU, MCU, and BMS. The reliability requirements for automotive PCBs are extremely high, necessitating rigorous testing and validation [3][8] Emerging Trends - The consumer electronics sector is witnessing the emergence of new terminal devices, with traditional consumer terminals gradually recovering. New consumption-related products, such as action cameras and smart glasses, are thriving, with AR, VR, and wearable devices identified as new market opportunities. The PCB market in consumer electronics is expected to reach over $10 billion [9] - The future development trends in the PCB industry include adapting to the advancements in terminal devices, such as high-frequency and high-speed requirements, and the need for lightweight and compact designs [6][7] R&D and Technological Innovation - Shenghong Technology invests approximately 6% of its revenue in R&D, with capabilities to manufacture 70-layer high-precision PCBs and 24-layer 6G HDI PCBs, leading in global market share for VGA PCBs and small-pitch LED PCBs. The company continuously optimizes its product structure, with high-value HDI boards driving overall growth [3][10][11] - The company has established a smart factory, significantly enhancing capacity and quality, focusing on high-end product expansion, including HDI and new energy boards [13] Recent Acquisitions - The recent acquisition of MFS aims to expand into new energy, high-end servers, base stations, and metaverse-related products. MFS specializes in flexible circuit boards, complementing Shenghong's rigid board business and enhancing its core market competitiveness [3][14]

Investment Rating - The investment rating for the company is "Buy" [4] Core Views - The company is advancing towards becoming a global leader in the engineering machinery sector, highlighted by the delivery of 100 units of fully electric unmanned mining trucks to Huaneng Yimin Open-pit Coal Mine [2] - The company has established a global framework agreement with mining giant BHP for the supply of mining equipment, indicating a significant expansion in its mining machinery footprint [2] - The mixed reform benefits are becoming evident, with a notable reduction in financing leasing obligations by 9.8% year-on-year [3] - The company aims to rank among the top three globally in the mining machinery sector, having been listed among the top five manufacturers of open-pit mining equipment for six consecutive years [3] - A commitment to shareholder returns is demonstrated through a planned dividend of 2.08 billion yuan for 2024 and a share buyback program totaling 3-6 billion yuan [3] Financial Forecast and Valuation - Revenue projections for 2025-2027 are 1050 billion yuan, 1282 billion yuan, and 1542 billion yuan, reflecting year-on-year growth rates of 15%, 22%, and 20% respectively [4] - The net profit attributable to shareholders is forecasted to be 7.8 billion yuan, 9.8 billion yuan, and 11.9 billion yuan for the same period, with growth rates of 30%, 25%, and 21% respectively [4] - The company is expected to maintain a price-to-earnings (P/E) ratio of 12, 9, and 8 for 2025-2027 [4]