Summary of JCET Group Co Ltd (A) Conference Call Company Overview - **Company**: JCET Group Co Ltd (JCET) - **Sector**: Semiconductors - **Headquarters**: Jiangsu, China - **Position**: Largest OSAT provider in China and the 3rd largest OSAT supplier worldwide as of 2024 [12][31] Key Industry Insights - **Market Demand**: The demand for advanced packaging, particularly 2.5D/3D packaging, is driven by applications in high-performance computing (HPC), autonomous driving, and 5G communication [2][19] - **Growth Projections**: The global 2.5D/3D packaging market is expected to grow from US$8 billion in 2024 to US$26 billion by 2029, reflecting a CAGR of 26% [20][21] - **China's HPC Growth**: China's HPC chip demand is anticipated to grow significantly, with local foundries and OSATs expected to meet this demand due to limited access to overseas HPC chips [24] Financial Performance - **Revenue Growth**: JCET's revenue is projected to grow by 17% in 2026 and 10% in 2027, driven by increased demand for HPC and automotive chips [1][31] - **Earnings Projections**: Expected EPS growth of 56% CAGR in 2026/27, with net income projected to reach CNY3.04 billion in 2026 and CNY3.52 billion in 2027 [1][4] - **Capex and Debt**: Anticipated capex of CNY7-8 billion per annum in 2025-26, leading to a net debt-to-equity ratio of 13%/14% by the end of 2025/26 [33] Strategic Developments - **Technology Leadership**: JCET is one of the few OSAT companies in China capable of mass-producing 2.5D/3D packaging technology, which is crucial for enhancing chip performance [2][28] - **Customer Relationships**: In 2024, 81% of JCET's sales were from overseas customers, with 64% from the US. Easing US-China trade tensions are expected to stabilize these relationships [3][31] - **New Revenue Streams**: The introduction of advanced packaging technologies is expected to contribute significantly to revenue, with projections of CNY500 million to CNY1.5 billion in revenue from this segment in 2026/27 [28] Valuation and Investment Outlook - **Rating Upgrade**: JCET's investment rating has been upgraded to Buy from Neutral, with a price objective raised to CNY55 from CNY43, based on improved demand visibility and historical P/E benchmarks [1][55] - **Market Position**: The company is positioned to benefit from a more normalized competitive landscape in the semiconductor market, particularly with US customers [13][55] Additional Insights - **Gross Margin Recovery**: JCET's gross margin improved to 14.3% in 2Q/3Q25, with expectations to reach 15.5% in 2026 and 15.8% in 2027 due to higher utilization rates and advanced packaging sales [32] - **Investment in AI**: China's AI investment is projected to grow from US$91 billion in 2025 to US$327 billion by 2030, which will further drive demand for HPC chips and related packaging solutions [25] This summary encapsulates the key points from the conference call regarding JCET Group Co Ltd, highlighting its strategic positioning, financial outlook, and industry dynamics.

Investment Rating - The report assigns a "Buy" rating for JCET Group with a target price of Rmb42, indicating an expected share price return of 9.8% and a total expected return of 10.1% [6][8]. Core Insights - JCET management is optimistic about growth in computing and automotive sectors, despite facing near-term volatility due to resource adjustments [1]. - The company is strategically reallocating resources from legacy RF SiP orders to focus on new opportunities, including edge AI and power modules [4]. - The outlook for 2026 is strong, driven by increasing memory demand and high-performance computing (HPC) capacity, particularly in the automotive sector, which saw over 130% year-on-year revenue growth in the first nine months of 2025 [5]. Revenue Mix - The revenue mix for 3Q25 is as follows: Communication (35%), Consumer (27%), Computing (20%), Industrial/Medical (9%), and Automotive (10%) [2]. Capacity Utilization - Overall capacity utilization rate (UTR) reached 80% in 3Q25 and is expected to improve to 80%-85% in 4Q25, with domestic capacities nearly fully utilized [3]. Strategic Focus - JCET is reducing some legacy orders to focus on developing future opportunities, which management believes will lead to higher revenue and profitability in the long term [4]. Growth Expectations - The demand for computing is robust, driven by domestic HPC needs, and automotive revenue is expected to continue growing with new capacity coming online [5].