Summary of Shengyi Tech (600183.SS) Conference Call Company Overview - **Company**: Shengyi Tech - **Ticker**: 600183.SS - **Industry**: Printed Circuit Board (PCB) and Copper Clad Laminate (CCL) Key Financial Highlights - **4Q25 Net Income**: Pre-announced to be between Rmb807 million and Rmb1,007 million, with a midpoint of Rmb907 million, reflecting a **147% YoY increase** but a **11% QoQ decline** [1][5] - **Comparison to Estimates**: The midpoint is **23% lower than Goldman Sachs estimates** and **15% lower than Bloomberg consensus** due to short-term dynamics in the PCB business and a high base from 3Q25 [1][5] - **Shengyi Electronics**: Reported a QoQ decline in net income, expected to be between Rmb316 million and Rmb339 million, indicating a **39% QoQ decline** at the midpoint [1] Industry Outlook - **Positive Long-term Outlook**: Despite short-term fluctuations, the outlook for the PCB/CCL industry remains positive, driven by increasing demand for AI applications and ongoing specification upgrades [1] - **Revenue Growth Projection**: Expected revenue growth of **28% CAGR from 2026 to 2030**, supported by: 1. Ramp-up of AI infrastructure, with projected demand for **11 million, 16 million, and 21 million AI chips in 2025-2027** [1][5] 2. Specification upgrades in CCL, particularly with M9 CCL in GPU AI servers [1][5] 3. Expansion of product offerings and customer base, including both domestic and international clients [1][5] Margin and Cost Management - **Gross Margin Stability**: Concerns about rising raw material prices (copper and glass fabric) impacting margins are being addressed through: 1. Price increases passed on to clients 2. Focus on high-value applications to support margins [1][6] - **Long-term Margin Outlook**: Expected to remain stable with a gradual uptrend due to increased revenue from AI-related products, although mainstream CCLs may face margin pressure if material prices continue to rise [1][6] Earnings Revisions - **2025 Net Income Revision**: Revised down by **6%** based on 4Q25 guidance, while earnings for 2026-2028 remain largely unchanged due to a continued growth outlook [1][7] - **Earnings Estimates**: - **2025E Net Income**: Revised to Rmb3,384 million - **2026E Net Income**: Unchanged at Rmb5,510 million - **2027E Net Income**: Unchanged at Rmb8,696 million [1][8] Valuation and Price Target - **Target Price**: Maintained at **Rmb111**, based on a target P/E of **31.0x 2027E EPS** [1][10] - **P/E Multiple Justification**: Derived from the correlation between P/E and EPS growth of peers, reflecting a positive view on Shengyi Tech's product mix upgrade towards AI CCL [1][10] Risks - **Key Risks Identified**: 1. Lower-than-expected AI infrastructure investment 2. Changes in technology direction [1][17] Conclusion - **Investment Recommendation**: Maintain a **Buy rating** on Shengyi Tech, with a significant upside potential of **59.9%** based on the current price of Rmb69.40 and the target price of Rmb111.00 [1][19]