AI demand is still key; midplane adoption visibility in Q425 the earliest AI remains the most interested downstream at all meetings. High Density Interconnect (HDI) and High Layer Count (HLC) PCB demand remains strong from both Nvidia and ASIC, with high order visibility into Q3 and Q425. Discussions around next-gen products mostly revolved around midplane design replacing copper cable in future AI systems. Visibility on adoption of midplane solution (3*26L=78L HLC PCB) will likely firm up in Q425. M9-grade ...

Investment Rating - The report maintains a "Buy" rating for Shennan Circuits with a 12-month target price of Rmb132, up from Rmb116.92, reflecting a positive outlook on the company's performance [1][15][21]. Core Insights - Shennan Circuits is expected to see a revenue growth of 19% YoY to Rmb5.2 billion in 2Q25, with net profit remaining relatively flat at -1% YoY due to a high base effect. The gross margin is projected to be 25.3%, slightly increasing QoQ due to product mix improvements [1][3]. - The growth in AI PCB is anticipated to be a significant driver for the company's revenue, with contributions expected to reach 18% and 20% of total revenue in 2025E and 2026E, respectively [12][15]. - The report highlights the optimization of BT substrate pricing, which is expected to positively impact earnings in 3Q25, driven by rising demand and higher raw material costs [7][15]. Summary by Sections Revenue and Profit Forecast - For 2Q25E, revenue is estimated at Rmb5,194 million, representing a 19% YoY increase and a 9% QoQ increase. The net income is projected at Rmb600 million, reflecting a -1% YoY change [3][14]. - The gross margin is expected to be 25.3%, with operating profit at Rmb635 million, indicating an 18% QoQ increase [3][14]. AI PCB Outlook - The demand for AI PCB is confirmed to remain strong, supported by increasing orders from domestic AI customers and steady overseas demand. Shennan's PCB utilization is reported to be close to 90% [2][12]. - AI PCB is projected to be the primary driver of incremental profits for Shennan in 2025E, with significant contributions to gross profit expected [18][15]. Market Position and Competitive Advantage - Shennan Circuits is well-positioned to benefit from the domestic AI infrastructure cycle in China, capturing demand overflow from PCB peers that primarily serve US customers [6][15]. - The company has been expanding its capacity both domestically and internationally to leverage opportunities in the overseas market [6][15].