Summary of Shennan Circuit (002916.SZ) Conference Call Company Overview - **Company**: Shennan Circuit - **Industry**: PCB (Printed Circuit Board) manufacturing - **Market Position**: Leading PCB supplier in China, focusing on telecom and aeronautics sectors, with a "3-in-1" model encompassing PCB, PCB assembly, and IC substrate packaging [20][21] Key Financial Highlights - **Revenue Growth**: - 9M25 revenue increased by 28.4% year-over-year (YoY) to RMB 16.754 billion, with 3Q25 growth at 33.3% compared to 25.6% in 1H25 [1] - **Net Profit**: - Attributable net profit surged 56.3% YoY to RMB 2.326 billion, with 3Q25 growth accelerating to 92.9% compared to 37.8% in 1H25 [1] - **Earnings Estimates**: - 2025-27 earnings estimates raised by 13-15%, target price increased to RMB 281 from RMB 230 based on a 48x PE for 2026E [1][22] 4Q25 Outlook - **Revenue Forecast**: Expected 4Q25 revenue growth of 33% YoY to RMB 6.427 billion, similar to 3Q growth [3] - **Net Profit Forecast**: Anticipated net profit growth of 115% to RMB 838 million, driven by a low base in 4Q24 [3] Capacity Expansion Plans - **New Plants**: - Thai plant to start in mid-2025, targeting annual revenue of RMB 1.3 billion - Nantong Phase 4 for AI-PCB to commence in 4Q25, with projected annual revenue of RMB 1.5 billion [4] - **Capital Expenditure**: High capex of around RMB 3 billion per annum planned to support AI infrastructure growth [4] Margin and Cost Insights - **Gross Margin**: - 3Q25 gross margin improved to 31.4%, with net margin rising to 15.3% [11] - **Material Cost Inflation**: - Major CCL players increased ASP by RMB 5-10 per sheet in October due to a ~10% rise in copper costs [12] Segment Performance - **PCB and Substrate Segments**: - PCB segment gross margin reached a record high of 36% in 3Q25, with AI-PCB margins estimated at over 40% [10] - Substrate gross margin improved significantly to ~20% in 3Q25 from 15% in 1H25 [10] Investment Strategy - **Recommendation**: Buy rating maintained, with a preference for Shengyi Tech over Shennan due to higher operating leverage in the CCL industry [1][21] - **Market Exposure**: Over 80% revenue exposure to PCB-related businesses, with strong growth potential in AI servers and automotive sectors [21] Risks - **Downside Risks**: - Slower-than-expected growth in AI server demand, weaker automotive demand, and higher laminate cost inflation could impact performance [23] Conclusion - Shennan Circuit is positioned for significant growth driven by its strong market position in the PCB sector, ongoing capacity expansions, and favorable industry dynamics, despite potential risks from market fluctuations and cost pressures [1][21][23]