Shennan Circuits (.SZ)_ AI PCB continues to be the focus in 2025; Buy

Summary of Shennan Circuits (002916.SZ) Research Report Company Overview - Company: Shennan Circuits (002916.SZ) - Industry: Printed Circuit Board (PCB) manufacturing, focusing on high-end markets including telecom, datacom, automotive, industrials, and medical sectors Key Insights 1. AI PCB Demand: The demand for AI PCBs is expected to be a significant growth driver into 2025, with a projected 70% increase in 800G transceiver volume and a ramp-up in 800G switch production [10][25] 2. Market Position: Shennan is well-positioned to capture a substantial share of the AI demand growth due to its leading technology and available capacity, especially as competitors face tight capacity constraints [10][25] 3. Revenue Contribution: AI PCB is forecasted to contribute 12% of total revenue in 2025, up from 6% in 2024, and 17% of total gross profit [25] 4. Earnings Revisions: The 12-month target price (TP) for Shennan has been revised up to Rmb143 from Rmb135, based on a 25x 2025E P/E multiple [11][25] 5. Financial Estimates: Revenue estimates for 2024-2026 have been raised by up to 1.6%, while net profit estimates have increased by up to 2.5% due to favorable market conditions and currency impacts [26][28] Financial Performance - Revenue Forecasts: - 2024E: Rmb17,907 million - 2025E: Rmb21,118 million - 2026E: Rmb23,487 million - Net Income Forecasts: - 2024E: Rmb2,079 million - 2025E: Rmb2,932 million - 2026E: Rmb3,351 million - Gross Margin: Expected to be around 26.0% in 2024, improving to 27.0% by 2026 [28] Risks and Challenges 1. Demand Fluctuations: A potential decline in datacom/AI PCB demand could negatively impact revenue [14] 2. Geopolitical Risks: Disruptions in the supply chain or operations of customers due to geopolitical tensions could pose significant risks [14] 3. Competitive Pressure: Increased competition may lead to pricing pressures and potential loss of market share [14] 4. 5G Demand: Further deterioration in 5G demand could adversely affect the company's performance [14] Conclusion - Investment Rating: The company is rated as a "Buy" due to its strong positioning in the AI PCB market and expected robust growth in revenue and net profit driven by domestic infrastructure investments in China [25][28] - Valuation: Current valuation is considered attractive as it trades at a discount to historical averages, providing a favorable investment opportunity [28]