2025-08-31 16:21Summary of Shennan Circuits Earnings Call Company Overview - Company: Shennan Circuits - Industry: PCB (Printed Circuit Board) and IC (Integrated Circuit) substrates manufacturing - Market Position: Fourth-largest PCB manufacturer globally as of 2024 [16] Key Financial Results - Q2 2025 Revenue: Rmb 5.7 billion, representing an increase of 18.6% QoQ and 30.1% YoY, exceeding consensus estimates by 4% and 6% [2][9] - Net Profit: Rmb 869 million, up 77% QoQ and 43% YoY; adjusted net profit (after non-recurring items) was Rmb 780 million, reflecting a 61% QoQ and 37% YoY increase [2][9] - Gross Profit Margin (GPM): Improved to 27.6%, a record high since Q3 2020, up 2.9 percentage points QoQ and 0.5 percentage points YoY [3][9] Revenue Growth Drivers - PCB Sales Growth: Increased by 29% YoY, driven by robust demand in data centers, wired communications, and automotive sectors [3] - Data Center PCB: Significant growth attributed to global AI capital expenditure upcycle, with revenue mix exceeding 25% compared to 20% in FY24 [3] - IC Package Substrate Sales: Rose by 9% YoY, supported by better BT substrate orders due to tight raw material supply [3] Operational Insights - Utilization Rates: High utilization rates for both PCB and BT substrates, with ongoing efforts to ramp up production capacity at new plants in Thailand and Nantong [4] - Future GPM Expectations: Anticipated recovery of GPM by 4-5 percentage points in H2 2025 [4] Market Outlook - AI-Related Orders: Management maintains a positive outlook for AI-related orders, particularly from North American customers, expecting data center revenue to lead growth in 2025 [4] - Supply Constraints: The company is currently supply-constrained for high-end PCBs, indicating potential for future growth as capacity expands [4] Investor Sentiment - Expected Market Reaction: Anticipated positive reaction from investors due to the earnings beat and favorable outlook for the second half of the year, following significant stock price increases since April [5] Valuation Metrics - Market Capitalization: Rmb 86.9 billion (approximately US$12.1 billion) [6] - 12-Month Price Target: Rmb 171.00, with a current price of Rmb 169.50 [6][31] - P/E Ratio (2025E): 34.3x, with projected EPS of Rmb 4.94 [8] Risks and Considerations - Downside Risks: Include slower-than-expected server demand, pricing pressure from clients, and longer breakeven times for new business segments [17] Conclusion Shennan Circuits demonstrated strong financial performance in Q2 2025, driven by robust demand in key sectors, particularly data centers and AI-related applications. The company is well-positioned for future growth, although it faces supply constraints and market risks that could impact its performance.