Victory Giant ( CH) (Buy) - Major beneficiary of global AI leader’s tech upgrade...

Summary of Victory Giant (300476.SZ) Conference Call Company Overview - Company Name: Victory Giant (VGT) - Ticker: 300476.SZ - Industry: Technology, specifically PCB (Printed Circuit Board) manufacturing - Headquarters: Huizhou, Guangdong, China - Main Applications: AI servers, network equipment, automotive, consumer electronics, healthcare appliances [11][28] Key Points and Arguments Financial Performance and Forecasts - Revenue and Earnings Adjustments: - FY25F revenue forecast slightly lowered by 1% to CNY19,698 million, and earnings forecast reduced by 2% to CNY4,740 million due to slower capacity ramp-up in Q4 FY25F [1][14] - FY26-27F revenue forecasts increased by 5-17% and earnings forecasts raised by 9-22% reflecting higher value content from existing customers and new customer acquisitions [1][14] - Target Price: - Target price cut to CNY333, implying an 18% upside, based on a P/E ratio of 35x FY26F EPS of CNY9.51, aligning with historical median P/E [1][19] - Market Capitalization: Approximately USD 35.2 billion [6][28] Market Dynamics - AI and PCB Demand: - VGT is expected to benefit significantly from the HDI PCB upgrade driven by global AI customers, with a key AI customer projected to contribute over 40% of total revenue in FY26-27F [2][19] - Revenue CAGRs estimated at 84% for HDI and 36% for HLC segments over FY25-27F [2] Supply Chain Management - Component Shortages: - Ongoing shortages in components and equipment due to high demand for AI PCBs, including high-end copper foil and laser drilling equipment [3] - VGT's effective supply chain management and strong relationships with global suppliers position the company favorably to mitigate these shortages [3] Financial Metrics - Earnings Growth: - Normalized EPS growth projected at 310.6% for FY25 and 73.2% for FY26 [4][15] - Profit Margins: - Gross profit margin expected to improve to 35.3% in FY26 and 38.6% in FY27 [4][15] - Debt Management: - Net debt/equity ratio projected to decrease to 26.5% in FY25F and net cash position by FY27F [4][10] Risks and Challenges - Downside Risks: - Key customers diversifying supply chains and increased competition from peers [20][30] - Potential technological changes (e.g., COWOP) that could alter the competitive landscape [20][30] - Slower technology upgrades in the AI PCB market and geopolitical tensions [20][30] ESG Considerations - VGT's role in providing electronic products for data centers and AI infrastructure highlights its social responsibility, though environmental impacts from manufacturing processes are noted [13] Conclusion Victory Giant is positioned as a leading player in the PCB manufacturing sector, particularly benefiting from the AI technology upgrade trend. Despite some adjustments in revenue and earnings forecasts, the company maintains a positive growth outlook driven by strong demand and effective supply chain management. However, it faces risks from market competition and technological changes that could impact its future performance.