拥抱人工智能，迈向新的增长轨迹

Embracing AI andmoving ontoa new growthtrajectory Shengyi Tech released itspreliminaryFY24 earnings.The company expects itsNPto rise by 46.0-54.6% YoY to RMB1.7bn-1.8bn. Mid-pointNPofRMB1.75bn(+50.3% YoY) is lower thanBloombergconsensus/our estimate by 6.1%/3.3%.Our forecastofRMB1.8bn isatthe high-end of the range.Weare optimistic aboutShengyiTech,as the company benefits from growing AI-related demand,particularly through its ultra-low-loss CCL products used in AI supply chain.Maintain BUY with TP adjusted to RMB34.5,corresponding to 30.6x 2025EP/E(prev. TP: RMB28.75)as we thinkthe sector is 1)embarking upon anupcycle,and 2) the company’s CCL products are expected to be used inNvidia’supcomingAI acceleratorsin 2025..ShengyiTech has climbed out of the troughwithrevenue improvement Target PriceRMB34.50(Previous TPRMB28.75)Up/Downside15.2%Current PriceRMB29.96 China Semiconductors Lily YANG, Ph.D(852) 3916 3716lilyyang@cmbi.com.hk (from both CCL and PCB, with higher growth from PCB)andnetmarginexpansion(up +1.8ppts) in 2024.By segment,in the preliminary results,1)CCL/Pregreg’sNP is estimated to be RMB1,421mn, up 19.5% YoY, drivenby higher production and sales volume,favourableproduct mix,as well asbetter GPM. 2)PCB’s(~20% rev. contribution)NP is estimated to beRMB329mn(mid-point of Shengyi Electronics’ revenue estimate), vs. net lossofRMB25mn in 2023. The turnaround inbottom-lineis driven by increasingdemand for multilayer PCB.Despitesequentialnet profitdeclinein 4Q24, we think ShengyiTechis Kevin ZHANG(852) 3761 8727kevinzhang@cmbi.com.hk well-positionedto enjoy thesignificantupsideasdollar valueof PCBused inupgradeddatacenter(new GPUs, cooling tech, high-densityinterconnect, etc)has increased substantially.Mid-point 4Q24 NP isestimated to be RMB378mn, up 43% YoY and down 14% QoQ. NPM isestimatedto be~7.4% vs.8.6%/6.3% in 3Q24/4Q23.By segment,1)CCL/Pregreg’sNP is estimated to be~RMB235mn, down 14% YoY and down33% QoQ. We believe it is likely due to weaker-than-expected demand innon-AI market(e.g.,consumer electronics), which has suppressed ASPrecovery. Meanwhile, copper price remained at its highs (avg. price in 3Q24:~US$9.9k/t).2)PCB’s NP is estimated to be RMB142mn, up 57% QoQ(vs.4Q23 was net loss of RMB7mn). We think it is a continuation of 9M24 growthmomentumdriven byrising contribution(20.9% YoY in 9M24)fromserverrevenue (42.5% of PCB sales). (report)Maintain BUY.We like Shengyi Tech given 1) products adopted in AI market(Ultra Low-loss and Extreme Low-loss CCL products),2) leadingmarket position (No.2 with12% market share of the global CCL market in2023 per Prismark). We maintain our NPgrowthforecastfor 2025at 51%YoY. Webelievethe sector is on the way of an upcycle plus AI theme.NewTP isRMB34.5, based on 1SDabove5-year hist. avg, corresponding to30.6x 2025E P/E.Potential risks include US-Chinatariff escalation,rising USinterest rates, exchange rates fluctuation, etc. Source: FactSet Source: Company data, CMBIGM estimates Source: Company data, CMBIGM estimates Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, inwhole or in part, certifies that with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his orher compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in thisreport.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issuedby The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to thedate of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3) serve as an officer of any of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies coveredin this report. CMBIGM RatingsBUY : Stock with potential return of over 15% over next 12 months: Stock with potential return of +15% to-10% over next 12 months: Stock with potential loss of over 10% over next 12 months: Stock is not rated byCMBIGM HOLDNOT RATED SELL :Industry expected to outperform the relevant broad market benchmark over next 12 months:Industry expected to perform in-line with the relevant broad marketbenchmark over next 12 months:Industry expected to underperform the relevant broad market benchmark over next 12 months CMB InternationalGlobal MarketsLimited Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong, Tel:(852) 3900 0888 Fax: (852) 3900 0800CMB InternationalGlobal MarketsLimited (“CMBIGM”) is a wholly owned subsidiary of CMB International Capital Corporation Limited (a wholly ownedsub