将目标价上调至人民币205元，以反映AIl-CCL在2026年第二季度的业绩超出预期

ShengyiTechnology (600183.SS)RaiseTPtoRmb205forBetter-than-expected2Q26GMforAl-CCL Shengyi printed 1H26 net profit of Rmb3.287bn, surging 130.4% yoy whichisathigh-endofRmb3.1-3.3bnstatedinpreliminary1H26resultsthankstobetter mix shift towards Al-CCLand Al-PCB.As such,we revised upearnings estimatesby21-22%during2026-28Efor liftingupGMassumptionparticularlyforCCLthankstofavourablemixtowardsAl-CCLTPis alsoupgradedtoRmb205but based onalowerPEtargetof 48xfor2027Eat+2SD(Fig4)fromprior56xPEat+3SDtoreflect recentmarketgrowing cautious about the sustainability of Al capex growth amongstmajorAlhyperscalersandcircularfinancingbyNVDA.ReiterateBuyasthestockhasretreatedby25%+fromitsmid-Junepeak.WepreferShengyi>ShennanonupsteamAl-CCL/substratesupplychainonA-sharemarket. Price (14Aug 2615:00) 2H26OutlookandBeyond-Weexpect Shengyiwill continuetoshiftbettermixintoAl-CCLwhichwillaccountfor~20%oftotalvolinend-2026from~15%inmid-2026andonly10%in2025.ThisismainlybasedonitscontinuedsharewinonNVDAWe expect its wallet share willkeepescalatingfroma singledigitin GB20O,teen inGB300 and will likelyexceed 20% in next generation Vera Rubin.This should beunderpinned by Shengyi's strongertechnologyleadershipand various solution ofhigh-frequency CCLs.However, management remains cautious about ongoingchallengesanduncertainties,includingUS-ChinageopoliticaltensionsrelatedtoAldevelopment and fluctuations in global supply chain.To capture future marketgrowth,Shengyiplanstoanchoritsstrategyonhigh-endmarkets,optimizeitsproductportfolio,and deepen its focus on emerging sectors like Al servers,datacenter switches,and autonomous driving.The company will also advance its Al-drivendigital transformation internallyto improveoperational efficiencyandoffsetexternalcostpressures. CapacityExpansionPlan-To support its long-term growth and rapidlyincreasingAl-driven demand,Shengyi has laid out significant capacity expansion initiativesacross multiple key regions.Internationally, construction on the Thailandproductionbase is progressing steadily,with trial production anticipated in 2H26.Domestically,the Jiangxi Shengyi Phase ll project reachedfull production during1H26,addinganannualcapacityof18millionsqmofCCL(>10%ofcurrentcapacity)and34mmeterofcommercialprepreg.(..continuedbelow) Eric LauAC+852-2501-2726eric.h.lau@citi.com Alice Cai+852-2501-2704alice.cai@citi.com Andy Li+852-2501-2597andy.li@citi.com initiatedthe"High-PerformanceCCLProject"in Dongguan (headquarter)with anestimatedtotalinvestmentofapprox.Rmb5.2bn,spanningtwophasesandtargetingafutureannual capacityof48msqmofhigh-endbasematerialstailoredfor high-speed,automotive,and packagingapplications. All in all, Shengyi inclinestoincreasemonthlycapacityby~50%to15msheets(orannualcapacity216msqm)in2029Efrom2026E. andPCBbusinessesispoisedforstructuralenhancementthrough2026-28propelled by an industry-wide shift toward high-end specifications and"volume-and-price-rise"dynamics.In 1H26,its CCL segmental GM expanded by 5.5%pt to29.2% which is an all-timehigh.See Fig 3for sustained GMuptrend of CCLsegment thru 2028E.On the other hand, the PCB segment—via~60%-ownedsubsidiaryShengyiElectronics(688183.SS)—reacheda GMof31.2%,raisedbyrelationships andcostpressures.Thecontinuousupward migrationoftheproduct2028E. PCBsegmentalsobenefitsfromAWS-ShengyiElectronic,thePCB subsidiary ofShengyi Tech,grewrev53.5%yoytoRmb5.784bn and delivered net profit ofRmb1.111bn.ThePCB segmentGMof31.20%,was up by+3.4%pt yoy,whichishigherthancoreCCLsegmentof29.2%.ThePCBsegmentalsobenefitsfromAl-PCBdemandmainlyfromAWS(byAmazon).WeexpectShengyiElectronicwilllikelygainnewcustomersfromASiCgoingforward. NointerimDPSwhilecapexstepsup-Theboardproposednointerimdistribution,againstRmb0.40/sharedeclaredwiththe1H25interimreport,andthe2025payoutran~87%.InvestingoutflowwidenedtoRmb3.322bnfromRmb988mayearagoonhighercapexforbuildingnewfacilitiesonAl-CCLandotheradvanced HDIforautoandtelecoms 2026 Citigroup Inc.Noredistribution without Citigroup'swrtenpermission.Source:Citi Research, Company Reports 2026 Citigroup Inc.Noredistribution without Citigroup'swritenpermission.Source: Citi Research,Company Reports @ 2026 Citigroup Inc. No redistribution without Citigroup's written permission.Source: Citi Research, Company Reports Bull/Bear: ShengyiTechnology (600183.SS) ShengyiTechnology Companydescription largestcoppercladlaminate(CCL)mfgwith13%shareperPrismark.SYTECHis also the leading supplier of high-frequency CCLfor 5G and loT (Internet ofThings) like autonomous driving. Investmentstrategy should continuetogainmore share.The CCLindustry seems tobeimprovingon higherutilization rates,andAsPslooksettobeonanuptrend,albeitbyamodestdegree.SYTECHhas import substitution of high-frequencyandhigh-speed CCL on 5G and server segments, but this is almost done.Shengyi TechstartedtodeliverCCLproductsrelatedtoAlservers (likelyGB2OOseries)inNov 2024 after gaining certification in 2Q24.It looks well positioned to rideyearcontributionfrom2025E. Valuation Ou