SCC(002916)2025-03-17 06:30Summary of Shennan Circuits Co Ltd Conference Call Company Overview - Company: Shennan Circuits Co Ltd - Ticker: 002916.SZ - Industry: Greater China Technology Hardware - Market Cap: Rmb62,178.5 million - Stock Rating: Equal-weight - Price Target: Rmb104.00, with an 18% downside from the current price of Rmb127.07 as of March 12, 2025 [5][3] Financial Performance - 4Q24 Results: - Revenue: Rmb4,858 million (+3% quarter-over-quarter, +20% year-over-year) - Gross Margin (GM): 21.4% (-320bps q/q, -220bps y/y) - Operating Profit (OP): Rmb367 million (-41% q/q, +33% y/y) - Net Profit (NP): Rmb390 million (-22% q/q, -21% y/y), resulting in EPS of Rmb0.76 [8] - 2024 Annual Results: - Revenue: Rmb17.91 billion (+32% y/y) - Net Profit: Rmb1.88 billion (+34% y/y) [2] Key Business Segments - PCB (Printed Circuit Board): - Contributed 59% of total revenue at Rmb10.49 billion, up 30% y/y - GM: 31.62%, up 5.1 percentage points y/y - Growth driven by demand for 400G switches, AI server shipments, recovery in traditional cloud, and automotive projects [8] - IC Substrate: - Contributed 18% of total revenue at Rmb3.17 billion, up 37% y/y - GM: 18.15%, down 5.7 percentage points y/y - GM decline attributed to ramp-up of Guangzhou facilities, higher raw material costs, and pricing pressure [8] - PCBA (Printed Circuit Board Assembly): - Contributed 16% of total revenue at Rmb2.82 billion, up 33% y/y - GM: 14.4%, approximately flat y/y [8] Market Outlook and Valuation - Current Valuation: Approximately 35x 2025 estimated P/E, above the 4-year average of 28x, indicating a fair valuation [3] - Investment Thesis: While NP recovery is encouraging, the positives are believed to be largely priced in, leading to a recommendation to stay Equal-weight [3] Risks and Opportunities - Upside Risks: - Rising demand for 5G and data center PCBs - Increased market share in 5G and data center PCBs - Growth in IC substrate demand due to semiconductor localization in China [11] - Downside Risks: - Delays in 5G network deployment - Escalating US-China trade tensions - Increased competition in the PCB market [11] Additional Insights - The gross margin miss in 4Q24 is attributed to lower utilization rates of substrate capacity and ongoing pricing pressures for BT substrates [8] - The company is experiencing solid demand across various sectors, including automotive and AI, which may provide growth opportunities moving forward [8] This summary encapsulates the key points from the conference call regarding Shennan Circuits Co Ltd, highlighting its financial performance, market outlook, and potential risks and opportunities.