SHENGYI TECH(600183)：SOLID 1H24 EARNINGS;HIGH COPPER PRICE TO HAVE MODEST IMPACT IN NEAR TERM-格隆汇

机构：招银国际
研究员：Lily YANG/Kevin ZHANG

　　Shengyi Tech released its 1H24 earnings. Revenue improved by 22.2% YoY/10.6% HoH to RMB9.6bn, driven by solid demand of AI servers, growing auto orders and inventory restocking. During the same period, GPM improved to 21.6% (vs. 19.3%/19.2% in 1H/2H23), benefiting from improving utilization and a favorable product mix towards high-margin products. Consequently, NP increased by 68.0% YoY/53.1% HoH to RMB932mn. 1H24 revenue/NP accounted for 47%/43% of our FY24E forecast. From a sequential perspective, Q2 revenue/NP were up 26%/76% YoY and 18%/38% QoQ, while GPM increased to 21.8% (vs. 21.3%/18.9% in 1Q24/2Q23). The stock is currently trading at 1SD below 5-year historical avg. Given copper price is likely to maintain at its highs, we think Shengyi’s CCL business will gradually recover.
　　Maintain BUY with TP unchanged at RMB26.41.
　　By segment, both CCL and PCB segments delivered double-digit
　　growth and margin expansion. Shengyi’s CCL/Prepreg sales increased by 20.7% YoY with GPM improving by 2.0ppts. PCB revenue increased by 23.5% YoY with GPM improving by 1.6ppts. Sales from server and auto markets grew; while telecom segment faced ongoing challenges due to soft investments. According to the mgmt., PCB revenue from server market accounted for 38% of the segment sales in 1H24, up ~20% from 1H23.
　　CCL business is likely to recover on elevated copper price. 3M LME
　　copper prices peaked above US$10k/t in May before retreating to US$9k/t by late-July. Current price is US$9.3k/t. We believe the impact from copper price volatility was mild in 1H (Shengyi’s CCL GPM was up 1.2ppt from 2H23). Based on recent channel check, the downstream saw some material price adjustment starting from 2Q. If copper price maintains at current level, we expect Shengyi’s CCL ASP is likely to increase. We project the company’s overall GPM to be 21.8%/23.3% in 2024/25E (up 2.5ppts and 1.2ppts each year), on higher sales contribution from AI (Shengyi achieved mass shipment in 1H), rising CCL ASP and better consumer sentiment.
　　Maintain BUY with unchanged TP at RMB26.41, implying a ~10%
　　premium to its 5-year historical avg. forward P/E, considering its AI upside. 2024/25E NP forecasts are slight adjusted by 1%/-2%. The stock is currently trading at 1SD below 5-year historical avg. of 26x. Maintain BUY. Potential risks include copper price volatility and weaker-than-expected demand recovery.