Shennan Circuit (002916 CH) Q3 2024 Results Review
Revenue Growth and Profit Margins:
- Revenue: Increased by 37.9% year-over-year (YoY) and 8.5% quarter-over-quarter (QoQ) to RMB4.73 billion.
- Net Profit: Rose 15.3% YoY but declined 17.6% QoQ to RMB187.8 million.
- Gross Profit Margin (GPM): Declined to 25.4% QoQ from 27.1% and 23.4% in previous quarters.
Key Factors Affecting Margins:
- Higher sales from lower-margin PCBA business (GPM at around 15%).
- Suppressed substrate margin due to Guangzhou factory ramp-up.
- Increased copper prices (average price of ~US$9.9k/t).
- Higher auto PCB sales with relatively lower margins.
End Market Breakdown:
- Telecom: Largest market with about 40% of segment sales.
- Datacom, Auto, Industrial & Medical, Energy: Contributed approximately 20%, 13%, 10%, and 5% respectively.
- Utilization rates: AI-related PCB production at ~90%, non-AI at 85-90%.
Forecast for 2025:
- Expected PCB revenue growth of 11%.
- PCBA sales growth offsetting substrate weakness.
- Substrate revenue expected to grow by 7%.
Financial Outlook:
- Revenue Forecast: Adjusted 2024/25E by 9%/3% respectively, driven by higher-than-expected PCBA sales.
- EPS: Up 7% for 2024E, unchanged for 2025E due to ongoing margin pressure.
- Target Price: RMB115, based on 27x 2025E P/E, close to historical forward P/E average.
- Risks: Weaker-than-expected demand recovery, slower product certification, and slower capacity ramp-up.
Share Data:
- Market Cap: RMB54,470 million.
- Average 3-month trading volume: RMB785.4 million.
- 52-week high/low: RMB130.50/49.27.
Analyst's Recommendations:
- Rating: Hold.
- Target Price: RMB115 (previously RMB106.40).
Summary Table:
| Year |
FY22A |
FY23A |
FY24E |
FY25E |
FY26E |
| Revenue (RMB mn) |
13,992 |
13,526 |
17,574 |
18,765 |
20,516 |
| Gross Margin (%) |
25.5 |
23.4 |
25.0 |
25.5 |
26.6 |
| Net Profit (RMB mn) |
1,641.2 |
1,398.1 |
1,877.9 |
2,178.2 |
2,670.6 |
Earnings Revisions:
- Revenue: Increased 9% for FY24E, 3% for FY25E.
- Gross Profit: Increased 8% for FY24E, 4% for FY25E.
- Net Profit: Increased 7% for FY24E, unchanged for FY25E.
- Gross Margin: Decreased 0.5 ppt for FY24E, 0.2 ppt for FY25E.
- Net Margin: Decreased 0.3 ppt for FY24E, 0.2 ppt for FY25E.
Analyst Estimates vs. Bloomberg Consensus:
- Revenue: 5% for FY24E, -4% for FY25E, -9% for FY26E.
- Gross Profit: 3% for FY24E, -5% for FY25E, -7% for FY26E.
- Net Profit: -2% for FY24E, -5% for FY25E, -3% for FY26E.
- Gross Margin: -0.5 ppt for FY24E, -
