JCET Posts Strong Second-Quarter Earnings Growth; Advanced Packaging Benefits from AI Trends, but Neutral Maintained on Fair Valuation

Overview

The report reviews JCET's 2Q26 results and analyzes AI infrastructure demand, upgrades to the advanced packaging product mix, capacity expansion, and earnings forecast revisions. Goldman Sachs recognizes the company's growth prospects but maintains its Neutral rating and 12-month target price of Rmb125 based on fair valuation.

Core views

JCET's 2Q26 revenue increased 12% YoY and 13% QoQ, broadly in line with Bloomberg consensus but 8% below Goldman Sachs' previous forecast. Gross margin, however, exceeded both Goldman Sachs' forecast and Bloomberg consensus. Management attributed the gross-margin improvement to three factors: higher capacity utilization driven by strong end demand, stringent cost controls, and a product mix upgrade toward high-end AIDC packaging and testing. The report therefore concludes that AI infrastructure demand is improving the company's profitability through both utilization and product mix. The 2Q26 operating expense ratio was in line with Goldman Sachs' forecast but above Bloomberg consensus; nevertheless, the metric improved both YoY and QoQ. Management expects the operating expense ratio to improve further as shipments from new factories gradually ramp up in 2H26E. Driven by revenue growth, better-than-expected gross margin, and improved expense efficiency, 2Q26 net profit increased 107% YoY and 91% QoQ, broadly in line with Goldman Sachs' forecast and 15% above Bloomberg consensus. The report believes this strong earnings growth shows that JCET has begun to benefit from rising end demand for AI infrastructure. Goldman Sachs remains positive on JCET's future growth, based mainly on the following factors: the continued rise in the importance of advanced packaging to AI chip performance; growing end demand supporting higher capacity utilization; a product mix shift toward high-value AI-related products such as AI chips and memory; and the company's simultaneous expansion of advanced packaging capacity. Together, these factors support medium- to long-term improvements in revenue scale and gross margin, although the pace of shipment ramp-up following capacity expansion and additional R&D investment will also affect the timing of profit realization. After incorporating the 2Q26 results, Goldman Sachs raised its 2027—2030 net profit forecasts by 11%, 9%, 13%, and 9%, respectively, mainly reflecting higher revenue and gross-margin assumptions. Because 2Q26 revenue fell below Goldman Sachs' previous forecast, the 2026E revenue forecast was cut by 3%; however, reflecting a greater contribution from advanced packaging, the 2027—2030 revenue forecasts were raised by 5%, 4%, 5%, and 4%, respectively. The 2026—2030 gross-margin forecasts were raised by 0.8—1.5 percentage points because advanced packaging carries a higher gross margin than other product lines. At the same time, Goldman Sachs raised its operating expense ratio forecasts for the same period, mainly to reflect the R&D investment required to support advanced packaging growth, and increased its tax-rate assumptions as earnings expand. On valuation, Goldman Sachs continues to use a discounted 2030E P/E methodology to determine its 12-month target price, reflecting the company's long-term growth opportunities. The target P/E is derived from the relationship between peer-company P/E multiples and the sum of next-year net profit growth and operating margin. Based on JCET's 2031E net profit growth of 15% YoY and an operating margin of 11%, the target multiple is 42.8 times 2030E P/E, down from 46.0 times previously. Goldman Sachs then discounts this valuation to 2027E using an 11% cost of equity, resulting in an unchanged 12-month target price of Rmb125. Despite higher earnings forecasts and a positive long-term growth thesis, the report believes the valuation is fair and therefore maintains its Neutral rating.

Analysis framework

The report first compares 2Q26 revenue, gross margin, operating expense ratio, and net profit with Goldman Sachs' previous forecasts and Bloomberg consensus, then explains the changes in profitability through end demand, utilization, cost controls, and product mix. It subsequently incorporates the results and the contribution from advanced packaging into its 2026—2030 forecasts for revenue, gross margin, expense ratio, tax rate, and net profit. Finally, it determines the target multiple based on the relationship between peer-company P/E multiples, earnings growth, and operating margins, and discounts it using the cost of equity to derive the 12-month target price.

Methodology notes

• Valuation MethodologyPE/PEG valuation

  Discounted 2030E P/E Valuation

  Goldman Sachs derives a target P/E of 42.8 times from the relationship between peer-company P/E multiples and the sum of next-year net profit growth and operating margin, then discounts it to 2027E using an 11% cost of equity to determine the 12-month target price of Rmb125.

• Company Fundamentals and Financial Framework

  Line-Item Earnings Forecast Revisions

  Based on the actual 2Q26 performance, the report separately adjusts its revenue, gross-margin, operating-expense-ratio, and tax-rate assumptions, then revises its 2026—2030 net profit forecasts accordingly to distinguish the benefits of advanced packaging growth from the impact of increased R&D investment.

• Industry/Sector Analysis FrameworkSupply-demand framework

  Transmission from AI End Demand to Utilization and Advanced Packaging Capacity

  The report believes that rising end demand for AI infrastructure will increase packaging and testing capacity utilization and drive the company to expand advanced packaging capacity; higher utilization and a greater share of high-value products will further improve gross margin and profitability.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• JCET (600584.SS)

  The company benefits from growing end demand for AI infrastructure, the increasing importance of advanced packaging, and a greater share of high-value AI-related products.

  Strengths

  Improved capacity utilization, stringent cost controls, and a product mix shift toward high-end AIDC and advanced packaging drove 2Q26 net profit growth of 107% YoY and 91% QoQ.

  Weaknesses

  2Q26 revenue was 8% below Goldman Sachs' forecast, and the operating expense ratio was above Bloomberg consensus; advanced packaging expansion also requires greater R&D investment.

  Comparison

  The target P/E is determined based on the relationship between the P/E multiples, next-year net profit growth, and operating margins of JCET and its peers, resulting in a discounted 2030E P/E of 42.8 times.

  Risks

  Faster- or slower-than-expected Chinese semiconductor capital expenditure, technology development, and advanced packaging shipment ramp-up could cause actual results to deviate from the report's assumptions.

Key data

• 2Q26 Revenue GrowthYoY +12% / QoQ +13%Broadly in line with Bloomberg consensus but 8% below Goldman Sachs' forecast.
• 2Q26 Gross-Margin PerformanceAbove Goldman Sachs' forecast and Bloomberg consensusMainly driven by higher utilization, cost controls, and a product mix upgrade toward high-end AIDC products.
• 2Q26 Net Profit GrowthYoY +107% / QoQ +91%Broadly in line with Goldman Sachs' forecast and 15% above Bloomberg consensus.
• 2027—2030E Net Profit Forecast Revisions+11% / +9% / +13% / +9%Mainly due to higher revenue and gross-margin forecasts.
• 2026E Revenue Forecast Revision-3%Reflects 2Q26 revenue falling below Goldman Sachs' previous forecast.
• 2027—2030E Revenue Forecast Revisions+5% / +4% / +5% / +4%Mainly reflects a greater contribution from advanced packaging.
• 2026—2030E Gross-Margin Forecast Revisions+0.8—1.5 percentage pointsAdvanced packaging has a higher gross margin than other product lines.
• Target Valuation Multiple42.8 times discounted 2030E P/EPreviously 46.0 times; based on 2031E net profit growth of 15% YoY and an operating margin of 11%.
• Cost of Equity11%Used to discount the 2030E target valuation to 2027E.
• 12-Month Target PriceRmb125The target price remains unchanged, and the rating remains Neutral.

Impact & implications

The report believes that growing AI infrastructure demand is improving JCET's revenue, gross margin, and net profit by increasing capacity utilization and raising the share of high-value advanced packaging products. Advanced packaging capacity expansion supports medium- to long-term growth, prompting Goldman Sachs to raise its 2027—2030 revenue and net profit forecasts. However, advanced packaging expansion requires greater R&D investment, new factories must still undergo shipment ramp-up, and the target valuation multiple was cut from 46.0 times to 42.8 times. With improved earnings forecasts offset by valuation constraints, Goldman Sachs maintains its Rmb125 target price and Neutral rating.

Risks

• Chinese semiconductor capital expenditure may expand faster or slower than expected.
• Technology development may progress faster or slower than expected.
• Advanced packaging shipments may ramp up faster or slower than expected.

What to watch

• Monitor the shipment ramp-up at new factories in 2H26E and whether the operating expense ratio improves further in line with management's expectations.
• Monitor the continued boost to capacity utilization from end demand for AI infrastructure.
• Monitor changes in the contribution of advanced packaging to revenue and product mix.
• Monitor Chinese semiconductor capital expenditure, technology development, and progress in advanced packaging capacity expansion.