Victory Giant (300476.SZ) Report Interpretation

Overview

This report assesses Victory Giant's 2Q26 results, AI PCB capacity ramp-up, and demand for next-generation GPU and ASIC servers, and updates earnings forecasts and valuation accordingly. Goldman Sachs believes near-term pressure on revenue and gross margin mainly stems from the slower ramp-up of complex AI PCB capacity, rising raw material prices, and depreciation on new capacity. However, inventory, capital expenditures, and order-related preparations point to accelerating shipments in 2H26, supporting its reiterated Buy rating.

Core views

Victory Giant's 2Q26 revenue was Rmb6.110bn, up 29% YoY and 11% QoQ, but 16% and 6% below Goldman Sachs' forecast and Bloomberg consensus, respectively. Goldman Sachs primarily attributes the revenue miss to the pace of the AI PCB capacity ramp-up: high-speed data transmission within AI servers requires greater precision and technical capabilities, so AI PCBs typically require a longer ramp-up period than conventional PCBs. Quarterly gross profit was Rmb1.962bn, up 7% YoY and 3% QoQ; gross margin was 32.1%, below Goldman Sachs' 35.6% forecast and the 36.8% consensus estimate. The report identifies higher costs for key raw materials such as AI CCL as the main source of pressure. Operating profit was Rmb1.595bn, up 13% YoY and 3% QoQ, with an operating margin of 26.1%. Profitability was relatively more resilient than revenue. The 2Q26 expense ratio was 6.0%, better than Goldman Sachs' and consensus expectations, reflecting improved operating efficiency; non-operating income also exceeded expectations. Net profit therefore reached Rmb1.568bn, up 28% YoY and 22% QoQ, 11% below Goldman Sachs' forecast but 4% above consensus; net margin was 25.7%. Goldman Sachs expects gross margin to recover in subsequent quarters as shipments of next-generation GPU and ASIC AI server PCBs ramp up and higher average selling prices for AI PCBs offset rising raw material costs. However, depreciation associated with the ramp-up of new capacity will continue to weigh on 2026 gross margin. Assets and capital investment indicate that the company is preparing for a volume ramp-up in 2H26. Inventory at the end of 2Q26 increased 51% QoQ to Rmb5.9bn, which Goldman Sachs believes will support the shipment ramp-up of next-generation GPU and ASIC server AI PCBs in 2H26. Capital expenditures in 1H26 increased 228% YoY to Rmb7.1bn, demonstrating the scale of the company's investment in expanding AI PCB capacity. As AI PCBs migrate toward higher layer counts and more advanced CCL, the capacity consumed per unit is significantly greater than for conventional PCBs. Goldman Sachs therefore believes that continued capacity expansion is both necessary to meet demand and helpful in enabling the company to capture growth in end-market demand for AI PCBs more fully. The industry demand outlook further reinforces the medium-term growth thesis. In its updated global AI PCB market sizing, Goldman Sachs raised its 2026 and 2027 market size forecasts by 35% and 38%, respectively, and expects the value of the market to reach US$14bn, US$38bn, and US$84bn in 2026—2028, respectively. Growth is driven by four factors: rising global shipments of GPU and ASIC AI servers, capacity expansion by major manufacturers, PCB specification upgrades toward higher-layer-count products that support high-speed transmission, and increased PCB value per rack for rack-scale AI servers. Goldman Sachs' positive view of Victory Giant is also based on six company-level factors: continued expansion of AI infrastructure; higher layer-count specifications increasing value per unit; greater PCB content in AI servers and the replacement of some copper cable connections; expansion of the customer base into ASIC AI server PCBs; continued investment in R&D and capital expenditures; and highly automated production lines and warehouse management that help improve efficiency. Based on these factors, the report expects the company to expand its AI PCB revenue during the next-generation GPU and ASIC platform upgrade cycle. Following the 2Q26 results, Goldman Sachs lowered its 2026 forecasts. The body text states that the 2026 revenue forecast was cut by 10%, reflecting the quarterly revenue miss, while the 2026 net profit forecast was cut by 13%, primarily due to lower revenue and gross margin. In the forecast table, 2026 revenue was reduced from Rmb36.5338bn to Rmb32.9112bn, and net profit from Rmb9.956bn to Rmb8.728bn, with the table showing a -12% change in net profit; 2026 EPS was reduced from Rmb11.41 to Rmb10.00. The 2026 gross margin forecast was lowered to reflect rising raw material prices and depreciation resulting from the ramp-up of new capacity; the expense ratio forecast was lowered due to expected operating efficiency improvements as AI PCB shipments expand. Goldman Sachs kept its 2027—2030 forecasts broadly unchanged, including 2027 revenue of Rmb64.6658bn, net profit of Rmb18.183bn, and EPS of Rmb20.84, as well as 2028 revenue of Rmb87.9073bn, net profit of Rmb23.963bn, and EPS of Rmb27.46. On valuation, Goldman Sachs continues to calculate its 12-month target price using 2027E EPS and a 26.3x target P/E. The target multiple remains unchanged and is based on the relationship between peer forward P/E multiples and EPS growth, with reference to Victory Giant's 2028 YoY EPS growth. The multiple lies between the company's historical average forward P/E and one standard deviation above the average, reflecting the report's positive view of growth in end-market demand for AI PCBs. As neither the 2027 earnings forecast nor the target multiple was adjusted, the 12-month target price remains Rmb550. Relative to the report's stated share price of Rmb263.05, this implies potential upside of 109.1%, and Goldman Sachs reiterates its Buy rating.

Analysis framework

The report first compares 2Q26 revenue, profit, and margins with the prior-year period, the previous quarter, Goldman Sachs' forecasts, and Bloomberg consensus, and then explains the variances in terms of the AI PCB capacity ramp-up, raw material costs, depreciation, expense efficiency, and non-operating income. It subsequently combines inventory, capital expenditures, product specification upgrades, and global AI PCB market size forecasts to assess the shipment trajectory for 2H26 and the medium term. Finally, it incorporates the results into its 2026—2030 earnings model and determines the target P/E and target price based on the relationship between peer P/E multiples and EPS growth.

Methodology notes

• Industry/Sector Analysis FrameworkSupply-demand framework

  Global AI PCB Market Size and Capacity Demand Analysis

  The report derives the 2026—2028 AI PCB market size and the necessity of Victory Giant's capacity expansion from demand- and supply-side variables including GPU and ASIC server shipments, manufacturer capacity expansion, PCB layer-count and material upgrades, and value per rack.

• Valuation MethodPE/PEG valuation

  Peer P/E and EPS Growth Correlation Valuation

  Based on the relationship between peer forward P/E multiples and EPS growth, together with Victory Giant's 2028 EPS growth rate, Goldman Sachs derives a 26.3x 2027 target P/E and multiplies it by 2027E EPS to obtain a 12-month target price of Rmb550.

Asset mapping & comparison

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

• Victory Giant (300476.SZ)

  Goldman Sachs views the company as a beneficiary of growth in demand for next-generation GPU and ASIC AI server PCBs, specification upgrades, and higher value per unit.

  Strengths

  Continued expansion of AI PCB capacity, customer expansion into ASIC servers, strong R&D and capital expenditure investment, and highly automated production lines and warehouse management.

  Weaknesses

  The high precision and technical requirements of AI PCBs result in a slower capacity ramp-up than for conventional PCBs, while rising raw material prices and depreciation on new capacity weigh on near-term gross margin.

  Comparison

  2Q26 revenue was 16% below Goldman Sachs' forecast and 6% below consensus, while net profit was 11% below Goldman Sachs' forecast but 4% above consensus; the target P/E is determined based on the relationship between peer P/E multiples and EPS growth.

  Risks

  AI server shipment ramp-up slower than expected, AI server PCB specification upgrades slower than expected, and more intense market competition than expected.

Key data

• 2Q26 RevenueRmb6,110mUp 29% YoY and 11% QoQ; 16% below Goldman Sachs' forecast and 6% below Bloomberg consensus
• 2Q26 Gross ProfitRmb1,962mUp 7% YoY and 3% QoQ
• 2Q26 Gross Margin32.1%Goldman Sachs forecast 35.6%; Bloomberg consensus 36.8%
• 2Q26 Operating ProfitRmb1,595mUp 13% YoY and 3% QoQ; operating margin 26.1%
• 2Q26 Net ProfitRmb1,568mUp 28% YoY and 22% QoQ; 11% below Goldman Sachs' forecast but 4% above consensus
• 2Q26 Expense Ratio6.0%Better than Goldman Sachs' and Bloomberg consensus expectations, reflecting improved operating efficiency
• 2Q26 Ending InventoryRmb5.9bnUp 51% QoQ; Goldman Sachs believes it can support the 2H26 shipment ramp-up of next-generation GPU and ASIC server PCBs
• 1H26 Capital ExpendituresRmb7.1bnUp 228% YoY, reflecting investment in AI PCB capacity expansion
• Global AI PCB Market SizeUS$14bn/US$38bn/US$84bnCorresponding to 2026E, 2027E, and 2028E, respectively; 2026 and 2027 forecasts raised by 35% and 38%, respectively
• 2026E Revenue ForecastRmb32,911.2mPrevious forecast Rmb36,533.8m, cut by 10%
• 2026E Net Profit ForecastRmb8,728mPrevious forecast Rmb9,956m; body text indicates a 13% cut, while the forecast table shows a -12% change
• 2026E EPSRmb10.00Previous forecast Rmb11.41
• 2027E EPSRmb20.842027—2030 forecasts broadly unchanged overall
• Target P/E26.3xApplied to 2027E EPS; multiple unchanged
• 12-month Target PriceRmb550Current price Rmb263.05, implying potential upside of 109.1%

Impact & implications

Goldman Sachs believes that the 2Q26 revenue and gross margin misses mainly reflect the ramp-up of complex AI PCB capacity and cost pressures rather than a change in the medium-term demand thesis. The substantial increase in inventory and capital expenditures, the volume ramp-up of next-generation GPU and ASIC server PCBs, and higher product layer counts and value per unit are expected to drive 2H26 growth and subsequent gross margin recovery. The 2026 earnings forecast was lowered, but the 2027—2030 forecasts, target valuation multiple, and target price remain broadly unchanged.

Risks

• The pace of the AI server shipment ramp-up may be slower than expected.
• The progress of AI server PCB specification upgrades may be slower than expected.
• Market competition may be more intense than expected.