Shengyi Technology's 1H26 earnings guidance beats expectations; Citi reiterates Buy

Overview

This report reviews Citigroup's assessment of Shengyi Technology's 1H26 earnings guidance. The company guided for 1H26 net profit of Rmb3.1-3.3bn, up 117%-131% YoY and above Citi's expectations. Citi believes the core drivers are upgrades in the AI-CCL product mix and its higher gross margins versus non-CCL businesses, and reiterates its Buy rating on Shengyi Technology.

Core views

Citi's core view is that Shengyi Technology has greater earnings leverage in the AI-CCL/PCB industry chain and is superior to Shennan Circuit. Shengyi Technology's 2Q26 midpoint net profit was approximately Rmb2.0bn, up approximately 135% YoY; excluding approximately Rmb380mn in non-operating gains, recurring net profit still doubled. Citi believes that a higher AI-CCL mix will continue to support earnings upgrades for 2026-2028E.

Analysis framework

The report primarily uses earnings-guidance decomposition, quarterly income-statement tracking, analysis of AI-CCL product-mix changes, comparisons with companies in the same industry chain, and a P/E valuation framework. Citi compares the growth performance of Shengyi Technology and Shennan Circuit in the AI-CCL/PCB chain and supports its target price with 2027E P/E and PEG.

Methodology notes

• Valuation methodsP/E valuation

  56x 2027E P/E

  Citi applies 56x 2027E P/E to Shengyi Technology, equivalent to +4SD, based on factors including the company's increasing share in Nvidia's AI supply chain, a higher AI-CCL revenue mix, and a 2025-2028E three-year EPS CAGR of approximately 45%.

• Earnings analysisEarnings-guidance decomposition

  Breakdown of net profit and recurring net profit

  The report distinguishes reported net profit from recurring net profit after excluding non-operating gains to assess the quality of underlying operating growth.

• Relative comparisonIndustry-chain comparable-company comparison

  Shengyi Technology versus Shennan Circuit

  Citi compares the companies' 2Q recurring growth and believes Shengyi Technology's approximately 112% growth is stronger than Shennan Circuit's approximately 71%, leading Citi to prefer Shengyi Technology in the AI-CCL/PCB chain.

Asset mapping & comparison

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

• Shengyi Technology (600183.SS)

  Core covered company

  Strengths

  AI-CCL mix upgrades, high gross margins, first-mover advantage in Nvidia's AI supply chain, track record of increasing global CCL share, and a 2025-2028E EPS CAGR of approximately 45%.

  Weaknesses

  The valuation already reflects a high P/E multiple, with strong dependence on AI-CCL growth and earnings upgrades.

  Comparison

  Citi prefers Shengyi Technology over Shennan Circuit in the AI-CCL/PCB chain because Shengyi Technology's 2Q recurring growth of approximately 112% was higher than Shennan Circuit's approximately 71%.

  Risks

  AI-CCL order demand below expectations, weak Chinese consumption, and 5G/IoT capital expenditure below expectations.

• Shennan Circuit (002916.SZ)

  Industry-chain comparison company

  Strengths

  Leading position in communications PCBs, exposure to AI servers and BT substrates, SOE background, and technical capabilities in AI servers, communications, data centers, and automotive ADAS.

  Weaknesses

  2Q recurring growth was lower than Shengyi Technology's; profitability of some new plants and BT substrates remains uncertain.

  Comparison

  Citi's target price for Shennan Circuit is RMB360, based on 38x 2027E P/E; however, this report relatively prefers Shengyi Technology.

  Risks

  Overseas AI-server demand below expectations, automotive and ADAS demand weaker than expected, Wuxi BT substrate new-plant profit below expectations, and CCL cost inflation above expectations.

Key data

• 1H26 net profit guidanceRmb3.1-3.3bnUp 117%-131% YoY, exceeding Citi's expectations.
• 2Q26 midpoint net profitApproximately Rmb2.0bnUp approximately 135% YoY.
• Non-operating gainsApproximately Rmb380mnApproximately Rmb48mn in 1H25; recurring net profit still doubled after exclusion.
• Change in AI-CCL mixApproximately 10% to 15%, rising toward approximately 20%Citi said the AI-CCL share of total volume increased from approximately 10% last year to approximately 15% by mid-2026, and expects it to rise to approximately 20% by the end of 2026 for Vera Rubin.
• Target priceRmb195.000Based on 56x 2027E P/E.
• Current priceRmb134.450Price timestamp: 15:00 on July 13, 2026.
• Expected total return46.4%Includes a 45.0% expected share-price return and a 1.4% expected dividend yield.

Impact & implications

If AI-CCL demand and product-mix upgrades continue to materialize, Shengyi Technology's earnings forecasts still have room for upward revisions, and its valuation premium will be easier to support. The report also implies that AI servers, localization of Nvidia's supply chain in China, and increased high-end CCL share are key drivers of the company's future share-price performance.

Risks

• AI-CCL order demand below expectations.
• Weak Chinese consumption environment.
• 5G/IoT product capital expenditure below expectations.
• AI demand or the strength of consumer subsidies falling short of expectations.
• High valuation sensitivity to earnings upgrades and increased AI supply-chain share.

What to watch

• Shengyi Technology's interim report scheduled for August 15, 2026.
• Whether AI-CCL revenue and shipment shares continue to rise.
• Vera Rubin-related demand and changes in Nvidia's supply-chain share.
• Whether 2026-2028E earnings forecasts continue to be upgraded.
• Differences in earnings growth among comparable companies in the PCB chain, including Shennan Circuit.