Maintain Neutral on Changdian Technology as raw material costs create near-term margin uncertainty

Overview

This report is J.P. Morgan's earnings review of Changdian Technology's A shares. The company delivered 4Q25 results in line with expectations, with utilization better than seasonal norms and improving gross margin. However, rising raw material costs, potential shortages of materials and components, and spending to ramp up new businesses are expected to create near-term margin uncertainty. The report maintains a Neutral rating and extends the Rmb45 target price time frame to Jun-27.

Core views

The core view is cautious in the near term but constructive over the long term. In the short term, rising raw material costs and new capacity ramp-up expenses will weigh on the visibility of earnings improvement. Over the longer term, expansion in the domestic AI supply chain, advanced packaging capabilities, customer and capacity diversification, and technology leadership remain key growth catalysts. J.P. Morgan said it would turn more constructive on the stock only after seeing clearer evidence of margin improvement.

Analysis framework

The report analyzes 4Q25 results, capacity utilization, business mix, raw material costs, incremental AI supply chain demand, capex, and valuation multiples, and assesses them alongside short-term earnings pressure and the expected 2026-28E sales/earnings CAGR. Valuation uses a one-year forward P/E framework, with the target price based on 20x PE.

Methodology notes

• Valuation methodsOne-year forward P/E

  Derive the Jun-27 target price of Rmb45.00 using a 20x one-year forward P/E.

  This multiple is roughly 1 standard deviation below the historical average valuation, reflecting the risk that near-term margins may be eroded.

• Earnings forecastSales and earnings CAGR forecast

  Forecast 2026-28E sales/earnings CAGR of 13%/40%, respectively.

  The growth assumption mainly comes from the ramp-up of the domestic AI supply chain, expansion of the advanced packaging business, and investment in high-end applications, but it is constrained in the near term by cost and expense pressure.

Asset mapping & comparison

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

• Changdian Technology A-share (600584.SS)

  Research target

  Strengths

  Ramp-up in the domestic AI supply chain, a more diversified customer and capacity base, improved advanced packaging capabilities, and faster growth in computing applications revenue.

  Weaknesses

  Rising raw material costs and ramp-up expenses for new capacity and new businesses are weighing on near-term margins, and earnings improvement visibility is limited.

  Comparison

  The target price uses 20x one-year forward PE, about 1 standard deviation below the historical average valuation, reflecting a relatively cautious valuation assumption.

  Risks

  Consumer electronics demand weaker than expected, shortages of raw materials or substrates, intensifying competition in traditional packaging, and changes in regulatory restrictions.

• JCET Micro

  Key advanced packaging subsidiary

  Strengths

  Revenue reached Rmb162mn in 2H25, more than tripling half-on-half, benefiting from advanced packaging and AI supply chain demand.

  Weaknesses

  Still in the ramp-up phase and may drag on overall profitability in the near term.

  Comparison

  Compared with traditional packaging businesses, advanced packaging offers higher growth optionality, but the learning curve and scale-up realization still take time.

  Risks

  Revenue ramp-up slower than expected, insufficient capacity utilization, and weaker-than-expected cost control.

Key data

• 4Q25 revenueRmb10.2bnUp 1% QoQ and down 7% YoY.
• 4Q25 net profitRmb612mnUp 27% QoQ and 15% YoY.
• 4Q25 gross margin15.3%Up 1.0 percentage point QoQ and 1.9 percentage points YoY.
• Target priceRmb45.00Target price time frame is Jun-27, based on 20x one-year forward PE.
• Current share priceRmb43.02The report prices the stock as of 2026-04-10.
• Earnings estimate cuts2026/27E cut by 20%/16%Mainly reflects margin pressure from raw material costs and new capacity ramp-up expenses.
• Computing applications revenue growthUp 43% YoY in 2025Including memory, accounting for 21% of total revenue.
• JCET Micro revenueRmb162mn in 2H25More than tripled half-on-half.
• Capex planAbout Rmb10bnMost of it is expected to go toward high-end applications.
• 2026-28E CAGRSales 13% / earnings 40%Reflects long-term growth potential, but it must overcome near-term earnings pressure.

Impact & implications

The investment implication is that Changdian Technology has a long-term growth story tied to AI and high-end packaging, but short-term earnings volatility will limit valuation re-rating. The Neutral rating reflects the balance between long-term opportunity and near-term margin uncertainty. If raw material costs ease, downstream demand improves, or new business ramp-up is faster than expected, the stock could see upside catalysts; otherwise, cost, supply chain, and competitive pressures may continue to weigh on margins.

Risks

• Demand for smartphones and other consumer electronics is weaker than expected.
• Shortages of raw materials, substrates, or other supplies due to logistics or geopolitical factors.
• Intensifying competition in traditional packaging and its impact on profitability.
• Higher-than-expected ramp-up spending for new businesses and costs for new capacity.
• Regulatory restrictions related to leading-edge processes or high-end products may affect business execution.

What to watch

• Trends in raw material and key component costs.
• Whether consolidated utilization excluding SiP can stay at a high level in 1H26.
• The pace of domestic AI supply chain orders, revenue ramp-up, and margin improvement.
• How the roughly Rmb10bn capex budget is allocated and how much high-end application capacity is utilized.
• Whether there are further changes after the 2026/27E earnings estimate cuts.
• Changes in demand for consumer electronics and smartphones.