JCET delivered strong earnings growth in the second quarter, with a positive outlook for AI advanced packaging but a largely fair valuation

Overview

This report reviews JCET's 2Q26 results and updates its 2026—2030 earnings forecasts and valuation. Goldman Sachs believes the company is benefiting from AI infrastructure demand, the rising value of advanced packaging, and product mix upgrades, but views the current valuation as largely fair and therefore maintains its Neutral rating.

Core views

JCET's 2Q26 revenue increased 12% year over year and 13% quarter over quarter, broadly in line with Bloomberg consensus but 8% below Goldman Sachs' original 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 shift toward high-end AIDC packaging and testing. The 2Q26 expense ratio was in line with Goldman Sachs' forecast but above Bloomberg consensus, although it improved both year over year and quarter over quarter. Management expects the expense ratio to improve further in 2H26E as shipments from new factories ramp up. Earnings growth was significantly stronger than revenue growth. 2Q26 net profit increased 107% year over year and 91% quarter over quarter, broadly in line with Goldman Sachs' forecast and 15% above Bloomberg consensus. The report believes this reflects JCET's exposure to rising end demand for AI infrastructure. Goldman Sachs remains positive on future growth, supported primarily by the increasing importance of packaging to AI chip performance, improved capacity utilization driven by demand growth, a product mix shift toward high-value AI-related products such as AI chips and memory, and advanced packaging capacity expansion. After incorporating the 2Q26 results, Goldman Sachs lowered its 2026E revenue forecast by 3% to reflect second-quarter revenue falling below its original forecast. At the same time, it raised its 2027—2030E revenue forecasts by 5%, 4%, 5%, and 4%, respectively, mainly reflecting greater contributions from advanced packaging. Its 2026—2030E gross margin forecasts were raised by 0.8—1.5 percentage points because advanced packaging carries higher gross margins than other product lines, and the product mix upgrade benefits overall profitability. Goldman Sachs also raised its expense ratio forecasts for the same period, mainly reflecting increased R&D investment required to support growth in the advanced packaging business, and raised its tax rate assumptions due to the larger earnings base. Taking the revenue and gross margin adjustments together, it raised its 2027—2030E net profit forecasts by 11%, 9%, 13%, and 9%, respectively. On valuation, Goldman Sachs continues to use a discounted 2030E P/E to reflect JCET's long-term growth opportunities, maintaining its 12-month target price of Rmb125. The target P/E is determined based on the relationship between peers' P/E ratios and the sum of next-year net profit growth and operating margin. Based on JCET's 2031E net profit growth of 15% year over year and operating margin of 11%, this yields a target 2030E P/E of 42.8x, down from 46.0x previously, which is then discounted to 2027E using an 11% cost of equity. In the peer comparison table, JCET's 2030E P/E is approximately 43x, and the ratio based on the aforementioned growth and margin metric is 1.7, in line with the peer average of 1.7. The corresponding P/E ratios for Huatian, Forehope, Amkor, and Tongfu are 65x, 62x, 19x, and 49x, respectively. Despite the earnings forecast upgrades and positive AI advanced packaging trend, Goldman Sachs views the valuation as fair and therefore maintains its Neutral rating.

Analysis framework

The report first compares 2Q26 revenue, gross margin, expense ratio, and net profit with Goldman Sachs' original forecasts and Bloomberg consensus, and then explains the variances in terms of end demand, capacity utilization, cost controls, and product mix. It subsequently incorporates the quarterly results and contributions 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 peers' P/E ratios, earnings growth, and operating margins, and discounts it using the cost of equity to derive the 12-month target price.

Methodology notes

• Valuation MethodP/E and PEG Valuation

  Discounted 2030E P/E and peer correlation valuation

  Based on the relationship between peers' P/E ratios and the sum of next-year net profit growth and operating margin, Goldman Sachs assigns JCET a target 2030E P/E of 42.8x and then discounts it to 2027E using an 11% cost of equity to derive the 12-month target price.

Asset mapping & comparison

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

• JCET (600584.SS)

  The subject of the report, benefiting from growth in AI infrastructure demand and the rising value of advanced packaging.

  Strengths

  Strong end demand, improving capacity utilization, stringent cost controls, a product mix shift toward higher-margin advanced packaging and high-end AIDC products, and continued expansion of advanced packaging capacity.

  Weaknesses

  2Q26 revenue was 8% below Goldman Sachs' original forecast, while the R&D investment required to support advanced packaging growth raises expense ratio forecasts.

  Comparison

  The target multiple is based on the relationship between peers' P/E ratios, net profit growth, and operating margins. JCET's corresponding ratio is 1.7, in line with the peer average of 1.7.

  Risks

  China semiconductor capital expenditure, technological development, or the pace of advanced packaging shipment ramp-up could deviate from expectations.

Key data

• 2Q26 revenue growth year over year+12%Broadly in line with Bloomberg consensus
• 2Q26 revenue growth quarter over quarter+13%Revenue was 8% below Goldman Sachs' original forecast
• 2Q26 net profit growth year over year+107%Broadly in line with Goldman Sachs' forecast
• 2Q26 net profit growth quarter over quarter+91%Net profit was 15% above Bloomberg consensus
• 2026E revenue forecast adjustment-3%Reflects 2Q26 revenue falling below Goldman Sachs' original forecast
• 2027—2030E revenue forecast adjustments+5% / +4% / +5% / +4%Mainly driven by greater contributions from advanced packaging
• 2026—2030E gross margin forecast adjustment+0.8—1.5 percentage pointsRising proportion of advanced packaging products
• 2027—2030E net profit forecast adjustments+11% / +9% / +13% / +9%Mainly driven by higher revenue and gross margin forecasts
• 2031E net profit growth year over year15%Used to derive the target P/E
• 2031E operating margin11%Used to derive the target P/E
• Target P/E42.8x 2030EPreviously 46.0x and discounted to 2027E
• Cost of equity11%Used to discount the target P/E to 2027E
• 12-month target priceRmb125Unchanged

Impact & implications

The report believes that AI chips' increasing reliance on advanced packaging, growing end demand, and a rising proportion of high-value products will continue to support JCET's revenue, capacity utilization, and gross margin. At the same time, increased R&D investment for advanced packaging expansion raises expense ratio forecasts, while a larger earnings base also leads to higher tax rate assumptions. After balancing growth expectations against valuation, Goldman Sachs continues to view the current valuation as fair.

Risks

• China semiconductor capital expenditure may expand faster or slower than expected, potentially causing performance to deviate from the report's forecasts.
• Technological development may proceed faster or slower than expected, potentially altering the company's growth trajectory.
• Advanced packaging shipments may ramp up faster or slower than expected, potentially affecting the realization of revenue and earnings.

What to watch

• Monitor the ramp-up of shipments from new factories in 2H26E and whether the expense ratio continues to improve as management expects.
• Monitor progress in advanced packaging capacity expansion and the rising proportion of high-end AIDC products.
• Monitor changes in China semiconductor capital expenditure, technological development, and the pace of advanced packaging shipments relative to expectations.