AI CCL Drives Margin Expansion at Shengyi Technology; Goldman Sachs Maintains Buy and Raises Target Price to Rmb249

Overview

The report focuses on Shengyi Technology's 2Q26 results, global AI CCL demand, 2026-28E earnings revisions, and target price. Goldman Sachs believes the rising share of high-end AI CCL is driving margin expansion and maintains its Buy rating and Conviction List view.

Core views

Shengyi Technology's 2Q26 revenue increased 54% year over year and 34% quarter over quarter to Rmb11bn, above Bloomberg consensus; gross margin improved both year over year and quarter over quarter to 32.6%, exceeding both Goldman Sachs' forecast and Bloomberg consensus. Based on this, Goldman Sachs concludes that the product mix is upgrading toward high-end products such as AI CCL faster than previously expected. The expense ratio was in line with Goldman Sachs' forecast and better than Bloomberg consensus, ultimately driving 2Q26 net profit up 147% year over year and 84% quarter over quarter to Rmb2bn, 3% and 34% above Goldman Sachs' forecast and Bloomberg consensus, respectively. The report attributes this performance to the company's exposure to continuously rising end demand for AI infrastructure. Regarding industry demand, Goldman Sachs raised its 2026E and 2027E global AI CCL TAM estimates by 20% and 18%, respectively, in its global AI PCB/CCL market opportunity analysis. The report lists the value TAM as “US$7nm / US$22bn / US$48bn” and describes the relevant period as 2027-28E; the input does not further specify how the three figures correspond to particular years. The TAM upgrades are supported by three factors: growth in end demand for AI CCL, capacity expansion by major suppliers, and product specification upgrades toward M9 and above. Goldman Sachs believes Shengyi Technology is a key beneficiary of growth in AI CCL demand. The company's growth path encompasses price, specification, and shipment volume. First, rising end demand is driving higher AI CCL prices. Second, upgrades in rack-scale AI servers toward higher transmission speeds are increasing the penetration of M9 and above products, improving the product mix and gross margin. Third, next-generation rack-scale AI servers are expected to enter mass production in 3Q26, driving growth in Shengyi Technology's AI CCL shipments. Based on these drivers, Goldman Sachs forecasts a 33% net profit CAGR for the company in 2026-30E and expects AI CCL shipment growth to accelerate in 2026-28E. After incorporating the 2Q26 results, Goldman Sachs raised its 2026-28E revenue forecasts by 1%, 2%, and 5%, respectively, mainly reflecting a greater contribution from AI CCL. It raised net profit forecasts for the same period by 8%, 2%, and 6%, respectively, mainly due to higher revenue and gross margins. The gross margin forecast upgrades are based on continued product mix improvement toward high-end AI CCL and rising average selling prices for AI CCL. Meanwhile, Goldman Sachs raised its 2026-28E expense ratio forecasts because the company needs to increase R&D investment to support migration toward M9 and above AI CCL. Regarding valuation, Goldman Sachs continues to derive its 12-month target price using a near-term P/E framework and maintains its 50.4x 2027E target P/E. This multiple is derived from the relationship between peers' P/E multiples and year-over-year earnings growth, combined with the company's 2027-28E year-over-year EPS growth, reflecting Goldman Sachs' positive view of the company's exposure to the global AI infrastructure growth trend. Following the earnings forecast updates, the 12-month target price was raised from Rmb247.0 to Rmb249.0, while Goldman Sachs maintained its Buy rating and Conviction List view.

Analysis framework

Goldman Sachs first compares 2Q26 revenue, gross margin, expense ratio, and net profit on a year-over-year and quarter-over-quarter basis and against its own forecasts and Bloomberg consensus to assess the pace of product mix upgrades. It then revises the global TAM and company earnings forecasts based on AI CCL demand, supplier capacity expansion, specification upgrades, and changes in prices and shipment volumes. Finally, it determines the target P/E based on the relationship between peer P/E multiples and earnings growth and incorporates the updated 2027E earnings into the target price.

Methodology notes

• Industry/Sector Analysis FrameworkSupply-demand framework

  AI CCL Supply-Demand and Specification Upgrade Analysis

  The report assesses the global AI CCL market opportunity from three perspectives: end demand for AI infrastructure, capacity expansion by major suppliers, and upgrades to M9 and above specifications, and uses this assessment to identify the extent to which Shengyi Technology will benefit.

• Industry/Sector Analysis FrameworkVolume-price decomposition

  AI CCL Price, Penetration, and Shipment Drivers

  The report decomposes growth into demand-driven price increases, penetration of higher-specification products driven by high-speed servers, and shipment growth resulting from the mass production of next-generation servers in 3Q26.

• Valuation MethodPE/PEG valuation

  Target P/E Valuation Based on the Relationship Between Peer P/E Multiples and Earnings Growth

  Based on the relationship between peer P/E multiples and earnings growth and incorporating Shengyi Technology's 2027-28E EPS growth, Goldman Sachs applies a 50.4x 2027E P/E to derive a 12-month target price of Rmb249.0.

Asset mapping & comparison

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

• Shengyi Technology (600183.SS)

  Goldman Sachs views it as a key beneficiary of growth in global AI CCL demand and product specification upgrades.

  Strengths

  Strong 2Q26 revenue, gross margin, and net profit performance; an accelerating product mix shift toward high-end AI CCL, with benefits from pricing, higher penetration of M9 and above products, and increased shipment volumes.

  Weaknesses

  To support migration toward M9 and above AI CCL, the company is increasing R&D costs, and Goldman Sachs has accordingly raised its 2026-28E expense ratio forecasts.

  Comparison

  2Q26 revenue exceeded Bloomberg consensus, gross margin exceeded Goldman Sachs' forecast and Bloomberg consensus, and net profit exceeded the two by 3% and 34%, respectively; the target P/E is determined based on the relationship between peer P/E multiples and earnings growth.

  Risks

  Lower-than-expected AI infrastructure investment, a lower-than-expected allocation share, and changes in the technological roadmap.

Key data

• 2Q26 RevenueRmb11bnUp 54% year over year and 34% quarter over quarter, above Bloomberg consensus.
• 2Q26 Gross Margin32.6%Improved both year over year and quarter over quarter, above Goldman Sachs' forecast and Bloomberg consensus.
• 2Q26 Net ProfitRmb2bnUp 147% year over year and 84% quarter over quarter, exceeding Goldman Sachs' forecast and Bloomberg consensus by 3% and 34%, respectively.
• Global AI CCL TAM Upgrade2026E raised by 20%; 2027E raised by 18%Supported by rising end demand, supplier capacity expansion, and upgrades to M9 and above specifications.
• Global AI CCL Value TAMUS$7nm / US$22bn / US$48bnPresented this way in the original text, which describes the relevant period as 2027-28E without specifying how the three figures correspond to particular years.
• Net Profit Growth Forecast+33% CAGRGoldman Sachs' forecast for 2026-30E.
• 2026-28E Net Profit Forecast Revisions+8% / +2% / +6%Mainly reflecting higher revenue and gross margin.
• 2026-28E Revenue Forecast Revisions+1% / +2% / +5%Mainly reflecting a greater contribution from AI CCL.
• 2026-28E Expense Ratio ForecastRaisedMainly due to increased R&D costs to support migration toward M9 and above AI CCL.
• Target P/E50.4x 2027E P/EMaintained unchanged and determined based on the relationship between peer P/E multiples and earnings growth.
• 12-Month Target PriceRmb249.0Raised from Rmb247.0.
• Historical Target Prices and Corresponding Closing Prices14-Jul-26: 247.00/147.90; 11-Jun-26: 217.60/149.73; 30-May-26: 146.30/140.62; 22-May-26: 127.40/108.01; 20-Jan-26: 111.00/68.00All figures are in Rmb; the target prices in the table are not adjusted for corporate actions.

Impact & implications

The report believes that growth in AI infrastructure demand is feeding through to Shengyi Technology's revenue, product mix, and gross margin via higher AI CCL prices, increased penetration of high-specification products, and shipment expansion. Goldman Sachs therefore raises its 2026-28E revenue, gross margin, and net profit forecasts. Although R&D investment to support migration toward M9 and above products will increase the expense ratio, the updated earnings forecasts still lift the target price from Rmb247.0 to Rmb249.0.

Risks

• AI infrastructure investment may be lower than expected.
• Shengyi Technology's allocation share may be lower than expected.
• The direction of technological development may change.

What to watch

• Whether next-generation rack-scale AI servers enter mass production in 3Q26 as expected and drive Shengyi Technology's AI CCL shipments.
• Whether growth in AI CCL shipments and higher average selling prices materialize in 2026-28E.
• Penetration of M9 and above AI CCL, product mix improvements, and corresponding changes in R&D expenses.