Shennan Circuits delivered solid 1Q26 results, with AI PCB and IC substrates forming multiple growth engines

Overview

This report is Nomura's review of Shennan Circuits' (002916.SZ) 1Q26 results. The report believes the company's first-quarter revenue, earnings, and gross margin were solid, mainly driven by a higher contribution from AI PCBs and continued improvement in IC substrate utilization. Nomura maintains a Buy rating and raises the target price to CNY391.

Core views

The core view is that Shennan Circuits has two growth drivers: AI PCBs and IC substrates. The PCB business is in an upcycle driven by AI network equipment upgrades and tight supply, benefiting from demand for 400G/800G switches, 800G/1.6T optical modules, and AI servers; within IC substrates, BT substrates are supported by memory demand and price increases, while ABF substrates are in a ramp-up stage and are expected to benefit from domestic Chinese AI chip customers and the import substitution trend.

Analysis framework

The report uses earnings review, upward revisions to segment forecasts, peer or consensus expectation comparisons, and a valuation multiple approach for analysis. Nomura raises FY26-27F revenue and earnings forecasts and values the target price at 37x 2027F EPS, while comparing with WIND consensus to show that it is more optimistic on revenue growth but more cautious on margin expansion during the capacity ramp-up period.

Methodology notes

• Valuation methodsP/E multiple method

  37x 2027F EPS

  The target price of CNY391.00 is based on 37x 2027F EPS of CNY10.57. The multiple matches the FY26-28F earnings CAGR of 37%, with CSI300 as the benchmark index.

• Earnings forecastForecast revision analysis

  Revenue, earnings, and gross margin forecast revisions

  The report raises FY26-27F revenue forecasts by 9.3%-18.7%, earnings forecasts by 13.2%-21.0%, and FY26-27F gross margin forecasts by 1.0-1.7ppt to reflect AI PCB demand, product mix improvement, and higher IC substrate utilization.

• Segment analysisBusiness segment growth breakdown

  PCB and IC substrate

  The report separately evaluates the demand, capacity, utilization, and gross margin improvement paths of the PCB and IC substrate businesses, and provides FY26-28F revenue CAGR assumptions.

Asset mapping & comparison

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

• Shennan Circuits (002916.SZ)

  Covered company

  Strengths

  Strong AI PCB demand, improved IC substrate utilization, and growth supported by domestic customer demand and the import substitution trend; target price raised and Buy maintained.

  Weaknesses

  PCB capacity constraints exist, ABF substrates are still in the ramp-up stage, and margin improvement during capacity expansion may fall short of expectations.

  Comparison

  Nomura's FY26-28F revenue forecasts are 5%-11% above WIND consensus, but FY26 and FY28F earnings are 2%-4% below WIND consensus, indicating it is more optimistic on revenue and more cautious on margins.

  Risks

  Delays in AI infrastructure investment, slower-than-expected AI PCB capacity expansion, further U.S. sanctions on China's communications supply chain, and intensified competition in the domestic PCB market.

• PCB business

  Core growth segment

  Strengths

  Benefits from demand for 400G/800G switches, 800G/1.6T optical modules, and AI servers, with FY26-28F revenue CAGR expected at 35%.

  Weaknesses

  Capacity bottlenecks exist and require new projects to release capacity.

  Comparison

  By FY28F, the PCB business is expected to contribute 69% of total revenue.

  Risks

  Weaker-than-expected demand for high-end PCBs or delays in capacity expansion.

• IC substrate business

  Core growth segment

  Strengths

  BT substrates benefit from memory demand and price increases, while ABF substrates are expected to benefit from domestic AI chip customers and import substitution.

  Weaknesses

  ABF substrates are still in the ramp-up stage, and profit contribution will take time to materialize.

  Comparison

  FY26-28F revenue CAGR is expected at 31%, and segment gross margin by FY28F is expected to rise from 22.6% in FY25 to 30%.

  Risks

  Customer demand, utilization improvement, or import substitution progress may fall short of expectations.

Key data

• 1Q26 revenue growth+38% YoY，-4.3% QoQThe company's 1Q26 revenue increased 38% YoY and declined 4.3% QoQ.
• 1Q26 earnings growth+73% YoY，-10.5% QoQEarnings increased 73% YoY and declined 10.5% QoQ.
• Gross margin change+4.4pp YoY，+0.6pp QoQThe improvement came from a higher contribution from AI PCBs and better IC substrate utilization.
• Target priceCNY391.00The previous target price was CNY263.00.
• Closing priceCNY301.30As of April 23, 2026.
• Implied upside+29.8%Calculated based on the target price relative to the closing price.
• FY27F EPSCNY10.57The 2027F EPS used for target price valuation.
• Valuation multiple37x 2027F EPSThe report says this multiple is consistent with the FY26-28F earnings CAGR of 37%.
• PCB revenue CAGR35%Nomura estimates FY26-28F PCB revenue CAGR at 35%.
• IC substrate revenue CAGR31%Nomura estimates FY26-28F IC substrate revenue CAGR at 31%.
• Wuxi new project investmentCNY4.6bnThe project focuses on high-speed, high-density, and high-layer-count PCBs to unlock growth potential.

Impact & implications

The report has a positive investment implication for Shennan Circuits: AI network equipment upgrades and the import substitution trend improve medium- to long-term growth visibility, while upward revisions to earnings forecasts and the target price reflect stronger-than-expected demand; however, margin expansion during the capacity ramp-up stage remains uncertain, and the company faces risks such as the pace of AI infrastructure investment, U.S. restrictions, and intensified domestic PCB competition.

Risks

• Delays in AI infrastructure investment, or AI PCB capacity expansion slower than expected.
• Further U.S. restrictions on companies in China's communications value chain.
• Intensified competition in China's PCB market.
• Delays in 5G network construction progress.
• Gross margin expansion during the capacity ramp-up period may fall short of expectations.

What to watch

• Construction and production ramp-up progress of the new CNY4.6bn PCB project in Wuxi.
• Demand for AI PCB orders, especially related demand for 400G/800G switches, 800G/1.6T optical modules, and AI servers.
• Changes in IC substrate utilization, BT substrate pricing, and memory demand.
• Customer onboarding for ABF substrates and demand from domestic AI chip customers.
• Whether FY26-27F revenue, earnings, and gross margin deliver on the revised forecasts.
• Policy changes in U.S. restrictions on China's communications supply chain.