Victory Giant's 2Q26 results were broadly in line, but raw material and depreciation pressures weighed on gross margin

Overview

This earnings review analyzes Victory Giant's 1H26 and 2Q26 performance. Nomura believes overall results were broadly in line with expectations, but investment income masked pressure on recurring earnings and gross margin. Meanwhile, the company is expanding AI PCB capacity through substantial capital expenditure to capture demand from NVIDIA's next-generation platform upgrade.

Core views

Victory Giant released its 1H26 results after market close on August 27, 2026. 1H26 revenue increased 28.8% YoY to CNY 11.6bn, while earnings rose 33.3% YoY to CNY 2.8bn. On a quarterly basis, 2Q26 revenue and earnings grew 29.5% and 28.3% YoY, respectively, and 10.7% and 21.7% QoQ. 2Q26 revenue was 1% below Nomura's forecast, while net profit of CNY 1.57bn was 1% above its forecast, making the headline results broadly in line with expectations. However, the net profit beat was mainly attributable to investment income, and core earnings were weaker than the reported figures suggested. 2Q26 earnings excluding non-recurring items were CNY 1.16bn, down 5.3% YoY and 7.7% QoQ. This indicates that although revenue continued to grow rapidly, the core business's ability to convert revenue into profit was under pressure, while investment income provided significant support to reported profit for the quarter. The key indication of weaker earnings quality was the decline in gross margin. 1H26 gross margin was 33.2%, down 3.0 percentage points YoY; 2Q26 gross margin declined further to 32.1%, down 6.7 percentage points YoY and 2.4 percentage points QoQ. Nomura believes the pressure may have stemmed from both higher prices for raw materials such as CCL and incremental depreciation costs resulting from substantial capital expenditure. Therefore, the current margin pressure reflects costs incurred during the investment phase, rather than merely changes in revenue growth. The company's expenditure on property, plant and equipment reached CNY 7.1bn in 1H26, up 228% YoY. Nomura believes this pace of investment will help increase AI PCB product capacity, enabling the company to capture the next wave of demand arising from NVIDIA's platform upgrade from Blackwell to Rubin. The resulting investment thesis is that capital expenditure and depreciation will depress gross margin in the short term, but the additional capacity may strengthen the company's supply capabilities during future platform upgrade cycles. In terms of valuation, Nomura maintains its Buy rating and CNY 389 target price. The target price is based on a 27x P/E multiple applied to FY27F EPS of CNY 14.41, with 27x in line with the company's historical median P/E. The report also notes that the stock currently trades at 18.3x FY27F EPS. The rating benchmark is the CSI300, and Nomura defines a Buy as an expectation that the stock will outperform the benchmark over the next 12 months. Therefore, while acknowledging pressure on gross margin and recurring earnings, the report maintains a positive view based on capacity expansion and the AI PCB upgrade opportunity.

Analysis framework

Nomura first compares the YoY and QoQ changes in 1H26 and 2Q26 revenue and earnings and contrasts the actual results with its forecasts. It then distinguishes reported net profit from recurring earnings to identify the contribution of investment income to the better-than-expected result. The report subsequently attributes the decline in gross margin to rising CCL raw material prices and depreciation resulting from capital expenditure, while linking capital expenditure and AI PCB capacity to demand from NVIDIA platform upgrades. Finally, it derives the target price using FY27F EPS and the company's historical median P/E.

Methodology notes

• Valuation methodologyPE/PEG valuation

  P/E-based target price methodology using the historical median

  The report derives its CNY 389 target price by applying a 27x P/E multiple to FY27F EPS of CNY 14.41. The 27x multiple is based on the company's historical median P/E and is compared with the current FY27F P/E of 18.3x.

• Corporate fundamentals and financial framework

  Comparison of reported earnings and recurring earnings

  The report analyzes net profit separately from earnings excluding non-recurring items to demonstrate that the slight 2Q26 net profit beat was mainly driven by investment income, while core earnings actually declined both YoY and QoQ.

• Industry/sector analysis frameworkUpstream-midstream-downstream industry chain transmission

  Transmission of platform upgrades into AI PCB capacity demand

  Starting from the downstream shift in NVIDIA's platform from Blackwell to Rubin, the report concludes that Victory Giant's increased capital expenditure and AI PCB capacity will help it capture the next wave of demand.

Asset mapping & comparison

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

• Victory Giant (300476 CH)

  The core company covered by the report; its 2Q26 results were broadly in line with expectations, and it is expanding AI PCB capacity to capture demand from NVIDIA platform upgrades.

  Strengths

  Revenue and reported earnings maintained rapid growth, while AI PCB capacity expansion progressed quickly.

  Weaknesses

  Gross margin declined significantly, recurring earnings fell both YoY and QoQ, and reported profit was supported by investment income.

  Risks

  Supply chain diversification by key customers, intensifying peer competition, technological changes such as COwOP, a slowdown in AI PCB technology upgrades, and escalating geopolitical tensions.

Key data

• 1H26 revenueCNY 11.6bnUp 28.8% YoY
• 1H26 earningsCNY 2.8bnUp 33.3% YoY
• 2Q26 revenue growth29.5% YoY, 10.7% QoQActual revenue was 1% below Nomura's forecast
• 2Q26 net profitCNY 1.57bnUp 28.3% YoY and 21.7% QoQ, 1% above Nomura's forecast, supported by investment income
• 2Q26 recurring earningsCNY 1.16bnDown 5.3% YoY and 7.7% QoQ
• 1H26 gross margin33.2%Down 3.0 percentage points YoY
• 2Q26 gross margin32.1%Down 6.7 percentage points YoY and 2.4 percentage points QoQ
• 1H26 expenditure on property, plant and equipmentCNY 7.1bnUp 228% YoY, to increase AI PCB capacity
• FY27F EPSCNY 14.41Valuation basis for the target price
• Target P/E27xIn line with the company's historical median P/E
• Current FY27F P/E18.3xCurrent trading valuation stated in the report
• Target priceCNY 389.00Maintained unchanged

Impact & implications

The report believes the company is currently in a period of heavy investment, with rising prices for raw materials such as CCL and incremental depreciation depressing gross margin, while investment income has also made reported profit stronger than core earnings. On the other hand, the CNY 7.1bn capital investment is expected to expand AI PCB capacity, enabling the company to participate in the next wave of demand generated by NVIDIA's upgrade from Blackwell to Rubin. Nomura therefore did not change its Buy rating or target price due to short-term margin pressure.

Risks

• Supply chain diversification by key customers and intensifying peer competition may weaken the company's business share and earnings performance.
• Technological changes such as COwOP may alter the competitive landscape and threaten the company's market share.
• If the pace of technological upgrades in the AI PCB market slows, demand realization for the additional capacity may be affected.
• Escalating geopolitical tensions may hinder the achievement of the target price.