1Q26 profit beat expectations; UBS raises Shengyi Technology target price to Rmb97.00

Overview

This report is UBS's review of Shengyi Technology 600183.SS's 1Q26 results. The report believes the company had a solid start to 2026. Although revenue came in below UBS and Reuters expectations, attributable net profit significantly beat expectations, mainly due to improved gross margins in the CCL and PCB businesses and better-than-expected expense control. UBS remains positive on the earnings boost from the CCL upgrade and price increase cycle.

Core views

The core views include: first, the 1Q26 profit beat was mainly driven by gross margin expansion and lower-than-expected operating expenses; second, gross margin for the CCL and prepreg business is expected to rise from 24.5% in 4Q25 to 25.5% in 1Q26, while PCB business gross margin also recovered significantly; third, AI demand is strongly boosting upstream materials such as fiberglass cloth and HVLP copper foil, while Middle East conflicts may also disrupt epoxy resin supply, supporting continued CCL price increases through 2026 and into 2027; fourth, UBS raises its earnings forecasts and target price, but also notes that new industry capacity in 2028 may slow ASP growth.

Analysis framework

The report uses earnings breakdown analysis, segment gross margin analysis, peer price hike tracking, and the PE valuation method. UBS compares actual 1Q26 results with its own forecasts and Reuters consensus expectations, and adjusts its 2026-2028E forecasts based on CCL shipments, ASP, PCB business mix, and contributions from the new Dongguan CCL plant.

Methodology notes

• Earnings ForecastResults Comparison and Forecast Revision

  Compare actual revenue, net profit, and EPS with UBS forecasts and Reuters and WIND consensus expectations.

  The report explains earnings elasticity using the magnitude of the 1Q26 beat, gross margin changes, and differences in expense ratios, and accordingly raises 2026-2028E EPS.

• Valuation methodsPE Valuation Method

  Based on 35x PE on the average of 2026E and 2027E EPS.

  UBS raises the target price to Rmb97.00, using 35x PE on the average of 2026E and 2027E EPS, versus the previous 36x 2026E PE.

• Industry CycleCCL Supply-Demand and ASP Cycle Analysis

  Assess the CCL price cycle through AI demand, raw material supply disruptions, peer price hike announcements, and capacity timing.

  UBS believes AI demand is driving tight supply of upstream materials, and together with epoxy resin supply disruptions, supports further upside in CCL ASP, though new capacity in 2028 may reduce the slope of price increases.

Asset mapping & comparison

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

• Shengyi Technology 600183.SS

  Covered company

  Strengths

  A global leading manufacturer of electronic circuit substrate materials, with CCL as a core product and key material for PCB manufacturing; 1Q26 attributable net profit beat expectations, with improvements in both gross margin and expense control.

  Weaknesses

  Revenue was below UBS and Reuters expectations, and the business remains exposed to raw material costs, industry capacity, and end-demand cycles.

  Comparison

  UBS believes the company is benefiting from CCL price increases and improved PCB product mix, and has raised EPS for 2026-2028E.

  Risks

  Sharp increases in raw material prices, slow exit of low-end CCL capacity, intensifying competition, and weakening demand in home appliances, communications, automotive, and data communications.

• CCL and prepreg business

  Main earnings driver

  Strengths

  UBS estimates 1Q26 gross margin rose to 25.5%, while AI demand and material supply disruptions support further ASP increases.

  Weaknesses

  Raw material cost inflation still needs to be passed through via price adjustments, and new industry capacity in 2028 may weaken the magnitude of price hikes.

  Comparison

  UBS raises its assumption for 2026E CCL ASP YoY growth from 30% to 40%, and forecasts this segment's 2026 gross margin at 28.5%.

  Risks

  Cost and supply volatility in fiberglass cloth, HVLP copper foil, epoxy resin, and other inputs, as well as the release of new capacity.

• PCB business / Shengyi Electric (SYE)

  Subsidiary and segment contribution

  Strengths

  1Q26 gross margin recovered to 35.2%, net profit rose 122% YoY and 24% QoQ, and a higher AI PCB mix helps margins.

  Weaknesses

  1Q26 sales fell 10% QoQ and the business still faces raw material cost pressure.

  Comparison

  UBS expects PCB gross margin at 30%/30.5% in 2026-2027E, rising further to 32% in 2028E.

  Risks

  AI PCB demand below expectations, further increases in raw material costs, and slower-than-expected product mix improvement.

• TUC 6274.TWO and Kingboard Laminates 1888.HK

  Reference for industry pricing signals

  Strengths

  TUC reportedly raised prices by 20-40% for multiple CCL products, while Kingboard Laminates again raised prices by 10% for FR-4 CCL and prepreg, confirming the industry price hike trend.

  Weaknesses

  Whether peer price hikes can be fully implemented still depends on demand, inventories, and customer acceptance.

  Comparison

  These price hike announcements support UBS's view that the CCL ASP uptrend will continue through 2026 and 2027.

  Risks

  Price hike execution may fall short of expectations, or new capacity may cause the price cycle to cool earlier than expected.

Key data

• 1Q26 revenueRmb8.1bnUp 45% YoY and 4% QoQ, below UBS and Reuters expectations by 7%/5%.
• 1Q26 attributable net profitRmb1.16bnUp 105% YoY and 30% QoQ, exceeding UBS and Reuters expectations by 17%/26%.
• 1Q26 recurring net profitRmb1.08bnUp 93% YoY and 36% QoQ.
• 1Q26 blended gross margin28.1%Up 3.5ppt YoY and 2.3ppt QoQ, 0.9ppt above UBS expectations.
• Shengyi Electric 1Q26 revenue and net profitRmb2.41bn / Rmb445mnRevenue up 53% YoY and down 10% QoQ; net profit up 122% YoY and 24% QoQ; gross margin 35.2%.
• 2026-2028E EPS revision magnitude2% / 4% / 16%2026E EPS raised from Rmb2.35 to Rmb2.38, 2027E from Rmb3.05 to Rmb3.17, and 2028E from Rmb3.53 to Rmb4.10.
• Target priceRmb97.00Previous Rmb85.00; based on 35x average 2026E and 2027E EPS.
• Current priceRmb76.62As of 28 Apr 2026.

Impact & implications

The report's investment implication for Shengyi Technology is positive overall: in the short term, earnings elasticity comes from recovery in CCL and PCB gross margins as well as expense control; in the medium term, AI-related demand, tight upstream materials supply, and industry price hikes may extend the CCL upcycle; in valuation terms, UBS's upward revisions to the target price and EPS forecasts indicate stronger confidence in earnings upgrades. However, rising raw material prices, slow exit of low-end capacity, intensifying competition, and weakening end demand could still weigh on earnings delivery.

Risks

• A sharp rise in raw material prices could squeeze CCL and PCB gross margins.
• Slow exit of low-end CCL capacity could intensify industry competition.
• End demand in home appliances, communications, automotive, or data communications could weaken.
• New industry capacity coming online around 2028 could reduce the pace of CCL ASP increases.
• The company did not provide financial guidance in its results, so subsequent forecasts depend on UBS assumptions.

What to watch

• The magnitude and duration of realized CCL ASP price increases.
• Changes in the supply and pricing of fiberglass cloth, HVLP copper foil, and epoxy resin.
• Whether AI-related PCB and CCL demand continues to drive product mix upgrades.
• Shipment contribution from the new Dongguan CCL plant in 2028 and the pace of new industry capacity additions.
• Whether actual earnings can deliver after the upward revisions to 2026-2028E EPS.