J.P. Morgan Initiates Coverage on Victory Giant Technology: Leader in AI PCBs, Target Price HK$600

Overview

J.P. Morgan initiates coverage of Victory Giant Technology (2476.HK) with an Overweight rating and a HK$600 target price. The report argues that strong demand for AI infrastructure construction is driving the global high-end PCB market into a structural growth cycle. Victory Giant Technology, leveraging its technological leadership in high-layer count MLPCBs and high-end HDIs, large-scale capacity, and deep cooperation with global tech giants, has become a core beneficiary of this cycle. The institution forecasts a net profit CAGR of 81% for the company from 2025 to 2028, and believes the current H-share valuation is attractive.

Core views

The AI wave drives increased value and structural growth in PCBs. The report points out that rapid AI technology iteration accelerates demand for high-end PCBs, particularly high-layer count MLPCBs and high-end HDIs used in AI servers and high-performance computing. According to Frost & Sullivan, the global market size for AI and HPC PCBs is expected to grow at a CAGR of 14.9% from 2025 to 2029. Each generation of GPU platform upgrades (e.g., from Blackwell to Rubin) is accompanied by improvements in PCB specifications and a significant increase in value per unit, creating growth opportunities exceeding industry averages for manufacturers with high-end capabilities. The company has established a global leading position in the AI PCB sector and is deeply bound to core customers. In the first half of 2025, Victory Giant Technology's global market share in the AI and high-performance computing PCB market rose to 13.8%, ranking first; its share in the high-end HDI market reached an impressive 44.6%. This advantage stems from its industry-leading technical capabilities (such as mass production of MLPCBs with over 70 layers and 24-layer 6+12+6 HDI), rapid capacity expansion, and long-term strategic cooperation with global tech leaders like NVIDIA. The company is not only a direct beneficiary of the NVIDIA platform upgrade cycle but also gains incremental share in projects such as Google TPU, with shipments related to Google TPU alone expected to reach 4.3 million units in 2026. Aggressive capacity expansion supports high earnings growth for the next three years. To meet strong order demand, the company's 2026 capital expenditure plan is as high as RMB 18.0 billion (up from RMB 6.4 billion in 2025), primarily used to expand high-end capacity. Based on this, J.P. Morgan forecasts that the company's revenue will grow by 84%/69%/40% in 2026/2027/2028 respectively, with net profits reaching RMB 9.0B / 17.2B / 25.6B, corresponding to a net profit CAGR of 81% from 2025 to 2028. Although new capacity ramp-up may cause short-term gross margin fluctuations, long-term profitability will remain high as the proportion of high-end products increases and scale effects are released. H-share valuation offers a margin of safety and re-rating potential. Since its listing in April 2026, the H-share price has risen 61%, but it still trades at a 6% discount to A-shares (lower than the average 16% discount for the tech sector). The current H-share trades at 17x 2027E P/E, while the average for A-share PCB peers is approximately 30x. The report believes that concerns about intensified competition and margin volatility are excessive, and valuation is likely to further repair as strong earnings are delivered. The target price of HK$600 is based on a 24x average EPS for 2026-27E, which is approximately 5% premium to global peers but about 20% discount to A-share peers, reflecting a reasonable H/A spread.

Analysis framework

The report adopts a typical 'Industry Beta + Company Alpha' analytical framework. First, it quantifies the pull effect of AI on the high-end PCB niche market using third-party data (Frost & Sullivan) to establish the macro background of high industry prosperity; second, it demonstrates the company's ability to generate excess returns by breaking down its product structure (MLPCB/HDI), customer binding relationships (NVIDIA/Google), and capacity release rhythm; finally, it determines a relatively reasonable target valuation multiple by combining historical H/A share premiums and peer valuation comparisons. This analysis method closely combines macro industrial trends with micro-company execution, avoiding empty logic based solely on storytelling.

Methodology notes

• Industry/Industrial Analysis FrameworkPenetration S-curve

  Leap in Value of AI Server PCBs

  The report emphasizes that generational upgrades in GPU platforms (e.g., from Blackwell to Rubin) bring non-linear growth in PCB specifications and value. This aligns with the S-curve theory where hardware specifications iterate rapidly during the new technology introduction phase, leading to a surge in single-product value, which is a key indicator for judging the growth potential of upstream component manufacturers.

• Valuation MethodPE/PEG valuation

  H/A Share Discount Anchoring Valuation Method

  When pricing H-shares, the report does not simply apply global peer PEs, but uses the average 2027 PE of A-share peers as a benchmark, applying a discount of approximately 20% (consistent with the average H/A discount for the tech sector). This method considers liquidity and investor structure differences between dual-listings of the same company, making it more referenceable than simple horizontal comparison.

• Company Fundamentals and Financial FrameworkOperating/Financial Leverage Analysis

  J-Curve Effect of Margins During Capacity Expansion

  When forecasting gross margins, the report does not linearly extrapolate from peak levels but incorporates the risk of short-term profit erosion caused by yield ramp-up and insufficient utilization rates in the early stages of new factory operations. This is a typical financial characteristic during heavy asset expansion periods in manufacturing, and understanding this helps in rationally viewing quarterly performance fluctuations.

Asset mapping & comparison

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

• Victory Giant Technology (2476.HK)

  Core Beneficiary: Global leader in high-end AI PCBs, directly benefiting from the surge in demand from NVIDIA and ASIC clients

  Strengths

  #1 global market share in AI/HPC PCBs; Leading high-end HDI technology; Deeply bound with giants like NVIDIA; Aggressive capacity expansion

  Weaknesses

  Risk of margin fluctuation during new capacity ramp-up; High dependence on a single top client

  Comparison

  H-shares trade at a 6% discount to A-shares, valuation lower than the average 30x P/E of A-share PCB peers, but higher than global peer averages

  Risks

  Capacity expansion execution falls short of expectations; Loss of market share due to intensified competition; Raw material price fluctuations; Geopolitical risks

Key data

• Net Profit CAGR 2025-28E81%Expected net profits for 2026/27/28 are RMB 9.0B / 17.2B / 25.6B
• Global Market Share in AI & HPC PCB (1H25)13.8%Ranked #1 globally, compared to just 1.7% for the full year 2024
• Global Market Share in High-End HDI PCB (1H25)44.6%Ranked #1 globally, with extremely high technical barriers
• 2026E Capital Expenditure PlanRMB 18.0 BillionA significant increase from RMB 6.4 billion in 2025, used to expand high-end capacity
• 2025 HDI Business Gross Margin43.5%Up 21 percentage points year-over-year, with significant product structure optimization
• Target Price Corresponding Valuation24x 2026-27E PEApproximately 20% discount to A-share peers, approximately 5% premium to global peers

Impact & implications

For Victory Giant Technology, the explosion of AI computing power demand is not only a short-term order bonus but also a strategic opportunity to reshape its position in the global PCB industry chain. If the company can execute its capacity expansion plans as scheduled and maintain technological leadership, its earnings growth rate will continue to outperform the industry, and the H-share valuation is also expected to return from its current discounted state to a reasonable level. For the PCB sector, Victory Giant Technology's case indicates that only enterprises that have entered the core AI supply chain and possess the capability to mass-produce high-end products can enjoy the valuation premium of this cycle, while traditional consumer electronics PCB manufacturers may face marginalization risks.

Risks

• Capacity Expansion and Delivery Risks: Delays in new factory construction or commissioning, or idle capacity and unrecovered costs due to demand下滑 (decline)
• Market Competition Risk: Intense global PCB industry competition, where rivals may seize share through scale or technological advantages
• Raw Material Price Fluctuations: Copper accounts for 60-70% of costs, and significant price increases will erode profits
• Geopolitics and Trade Policies: Tariffs or export controls may affect overseas business, although the company has laid out capacity in Southeast Asia

What to watch

• Progress of mass production of NVIDIA Rubin/Rubin Ultra platforms and changes in Victory Giant Technology's share within them
• Order landing status for Google TPU v9 and other ASIC clients
• Monthly yield and utilization rate data after the ramp-up of new capacity in 2026
• Whether quarterly gross margins experience unexpected fluctuations due to new factory operations
• Changes in the H/A share premium index (HSAHP) and southbound fund flows