J.P. Morgan Initiates Coverage on Shengju Technology H-Shares: AI PCB Leader, Target Price HK$600

Overview

J.P. Morgan initiates coverage on Shengju Technology H-shares (2476.HK) with an Overweight rating and a June 2027 target price of HK$600. The report argues that driven by surging AI infrastructure demand and PCB specification upgrades, the global high-end PCB market is experiencing structural growth. Leveraging its technological leadership, capacity expansion, and deep collaboration with global tech giants, Shengju Technology has become a core beneficiary of this 'PCB content value growth cycle.' The firm forecasts a net profit CAGR of 81% for 2025-2028, noting that current H-share valuations remain attractive relative to both A-shares and global peers.

Core views

AI Drives PCB Value Re-rating and Market Expansion. The report notes that rapid iteration in AI technology is fueling strong demand for high-performance computing infrastructure, thereby driving rapid expansion in the high-end PCB market (e.g., high-layer-count MLPCB and advanced HDI). According to Frost & Sullivan, the global PCB market for AI and high-performance computing 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 series) entails higher PCB specifications and a significant increase in unit value, creating above-industry-average growth opportunities for suppliers with high-end manufacturing capabilities. Solidified Position as Global AI PCB Leader with Deep Core Customer Ties. Shengju Technology has established a leading position in the AI PCB sector, capturing 13.8% of the global AI and HPC PCB market in 1H25 and a commanding 44.6% share of the advanced HDI market, ranking first globally in both. The company is a direct beneficiary of the NVIDIA platform upgrade cycle and a key supplier to ASIC customers such as Google. Despite intensifying competition, the report believes the company has built deep competitive moats through industry-leading technical capabilities (e.g., mass production of 70+ layer MLPCBs), large-scale high-quality delivery, and 2-3 year early joint R&D mechanisms with top-tier customers, positioning it to maintain its dominant market share. Aggressive Capacity Expansion Signals Strong Earnings Growth Expectations. The company's 2026 capex plan reaches RMB 18 billion, significantly exceeding the RMB 6.4 billion in 2025, signaling confidence in future orders and demand. Based on this, J.P. Morgan forecasts revenue growth of 84%/69%/40% for 2026/2027/2028, with net profit reaching RMB 9.0bn/17.2bn/25.6bn, implying an 81% net profit CAGR for 2025-2028. These earnings forecasts are above consensus, primarily reflecting optimism about the company gaining higher market share in AI projects. Additionally, driven by a higher mix of high-value-added products, gross margin is expected to improve gradually from 35.2% in 2025 to 42.5% in 2028. Valuation Offers Margin of Safety and Upside Potential. Since listing in April 2026, Shengju Technology H-shares have risen 61%, yet still trade at a 6% discount to A-shares (below the tech sector average AH discount of 16%). The report derives a target price of HK$600 based on 24x average 2026-27E P/E. This multiple represents a ~20% discount to the average 2027E valuation of A-share PCB peers and only a 5% premium to the global peer average. Given the company's high growth profile and industry leadership, current valuations are deemed attractive.

Analysis framework

The report employs a typical 'Industry Beta + Stock Alpha' analytical framework. First, it quantifies the structural tailwinds of AI on the high-end PCB market using third-party data (Frost & Sullivan) to establish a macro backdrop of high industry prosperity. Second, it validates the company's competitive moats across three dimensions: market share, technical specifications, and customer stickiness, specifically treating the company's capex plan as a leading indicator of future order momentum. Finally, at the valuation level, it adopts relative valuation, comprehensively considering AH premium patterns, global peer valuations, and the company's inherent high growth to determine the target multiple. This methodology translates qualitative competitive advantages into quantitative earnings forecasts and valuation premium justification.

Methodology notes

• Industry/Sector Analysis FrameworkPenetration S-curve

  Logic Behind the Surge in PCB Value Content in AI Servers

  The report emphasizes that each generation of AI chip platform upgrades brings significant increases in PCB specifications and value content. This aligns with the acceleration phase of the new technology penetration S-curve: as AI computing demand shifts from optional to mandatory, supporting hardware not only increases in volume but also sees unit prices multiply due to heightened technical complexity. This is a key logic for assessing the earnings elasticity of supply chain companies.

• Competition and Strategy FrameworkMoat / competitive advantage

  Customer Switching Costs Built via Early Joint R&D

  The report highlights the company's 2-3 year early joint R&D engagements with global tech giants. This model of deep embedding into customers' next-generation product development cycles creates extremely high switching costs and trust barriers, making it difficult for competitors to seize share solely through price wars. This serves as the core rationale for the company's ability to maintain high market share and gross margins amidst fierce competition.

• Valuation MethodologyPE/PEG valuation

  Relative Valuation Anchoring Based on AH Share Discount Patterns

  When pricing H-shares, the report does not simply apply global peer multiples but references A-share peer valuations with an approximate 20% discount, keeping it consistent with the tech sector's average AH discount levels. This approach acknowledges the company's growth premium as a scarce A-share asset while respecting the liquidity discount reality of the Hong Kong market, providing a reasonable valuation reference for cross-market investors.

• Company Fundamentals and Financial FrameworkOperating/Financial Leverage Analysis

  Capex as a Leading Indicator of Prosperity

  The report interprets the company's substantial capex increase in 2026 (from RMB 6.4bn to 18bn) as a direct reflection of management's confidence in future orders. In capital-intensive manufacturing, counter-cyclical or forward-looking large-scale Capex often precedes revenue realization, serving as an important forward-looking signal for predicting accelerated revenue growth over the next 1-2 years.

Asset mapping & comparison

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

• Shengju Technology-H (2476.HK)

  Core Beneficiary: Global AI PCB leader, directly benefiting from NVIDIA and ASIC platform upgrades

  Strengths

  #1 global market share in AI & HPC PCBs; leading advanced HDI technology; deep ties with global tech giants; aggressive capacity expansion

  Weaknesses

  Potential short-term gross margin volatility during new capacity ramp-up; high dependence on a single top-tier customer

  Comparison

  20% valuation discount vs. A-share peers; 5% premium vs. global peers but with significantly faster growth

  Risks

  Capacity expansion execution below expectations; intensified competition leading to share loss; raw material price volatility; geopolitical and trade policy risks

Key data

• 2025-28E Net Profit CAGR81%Net profit forecast for 2026/27/28 at RMB 9.0bn / 17.2bn / 25.6bn, respectively
• Global Market Share in AI & HPC PCB (1H25)13.8%Ranked first globally; full-year 2024 was only 1.7%
• Global Market Share in Advanced HDI PCB (1H25)44.6%Ranked first globally, demonstrating absolute dominance in high-end segments
• 2026E Capex PlanRMB 18 BillionSignificant increase from RMB 6.4bn in 2025, primarily for capacity expansion
• 2025 Gross Margin35.2%Up 12.5ppt YoY, benefiting from optimized product mix
• Target Price Implied 2026-27E Average PE24x~20% discount to A-share peers' 2027E average PE

Impact & implications

For Shengju Technology, continued investment in AI computing infrastructure signifies a successful business structure transformation from traditional PCBs to high-value-added AI PCBs, significantly enhancing the certainty and elasticity of earnings growth. For the PCB industry, AI brings not only aggregate volume growth but also a re-rating of value content; leading manufacturers with high-end process capabilities and customer certification barriers will capture excess returns. For investors, the current AH discount and valuation level relative to high growth offer an investment window into the core AI hardware supply chain, though close attention should be paid to margin volatility during capacity ramp-up and geopolitical risks.

Risks

• Capacity Expansion and Delivery Execution Risk: New factory construction or yield ramp-up falling short of expectations could impact order delivery
• Market Competition Risk: Intense competition in the global PCB industry may lead to market share loss or margin pressure
• Raw Material Price Volatility Risk: High proportion of costs attributed to raw materials like copper; significant price hikes could erode profits
• Geopolitical and Trade Policy Risk: Tariffs and export controls may affect cross-border business operations

What to watch

• Launch and mass production progress of NVIDIA Rubin/Rubin Ultra platforms
• Adoption of HDI in next-gen TPU projects by ASIC customers like Google
• Quarterly gross margin trends and new capacity utilization ramp-up pace
• Actual implementation of 2026 capex and production start timelines for Vietnam/Thailand factories