High-end AI CCL drives margin expansion at Shengyi Technology; Goldman Sachs raises 12-month target price to Rmb249

Overview

The report reviews Shengyi Technology's 2Q26 results and analyzes AI CCL demand, product specification upgrades, shipment growth, and earnings forecast revisions. Goldman Sachs believes the shift toward a higher-end product mix is driving margin expansion, maintains its Buy (Conviction List) rating, and raises its 12-month target price to Rmb249.

Core views

Shengyi Technology's 2Q26 results reflected the combined effects of rising AI infrastructure demand and an upgraded product mix. Quarterly revenue reached Rmb11.0bn, up 54% YoY and 34% QoQ and above Bloomberg consensus; gross margin improved both YoY and QoQ to 32.6%, exceeding Goldman Sachs' forecast and Bloomberg consensus. Goldman Sachs attributed this performance to a faster-than-expected product mix shift toward high-end products such as AI CCL. The operating expense ratio was in line with Goldman Sachs' forecast and better than Bloomberg consensus, driving net profit to Rmb2.0bn, up 147% YoY and 84% QoQ and 3% and 34% above Goldman Sachs' forecast and Bloomberg consensus, respectively. Regarding industry demand, Goldman Sachs raised its 2026-27 global AI CCL total addressable market forecasts by 20% and 18% in its global AI PCB/CCL market research. The original report stated that the value market size would reach "US$7nm / US$22bn / US$48bn" in 2027-28E; the years and units are retained as originally stated. The forecast increases were based on stronger end demand for AI CCL, capacity expansion by major suppliers, and product specification upgrades toward M9 and above. Goldman Sachs therefore views Shengyi Technology as a major beneficiary of growing AI CCL demand. Goldman Sachs forecasts a 33% net profit CAGR for Shengyi Technology over 2026-30 and identifies three main drivers. First, rising end demand will support higher AI CCL prices; second, the migration of rack-scale AI servers toward higher-speed specifications will increase the penetration of M9-and-above CCL; third, next-generation rack-scale AI servers are expected to enter mass production in 3Q26, driving growth in the company's AI CCL shipments. Simultaneous improvements in volume, price, and product mix form the core rationale behind the report's expectations for sustained profit growth and gross margin expansion. Incorporating the actual 2Q26 results, Goldman Sachs raised its 2026-28 revenue forecasts by 1%, 2%, and 5%, respectively, mainly reflecting a higher AI CCL contribution; it raised its net profit forecasts for the same period by 8%, 2%, and 6%, respectively, primarily due to higher revenue and gross margin. Goldman Sachs also increased its 2026-28 gross margin forecasts to reflect the product mix upgrade toward high-end AI CCL and rising AI CCL average selling prices. On the other hand, it also raised its 2026-28 operating expense ratio forecasts because the company needs to invest more in R&D to support its migration toward M9-and-above AI CCL. Regarding valuation, Goldman Sachs continues to use a near-term P/E methodology to determine its 12-month target price and maintains its 50.4x 2027 target P/E. This multiple is based on the relationship between comparable companies' P/E multiples and YoY earnings growth, combined with Shengyi Technology's 2027-28 YoY EPS growth. Following the earnings forecast increases, the 12-month target price rises from Rmb247 to Rmb249; Goldman Sachs maintains its Buy (Conviction List) rating because the company is expected to benefit from the global AI infrastructure expansion trend.

Analysis framework

Goldman Sachs first compares 2Q26 revenue, gross margin, operating expense ratio, and net profit against the prior-year period, previous quarter, its own forecasts, and Bloomberg consensus; it then assesses the industry opportunity based on global AI CCL demand, supplier capacity expansion, and upgrades toward M9-and-above specifications; next, it updates its 2026-30 earnings model using the three drivers of price, penetration, and shipment volume; finally, it determines the target P/E based on the relationship between comparable companies' P/E multiples and earnings growth and converts the revised earnings forecasts into a target price.

Methodology notes

• Industry/Sector Analysis FrameworkSupply-demand framework

  AI CCL supply-demand analysis

  The report combines end demand for AI infrastructure, capacity expansion by major suppliers, and upgrades to high-specification products to assess the direction of AI CCL market size, pricing, and Shengyi Technology's shipment volume.

• Industry/Sector Analysis FrameworkVolume-price decomposition

  Decomposition of shipment volume, price, and product mix

  Goldman Sachs separately examines AI CCL shipment growth, increases in average selling prices, and the rising share of high-end M9-and-above products to explain revenue growth and gross margin expansion and revise its earnings forecasts accordingly.

• Valuation MethodPE/PEG valuation

  Target P/E valuation based on the relationship between comparable companies' P/E multiples and earnings growth

  The report uses a 50.4x 2027 target P/E to calculate the 12-month target price; this multiple is derived from the relationship between comparable companies' P/E multiples and earnings growth and incorporates Shengyi Technology's 2027-28 EPS growth.

Asset mapping & comparison

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

• Shengyi Technology (600183.SH)

  Goldman Sachs believes the company is a key beneficiary of rising global end demand for AI CCL, product specification upgrades, and mass production of next-generation rack-scale AI servers.

  Strengths

  The high-end AI CCL product mix is upgrading faster than expected, 2Q26 gross margin and net profit both exceeded Goldman Sachs' forecasts, and the company has the capability to migrate toward M9-and-above products.

  Weaknesses

  Migration toward M9-and-above AI CCL requires increased R&D investment, prompting Goldman Sachs to raise its 2026-28 operating expense ratio forecasts.

  Comparison

  The target P/E is determined based on the relationship between comparable companies' P/E multiples and earnings growth; 2Q26 revenue, gross margin, and net profit all met or exceeded the market expectations cited in the report.

  Risks

  Lower-than-expected AI infrastructure investment or customer allocations, as well as changes in technology pathways, could weaken the demand, shipment, or product upgrade thesis.

Key data

• 2Q26 revenueRmb11.0bnUp 54% YoY and 34% QoQ, above Bloomberg consensus
• 2Q26 gross margin32.6%Improved both YoY and QoQ, above Goldman Sachs' forecast and Bloomberg consensus
• 2Q26 net profitRmb2.0bnUp 147% YoY and 84% QoQ, 3% above Goldman Sachs' forecast and 34% above Bloomberg consensus
• Global AI CCL market size forecast revision2026-27E raised by 20%/18%Supported by increased end demand, capacity expansion by major suppliers, and specification upgrades toward M9 and above
• Global AI CCL value market sizeUS$7nm / US$22bn / US$48bnThe original report stated that these correspond to 2027-28E; the figures, units, and year description are retained as originally stated
• 2026-30E net profit CAGR33%Driven by AI CCL price increases, higher penetration of high-specification products, and shipment growth
• 2026-28E revenue forecast revision+1% / +2% / +5%Mainly reflects a higher AI CCL contribution
• 2026-28E net profit forecast revision+8% / +2% / +6%Primarily due to higher revenue and gross margin forecasts
• Target P/E50.4x 2027E P/EMaintained unchanged and determined based on the relationship between comparable companies' P/E multiples and earnings growth
• 12-month target priceRmb249Previously Rmb247

Impact & implications

The report believes that the migration of AI servers toward higher-speed and higher-specification products will simultaneously increase the penetration of M9-and-above AI CCL, average selling prices, and Shengyi Technology's shipment volume, thereby supporting revenue growth and gross margin expansion. Higher earnings forecasts offset the pressure on the operating expense ratio from increased R&D investment and drove a modest target price increase.

Risks

• AI infrastructure investment falls below expectations.
• Relevant resource or order allocations fall below expectations.
• The direction of technological development changes.

What to watch

• Monitor whether next-generation rack-scale AI servers enter mass production as expected in 3Q26 and drive growth in Shengyi Technology's AI CCL shipments.
• Monitor end demand and pricing for AI CCL, as well as capacity expansion by major suppliers.
• Monitor the penetration growth of M9-and-above AI CCL and the progress of the product mix upgrade.
• Monitor changes in the operating expense ratio following increased R&D investment for migration toward high-specification products.