Maintain Buy: ASIC Customer Product Upgrades and High-End PCB Capacity Expansion Support Growth

Overview

Shengyi Electronics reported 1H26 results: revenue of CNY 5.78 billion, up 53.5% YoY; profit of CNY 1.11 billion, up 109.4% YoY, in line with the midpoint of the company's earnings guidance. Nomura maintains its Buy rating and CNY 159 target price.

Core views

The investment thesis centers on AI-related high-end PCB demand and customer product iterations. Nomura expects the key ASIC customer's Trainium3 to ramp up in 2H26, supporting continued improvement in the company's ASPs and margins. The company is concurrently advancing capacity construction in Dongcheng, Ji'an, Thailand, and Dongguan to capture market-share opportunities in high-layer-count boards, AI computing PCBs, and high-end HDI.

Analysis framework

The report assesses interim results, quarterly profitability and cash-flow performance, downstream PCB industry growth forecasts, and capacity-project progress; valuation uses a P/E multiple based on expected 2027 EPS.

Methodology notes

• Valuation methodsP/E multiple method

  The target price is based on 35x expected 2027 P/E

  Multiplying expected 2027 EPS of CNY 4.55 by a 35x P/E yields the CNY 159 target price; this multiple is in line with the company's historical median P/E.

• Industry analysisMarket size and structural growth

  Growth in high-end PCB subsegments exceeds overall industry growth

  Citing Prismark forecasts, global PCB output value is expected to grow at a 11.0% CAGR from 2025 to 2030, while multilayer boards with more than 18 layers and HDI are expected to grow at CAGRs of 30.3% and 13.1%, respectively.

Asset mapping & comparison

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

• Shengyi Electronics (688183.SS)

  Covered company

  Strengths

  Benefits from AI/ASIC-related PCB demand; strong growth in profit, gross margin, and operating cash flow; ongoing expansion of high-layer-count PCB, AI computing PCB, and HDI capacity.

  Weaknesses

  Free cash flow is negative due to high capital expenditures; gross margin declined sequentially in the second quarter.

  Comparison

  High-end PCB subsegments in which the company is positioned, such as multilayer boards with more than 18 layers, are expected to grow faster than the overall global PCB industry.

  Risks

  Downstream PCB demand may fall short of expectations, intensified industry competition may pressure margins, and raw-material cost pressure may exceed expectations.

Key data

• 1H26 revenueCNY 5.78 billion, up 53.5% YoY2Q26 revenue was CNY 3.37 billion, up 54.1% YoY and 39.9% QoQ.
• 1H26 profitCNY 1.11 billion, up 109.4% YoYIn line with the midpoint of the company's earnings guidance.
• Gross margin34.3%Up 3.9 percentage points YoY; 2Q26 gross margin was 33.7%, up 2.9 percentage points YoY but down 1.5 percentage points QoQ, which Nomura attributes mainly to rising raw-material prices.
• Operating cash flowCNY 917 million, up 112% YoYCapital expenditures rose 111% YoY to CNY 1.27 billion, resulting in negative free cash flow.
• Target price and valuationCNY 159; 35x expected 2027 P/EExpected 2027 EPS is CNY 4.55; the report states that the share price trades at 25.5x expected 2027 P/E.

Impact & implications

If the ramp-up of new ASIC customer products and demand for high-end PCBs materialize, the company's revenue mix is likely to continue shifting toward higher value-added products, lifting ASPs and margins. High capital expenditure weighs on free cash flow in the short term, but also reflects the company's proactive investment in expanding AI PCB capacity and gaining share.

Risks

• PCB demand from downstream sectors such as 5G servers and automotive electronics may be weaker than expected.
• Competition in the high-end PCB market may intensify, pressuring prices or margins.
• Raw-material price increases may exceed expectations.
• Construction progress, production ramp-up, or returns from large-scale capital expenditures may fall short of expectations.
• The volume ramp-up of the ASIC customer's new Trainium3 product may be slower than expected.

What to watch

• Shipments and revenue contribution from Trainium3 and other ASIC customer products in 2H26.
• Changes in ASPs, gross margins, and raw-material costs.
• Construction, trial production, and capacity ramp-up progress for the Dongcheng high-layer-count board project, Ji'an AI computing PCB project, Thailand facility, and Dongguan HDI project.
• Capital-expenditure intensity, free-cash-flow improvement, and utilization of newly added capacity.
• High-end PCB demand and the competitive landscape.