Victory Giant Technology (300476) Report Interpretation

Overview

This is a company update on Victory Giant following its 2Q26 results. BofA views the margin-related operating-income miss as a temporary platform-transition issue and expects a stronger earnings trajectory from 3Q26, supported by AI-server PCB demand, Nvidia exposure, longer order visibility and diversification, while reducing forecasts and valuation for near-term pressure and rising competition.

Core views

Victory Giant reported 2Q26 net income of CNY1.6bn, up 22% quarter on quarter and 28% year on year, beating BofA and consensus by 10% and 4%, respectively, because of higher fair-value gains. Revenue grew 11% quarter on quarter to CNY6.1bn, broadly reflecting the slower growth BofA had expected. The operational result was weaker: operating income was CNY1.5bn, down 1% quarter on quarter and up 8% year on year, 8% below BofA estimates and 16% below consensus. Gross margin fell 2.4 percentage points sequentially to 32.1%, while operating margin declined to 25.1%. Management attributed the weaker gross margin to labour added ahead of the new-platform ramp-up—headcount rose more than 30% quarter on quarter—and capacity-related depreciation. BofA therefore characterizes the near-term pressure as part of the platform transition rather than a change in the longer-term demand thesis. The firm expects margin improvement sequentially in the second half of 2026 as the Vera Rubin ramp begins from 3Q, with earnings momentum strengthening into 4Q26. Its quarterly model has gross margin recovering from 32.1% in 2Q26 to 32.9% in 3Q26E and 35.1% in 4Q26E, while operating profit rises from CNY1.5bn in 2Q26 to CNY2.2bn and CNY3.4bn, respectively. The longer-term case rests on improved order visibility, now extending into 2027, and a planned increase in capacity to CNY100bn by end-2027. Management remains confident it can maintain more than 50% market share. Beyond its key customer, the company is pursuing ASIC customers, mSAP optical-transceiver opportunities and domestic-server projects. BofA argues that fast capacity ramp-up remains an advantage as additional peers enter Nvidia's supply chain, and that the company's Nvidia position and diversification progress support its Buy view. The report models a 71% earnings CAGR over 2025-28E. BofA nevertheless lowers 2026E net income by 7% to CNY7.689bn and EPS to CNY8.05 to reflect near-term pressure. It trims 2027E and 2028E net income by 2.7% and 0.9% to CNY14.442bn and CNY22.510bn, respectively, primarily for competition. Its 2026E and 2027E earnings remain 10-11% below consensus, reflecting more conservative sales and margin assumptions. The price objective is reduced to CNY367 from CNY455 as the valuation multiple is cut to 25x 2027E P/E from 30x. BofA says 25x is near the company's 10-year average of 26x and balances a strong earnings cycle, longer visibility and a diversified customer base against a more competitive market. The stock was trading at 20x one-year-forward P/E, below its historical average.

Analysis framework

BofA reviews the 2Q26 income statement against its estimates and consensus, identifies the margin drivers behind the operating-income miss, and connects the expected platform ramp to quarterly margin and earnings recovery. It then revises 2026-28 estimates for transition pressure and competition, and sets the price objective by applying a 25x 2027E P/E multiple.

Methodology notes

• Valuation methodsP/E and PEG Valuation

  Forward price-to-earnings valuation

  BofA values Victory Giant at 25x 2027E P/E to derive its CNY367 price objective, comparing that multiple with the company's 10-year average of 26x and adjusting for both growth visibility and competition.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  AI-server and GPU-platform supply-chain demand transmission

  The report links GPU-platform upgrades, AI cloud capital expenditure, server-rack shipments and Nvidia supply-chain participation to demand, capacity utilization and margins for Victory Giant's PCB products.

Asset mapping & comparison

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

• Victory Giant Technology (300476.SZ)

  The report views the company as a beneficiary of AI-server PCB content growth through its Nvidia-platform position, with expected recovery after the platform transition.

  Strengths

  Industry-leading high-density PCB position, fast capacity ramp-up, more than 50% market-share confidence, Nvidia exposure, and expansion into ASIC, mSAP and domestic-server projects.

  Weaknesses

  2Q26 margins and operating income were pressured by pre-ramp labour additions and capacity depreciation.

  Comparison

  BofA applies 25x 2027E P/E, close to Victory Giant's 10-year average of 26x; its one-year-forward P/E of 20x was below its historical average.

  Risks

  Competition from peers entering Nvidia's supply chain could erode market share and valuation.

Key data

• 2Q26 revenueCNY6.110bnUp 10.7% QoQ and 29.5% YoY; 3.2% below BofA estimates and 5.8% below consensus.
• 2Q26 gross margin32.1%Down 2.4ppt QoQ and 6.7ppt YoY, reflecting early labour additions and depreciation.
• 2Q26 operating incomeCNY1.532bnDown 1.0% QoQ and up 8.3% YoY; 7.8% below BofA estimates and 16.4% below consensus.
• 2Q26 net incomeCNY1.568bnUp 21.7% QoQ and 28.3% YoY; 9.6% above BofA estimates and 4.4% above consensus.
• 2026E net incomeCNY7.689bnReduced 7.0% from the prior estimate; BofA is 10.7% below consensus.
• 2027E EPSCNY14.70Reduced 2.7% from the prior estimate and 10.2% below consensus.
• 2025-28E earnings CAGR71%BofA's modeled net-income growth trajectory.
• Price objectiveCNY367Cut from CNY455 and based on 25x 2027E P/E.

Impact & implications

BofA sees the 2Q operating miss as a temporary cost and depreciation burden ahead of a new-platform ramp, rather than a break in the AI-server PCB opportunity. The report maintains that longer order visibility, capacity expansion and customer diversification can support growth, but incorporates lower near-term earnings and a more competitive valuation framework.

Risks

• Global AI cloud capital expenditure grows more slowly than expected.
• GPU-platform upgrades occur more slowly than expected.
• Victory Giant loses significant market share to competitors.
• Supply-chain bottlenecks cap server-rack shipments.
• US-China disputes worsen.