Goldman Sachs reiterates Buy on Shennan Circuits, raises target price to Rmb450

Overview

This report is Goldman Sachs' company research and rating change report on Shennan Circuits. The report reiterates Buy and raises the 12-month target price from Rmb394 to Rmb450. The core logic is that the company has multiple growth drivers in AI servers, switches, optical module PCB, BT substrates, and ABF substrates, while ABF utilization and profitability are improving.

Core views

The report believes that Shennan Circuits' AI PCB business covers AI servers, general-purpose servers, switches, and optical module PCB, and is one of the key suppliers of optical module PCB. Goldman Sachs expects 2027E global 800G/1.6T optical module shipments of 4500万/4600万 units respectively, and 3.2T shipments rising to 1300万 units; a higher share of high-speed products will benefit the company. 800G will still be the main revenue contributor in 2026, while 1.6T optical module PCB is expected to contribute more meaningfully in 2027E. On ABF, the company has already mass-produced 22-layer products and validated 24-layer products, and rising demand from Chinese GPU and CPU customers is expected to accelerate revenue growth.

Analysis framework

The report uses a combination of upward earnings forecast revisions and valuation multiple re-rating. Goldman Sachs raised 2027E/2028E earnings forecasts by 2% each and revenue forecasts by about 1%, mainly reflecting higher demand for optical module PCB and ABF; at the same time, it raised 2027E/2028E gross margins by 0.1 percentage point each and lowered operating expense ratios by 0.1 percentage point each over the same period due to scale expansion and improved operating efficiency.

Methodology notes

• Valuation methods2027E P/E target multiple

  12-month target price based on 2027E EPS

  The target price is based on 2027E EPS and a target P/E of 36.9x, with the target P/E derived from the correlation between peers' 2027 trading P/Es and 2027-2028 year-on-year EPS growth and between 2027-2028 operating margins.

• Factor frameworkGS Factor Profile

  growth, financial returns, valuation multiple, and composite factor

  Goldman Sachs uses normalized rankings to compare stocks' growth, financial returns, and valuation multiples relative to the market and industry peers, and derives a composite percentile.

• M&A frameworkM&A Rank

  M&A probability score

  Goldman Sachs uses a 1-to-3 M&A ranking to assess the likelihood of a company becoming an acquisition target, with 1 representing high probability, 2 representing medium probability, and 3 representing low probability.

Asset mapping & comparison

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

• Shennan Circuits (002916.SZ)

  Core coverage name

  Strengths

  AI PCB covers servers, switches, and optical modules; 1.6T optical module PCB has already begun mass production; ABF utilization is improving; MLPCB expansion provides medium-term capacity support.

  Weaknesses

  Growth depends on the pace of AI PCB expansion, ramp-up of high-end optical module products, and ABF ramp-up progress.

  Comparison

  The valuation multiple is derived from the correlation between peers' 2027 P/E ratios, EPS growth, and operating margins, and the target P/E is raised to 36.9x.

  Risks

  AI PCB expansion slower than expected, stronger competition leading to ASP and margin pressure, customer concentration, and slower-than-expected growth in server/automotive PCB and IC substrates.

• AI PCB and optical module PCB value chain

  Main growth driver

  Strengths

  Ramp-up of 800G/1.6T high-speed transmission products lifts demand for high-speed PCB and improves product mix.

  Weaknesses

  Product iteration and customer qualification timing may affect revenue recognition.

  Comparison

  800G remains the main contributor in 2026, while contribution from 1.6T is expected to increase from 2027E.

  Risks

  Demand for high-speed optical modules falls short of expectations or competition compresses prices.

• ABF substrate business

  Source of profit improvement

  Strengths

  22-layer ABF is already in mass production, 24-layer products are in validation, and utilization at the Guangzhou base is improving.

  Weaknesses

  The business is still in a recovery and ramp-up phase, and earnings leverage depends on capacity utilization and customer demand.

  Comparison

  Rising demand from GPU and CPU customers provides support for ABF demand in the Chinese market.

  Risks

  Customer validation, demand release, or capacity utilization improvement slower than expected.

Key data

• RatingBuyGoldman Sachs reiterates Buy.
• 12-month target priceRmb450Raised from Rmb394.
• Reference disclosed priceRmb378.27The report disclosure page mentions the price of Shennan Circuits.
• Target P/E36.9xPreviously 33.0x, based on the 2027E P/E method.
• 2027E/2028E earnings forecast adjustment+2%/+2%Mainly from higher revenue and gross margin.
• MLPCB expansion planno more than Rmb46亿元The report expects revenue contribution to begin gradually from 2027E.
• 2027E global 800G/1.6T optical module shipment forecast4500万/4600万 unitsGoldman Sachs expects the ramp-up of high-speed optical modules to increase the company's exposure to high-speed PCB.
• 2027E 3.2T optical module shipment forecast1300万 units3.2T products are beginning to ramp.

Impact & implications

If the report's assumptions play out, Shennan Circuits' revenue mix may tilt further toward AI servers, switches, and high-speed optical module PCB, while improved ABF substrate utilization will also drive earnings recovery. The higher target multiple reflects the market's possible re-rating of the company's growth profile in the AI hardware chain and higher value per unit.

Risks

• AI PCB expansion slower than expected.
• Competition more intense than expected, which may lead to ASP declines and margin pressure.
• Customer concentration risk.
• Slower-than-expected growth in server, automotive PCB, and IC substrates.

What to watch

• Ramp-up progress of 1.6T optical module PCB from Q2 2026 onward.
• Changes in revenue mix between 800G and 1.6T optical module PCB.
• Ramp-up of 22-layer ABF mass production and progress in 24-layer ABF validation.
• ABF capacity utilization and improvement in profitability at the Guangzhou base.
• Construction pace and 2027E revenue contribution of the MLPCB expansion project of no more than Rmb46亿元.
• Changes in demand from AI servers, switches, GPU, and CPU customers.