Shengyi Tech announced its 1H25 preliminary earnings. The company

projected 1H25 NP to surge by 50%-56% YoY, reaching RMB1.40bn- RMB1.45bn. 2Q NP alone is estimated to be RMB836mn-RMB886mn, implying 55%-64% YoY/48%-57% QoQ growth, and exceeding Bloomberg consensus of RMB611mn by 37%-45%. The strong results were driven by 1) volume growth of CCL products, 2) surging PCB sales (85%-97% YoY in 1H25) and 3) GPM increase from a favorable product mix. Reiterate BUY on Shengyi Tech as the company is one of the key beneficiaries in the global AI supply chain (report). TP is revised up to RMB41.1.

Surging PCB sales underscore AI-driven strength. The company’s PCB

subsidiary Shengyi Electronics (688183 CH, NR) also released prelim. 1H25 results, projecting revenue growth of 85%-97% YoY to RMB3.7bn- RMB3.9bn, and NP growth of 432%-471% YoY to RMB511-549mn. Shengyi Electronics has showed sequential growth in 2Q. Its latest quarterly sales are estimated to be RMB2.1bn-RMB2.3bn, showing 90%-111% YoY/31%- 46% QoQ growth (following 5% QoQ growth in 1Q). 2Q NP is guided to be RMB311mn-RMB349mn, with 346%-401% YoY and 56%-75% QoQ increases. We believe that such strong performance is supported by resilient AI-driven demand and further product mix enhancement, which together drove margin expansion and earnings acceleration.

Margin continues to improve, which may offset the rising copper cost

headwinds. Shengyi Tech’s mgmt. sees GPM increase in its CCL business, driven by optimization in product structure. In addition, NPM of Shengyi’s PCB segment continues to recover, with mid-point NPM rising to 15.1% in 2Q25 vs. 12.7%/6.4% in 1Q25/2Q24. Meanwhile, we have observed that rising copper price appears to be headwinds to its PCB segment. Copper price remains at its high level at above US$9.6k/tonne during the month. The material cost pressure may sustain in our view, primarily attributable to the tariffs and growing demand from AI/data centers, auto and etc. However, we think Shengyi Elec. will manage the impact, as it focuses on high value products and has strengthened its competitiveness in the mid- to high-end market.

Reiterate BUY with TP raised to RMB41.1 based on 30x 2025E P/E (vs.30.6x prev.), close to 1-SD above its 5-yr hist. forward P/E. We raise our revenue/NP growth forecasts to 39%/92% YoY in 2025 on higher volume sales and better GPM. We think the valuation is justified as the company is experiencing upcycle and robust growth (revenue/NP to grow). Key risks include: slower-than-expected capacity ramp-up, intensified competition, geopolitical uncertainties, etc.