Shengyi Tech (SYT) reported strong 1H26 results, with revenue increasing 50% YoY to RMB19.0bn and net profit surging 130% YoY to RMB3.3bn. In 2Q26, revenue rose 54% YoY/34% QoQ to RMB10.9bn, slightly below Bloomberg consensus of RMB11.2bn. Net profit reached RMB2.13bn, up 147% YoY/84% QoQ and well above consensus of RMB1.7bn. GPM expanded to 32.6% from 28.1% in 1Q26, beating the 30.4% consensus estimate. The results reinforce our view that SYT remains a key beneficiary of the AI infrastructure upcycle. Reiterate BUY and raise our TP to RMB190, based on 40x 2027E P/E (previously RMB90 based on 35x 2026E P/E), approximately 2-SD above its 1-yr historical mean. We forecast revenue and earnings CAGRs of 47% and 68% over 2025-28E, implying a PEG of 0.58x. We lift revenue forecasts by 16%/39% and net profit forecasts by 15%/31% in FY26/27E, respectively, reflecting strong AI-CCL/PCB demand and higher margin assumptions driven by ASP increases and a richer high-end product mix.

Core segments: Broad-based AI-driven growth across CCL & PCB. CCL & prepreg sales volumes increased 14.2%/12.4% YoY, respectively in 1H26, while segment revenue rose 47.7% to RMB12.4bn, reflecting price adjustments and a richer AI product mix. Subsidiary Shengyi Electronics (688183 CH, NR) recorded revenue of RMB5.8bn, up 53.5% YoY, and net profit of RMB1.1bn, up 109% YoY. PCB shipments increased 23.1% YoY, with sales growth outpacing volume as high-layer-count and HDI products continued to ramp up. SYT’s strength across CCL and PCB gives it broad exposure to the AI infra. value chain. We forecast revenue growth of 62%/51% in FY26/27E driven by expansion of high-end CCL products.

Margins: ASP increases and mix upgrades drove another step-up. GPM expanded by 4.8ppt YoY to 30.7% in 1H26. CCL & prepreg GPM increased by 5.5ppt to 29.2%, while PCB GPM rose by 3.4ppt to 31.2%. Stronger pricing and premium AI products drove profit growth ahead of sales. SYT recorded RMB410mn of fair-value gains, mainly related to Novoray’s (688300 CH, NR) convertible bonds, while adj. net profit nevertheless increased 111% YoY. We forecast GPM of 30.6%/31.7% in FY26/27E.

Capacity expansion supports medium-term growth. Jiangxi Phase II reached full production in 1H26, adding annual capacity of 18mn sqm of CCL and 34mn meters of prepreg. Thailand plant is expected to begin trial production in 2H, while the two-phase Songshan Lake project is planned to add 48mn sqm of CCL and 100mn meters of prepreg. Capex reached RMB1.88bn in 1H26. Ramp-up execution and the availability of critical upstream materials remain key variables for earnings delivery beyond 2026.

Reiterate BUY with TP raised to RMB190, based on 40x FY27E P/E, approx. 2-SD above SYT’s one-year historical mean. We believe the multiple is justified by accelerating earnings, structural mix upgrades and exposure to tight AI-related CCL and PCB capacity. Key risks include slower capacity ramp-up, raw-material costs, intensifying competition, etc.