Key takeaway

Redborad has established a solid business foundation with HDI boards. Leveraging its mSAP process expertise in IC substrates, it has expanded into high-speed optical transceiver PCBs. It is also benefiting from surging demand for BT substrates used in memory products, with optical communications and memory board business expected to accelerate growth. The company’s optical transceiver PCB products have successfully completed technical validation for 800G and 1.6T specifications and entered regular mass production, serving several leading companies in the industry. Its IC substrates for memory products have also entered mass production. The company is developing a business structure featuring steady growth in HDI, optical transceiver PCBs as a second growth engine, and additional upside from memory substrates.

Investment thesis

HDI segment: Solidifying the company's core business, with profitability continuing to improve. The company's any-layer interconnect HDI boards can have up to 26 layers, with a minimum line width/spacing of 25μm/25μm and impedance tolerance controlled within ±5%. Its technology is among the industry's best. Amid the rise of domestic smartphone brands, an improved customer order mix, economies of scale, and process enhancements have boosted the profitability of the HDI board business. 2023 - 2025, the company's HDI board sales revenue was RMB1,071mn / RMB1,518mn / RMB2,293mn, up YoY by + 3.17% /+ 41.74% /+ 51.04%, respectively. Gross margins were 8.35% / 15.97% / 26.39%, changing by - 6.22pcts/+7.62pcts/+10.42pcts YoY, respectively. In 2024, the company's HDI mainboards supplied for smartphones accounted for approximately 13% of shipments by the world's top 10 smartphone brands. It was a major supplier to eight of these brands, with products used by well-known brands including OPPO, vivo, Honor, Xiaomi, Samsung, Transsion, Huawei, and Motorola.

High-speed optical transceiver segment: Forward-looking mSAP deployment and capacity expansion open a second growth curve. As optical transceivers are upgraded from 800G to 1.6T and 3.2T, mSAP is gradually becoming an essential process for high-speed optical transceiver PCBs. However, the global supplydemand gap in mSAP processing capacity may become a key supply bottleneck in the high-speed optical transceiver industry chain. According to estimates, excluding shipments of 3.2T optical transceivers, mSAP capacity is expected to remain in short supply or tight balance from 2026 to 2028, with gap rates of - 15.7%/+1.8%/+3.8%, respectively. The company is an mSAP veteran. Its first mSAP production line for IC substrates began operations at the end of 2022. It has now successfully transferred its mSAP technology to optical transceivers, achieving a line width/spacing of 20μm/20μm. In addition, the company has resolved technical challenges in impedance uniformity control, bonding using special processes and tangency control for formed edges, laser ablation control for blind slots, and embedded copper block control in inner layers. The company's 800G and 1.6T products have completed validation and entered mass production. As the company's fundraising projects gradually commence production and the RMB5bn Ganzhou Redboard advanced mSAP high-end precision circuit board industrialization project is successfully completed and put into operation, its optical transceiver PCB business is expected to scale up rapidly. This will continue to strengthen and consolidate the company's core competitive advantages in high-end communications PCBs and open a second growth curve for its earnings.

Memory sector: The upcycle is accelerating, allowing BT substrates to unlock earnings upside. Rapid AI development is driving demand for expanded memory capacity, which in turn is boosting demand for BT substrates. According to TrendForce data and our estimates, the global DRAM and NAND quarterly market sizes grew 81% and 83.7% QoQ, respectively, in 1Q26, and the global output value of BT substrates is expected to exceed USD8.5bn in 2026. Rising memory demand, combined with raw material and capacity constraints, is tightening the supply-demand balance for memory BT substrates. The company made an early move into the IC substrate business and is poised to ramp up shipments of memory BT substrates. It is actively working with leading memory customers on certification and sample submissions. Since 2023, the company’s IC substrate business has entered the volume delivery stage, with profitability continuing to improve. From 2023 to 2025, the company's IC substrate revenue increased from RMB4mn to RMB76mn, while the net loss of Redchip Technology, its substrate manufacturing subsidiary, narrowed from RMB61mn to RMB46mn. Amid growing demand for BT substrates used in memory products, growth in the IC substrate business should help Redchip Technology turn profitable and unlock earnings upside.

Risk reminder: Risks that new business expansion falls short of expectations, capacity utilization risks after projects commence production, risks from fluctuations in the macroeconomy and downstream market demand, risks of intensifying market competition, and risks that technological innovation and product iteration fall short of expectations.