Key takeaway

The company released its 2026 semi-annual earnings guidance, expecting net profit attributable to shareholders of the parent company of RMB640mn-RMB700mn in 1H26, up 300.62%-338.18% YoY; based on the midpoint, net profit attributable to shareholders of the parent company in 2Q26 is expected to reach RMB409mn, up 369.68% YoY and 57.12% QoQ, exceeding our expectations. DTECH is a global leader in PCB drill bits, with industry-leading capacity expansion pace and high-end product adaptation capabilities, and is expected to fully benefit from the surge in demand for AI PCB drill bits. The rapid growth indicated in its earnings guidance validates the company’s strong earnings delivery capability, and we are optimistic about its future rapid growth.

Event

The company released its 2026 semi-annual earnings guidance, expecting net profit attributable to shareholders of the parent company of RMB640mn-RMB700mn in 1H26, up 300.62%-338.18% YoY; net profit attributable to shareholders of the parent company excluding non-recurring gains and losses is expected to be RMB630mn-RMB690mn, up 326.19%-366.78% YoY.

Quick Take

Interim earnings guidance exceeded our expectations, with profitability continuing to improve

Based on the midpoint of the guidance, the company achieved net profit attributable to shareholders of the parent company of RMB670mn in 1H26, up 319.40% YoY. On a quarterly basis, based on the midpoint, net profit attributable to shareholders of the parent company in 2Q26 is expected to reach RMB409mn, up 369.68% YoY and 57.12% QoQ; both YoY and QoQ performance recorded rapid growth, exceeding our expectations. On the one hand, benefiting from growing demand for AI servers, PCB customers have maintained strong procurement demand for precision cutting tools and grinding and polishing materials. On the other hand, AI development is driving PCBupgrades toward higher layer counts and higher precision, leading to rapid growth in demand for high value-added products such as coated drill bits and high aspect ratio drill bits. The company has seized the industry upcycle by deepening technology iteration and customer collaboration, further increasing the penetration of high value-added products, continuously upgrading its product mix toward the high end, and further enhancing profitability. In addition, the company’s production ramp-up efficiency improved significantly, and economies of scale were gradually released, also driving rapid growth in 1H earnings.

Tight supply and demand for AI PCB drill bits, with a clear trend of rising volume and prices

The AI PCB drill bit industry is currently maintaining strong momentum, with demand exceeding supply. Driven by multiple factors, including higher drilling volume per board, increased drill bit consumption per hole, and shorter processing lifespan per drill bit, demand for drill bits used in AI servers is expected to achieve exponential growth. Meanwhile, high multilayer boards and ultra-micro hole applications are generating substantial demand for high aspect ratio drill bits, while requirements for machining precision and rod material grades are rising across the board, leading to significant product premium expansion. Overall, the trend of simultaneous volume and price growth for PCB drill bits is becoming increasingly clear. As the global leader in PCB drill bits, DTECH accounted for an estimated 29.2% share of global drill bit sales volume in 2025. According to the company's announcement, as of the end of 1Q26, the company's monthly drill bit production capacity had reached 130mn units; regarding self-manufactured equipment, the company has increased the drill bit equivalent production capacity of its original self-manufactured equipment from 5mn units per month to 10mn units per month through continuous optimization and upgrades, and proactive capacity expansion is expected to allow the company to fully benefit from the industry's strong growth momentum. In addition, the company's H shares were listed in Hong Kong in July 2026, and the funds raised will be used for global capacity expansion, R&D investment in frontier technology fields, and strategic acquisitions and investments, which is expected to further strengthen its market leadership in PCB drill bits and support its long-term development.

Investment recommendation:DTECH is the global leader in PCB drill bits, with industry-leading capacity

expansion pace and high-end product adaptation capabilities, and is expected to fully benefit from the surge in demand for AI PCB drill bits. The rapid growth indicated in its earnings guidance validates the company’s strong earnings delivery capability, and we are optimistic about its future rapid growth. We expect the company to achieve operating revenue of RMB4.533bn, RMB7.355bn, and RMB10.822bn in 2026-2028, representing YoY growth of 111.48%, 62.26%, and 47.13%, respectively; net profit attributable to shareholders of the parent company is expected to reach RMB1.301bn, RMB2.074bn, and RMB3.082bn, representing YoY growth of 200.09%, 59.36%, and 48.62%, respectively, corresponding to PE ratios of 108.51x, 68.09x, and 45.82x, respectively. We maintain a “Buy” rating.

Risks: ① AI server demand may fall short of expectations. If AI industry development is weaker than expected and cloud vendors reduce capital expenditure, the expansion pace of PCBs for high-computing-power servers may slow, leading to lower equipment utilization rates at downstream PCB manufacturers, which may reduce demand for the company's PCB drill bits; coupled with industry competition, product pricing may come under pressure, thereby adversely affecting the company's operating performance.

Progress in PCB premiumization falls short of expectations. If the development pace of high-end PCBs (high multilayer boards, advanced HDI boards, etc.) slows, or if the company's product R&D progress fails to meet downstream customers' demand for new processes, the company's market share expansion may be constrained, thereby affecting its profitability.