The company's performance in the first quarter is impressive, driven by AI, leading to a rise in demand for high-end PCBs.

A certain company released its financial report for the first quarter of 2024, achieving a revenue of 2.58 billion yuan, a year-on-year rise of 38%. The net profit attributable to the parent company was 510 million yuan, a year-on-year rise of 157%. The net profit attributable to the parent company after deducting non-recurring gains and losses was 500 million yuan, a year-on-year rise of 172%. The gross profit margin reached 34%, and the net profit margin reached 20%.

The company's performance was outstanding, approaching the upper limit of expectations, with significant increases in both gross margin and net margin, indicating that the product structure may have improved:

• The company's actual performance in the first quarter was close to the highest forecast value, with the net profit after deductibles reaching the expected upper limit. Profitability has significantly improved, with the gross margin and net margin in the first quarter increasing by 8 and 9 percentage points year-on-year, respectively.

• Analysis indicates that the significant increase in the company's profit growth and profit margin reflects further optimization of the company's product structure against the backdrop of rising demand for high-end PCBs in AI servers and high-performance computing, with the revenue share of high-gross-margin products increasing. With the accelerated development of AIGC, the demand for high-end PCBs is expected to continue, and the company's product structure is expected to continue improving, maintaining high profitability.

From the perspective of enterprise communication services, the proportion of the company's AI computing power-related products is expected to continue to rise, offsetting the impact of weak demand in the traditional data center sector and driving performance recovery and improvement across the board. In 2023, the company's high-speed, high-rise PCBs with more than 18 layers performed the best, as their structural demand offset adverse factors such as the slowdown in the growth rate of traditional data center expenditures. It is anticipated that as the demand for AI computing power continues to grow, the company's high-layer PCBs will continue to benefit, increasing their proportion in the communications sector and driving a steady increase in the overall gross profit margin of this business.

From the perspective of the company's overall strategy, the revenue share of the emerging automotive plate is increasing, and the company will focus on improving production efficiency in the future. In the automotive plate business, the market for emerging products such as millimeter-wave radar and HDI-based advanced driver assistance systems continues to grow. In the face of price competition in the new energy vehicle market, the company stated that it will increase investment in improving production efficiency, automation and intelligence in production, and the introduction of new technology applications, continuously improving efficiency and quality while reducing costs. Analysis suggests that, with its comprehensive布局 in the automotive and enterprise communications fields, the company is expected to seize opportunities in computing power and the new energy market, achieving revenue expansion.

Investment advice: The stock and incremental space growth of AI-driven network infrastructure is rising, the arrival of the 800G switch era, and the accelerated deployment of AI servers. In the future, as the demand for AI computing power increases, the company is expected to achieve rapid growth. It is estimated that the company's revenue in 2024-2026 will be 11.5/13.8/16 billion yuan, with a net profit attributable to the parent company of 2.2/2.7/3.3 billion yuan, corresponding to PE ratios of 26/21/17 times, maintaining a "buy" rating.

Risk Warning: Increased market competition, exchange rate fluctuation risks, and overseas business development not meeting expectations.