The company announced its first-quarter report for 2026: revenue reached RMB 7.986 billion, down 1.25% year-on-year; net profit attributable to shareholders was RMB 463 million, down 5.21% year-on-year; and adjusted net profit was RMB 326 million, down 31.85% year-on-year. Gross margin stood at 22.95%, an increase of 5.12 percentage points year-on-year, while net margin was 5.58%, a decrease of 0.43 percentage points. Considering recent developments, we provide the following analysis: Q1 2026 revenue saw a slight decline of 1.2%, but a significant improvement in gross margin was offset by higher expenses during the investment period, leading to a net margin that slightly surpassed market expectations. Demand for AI computing power is driving growth in the PCB sector, with notable progress in expanding high-end product categories such as AI servers and optical modules.
A capital expenditure plan of RMB 16.8 billion is being rapidly implemented, and capacity expansion at both the Huaian and Thailand bases is expected to drive an earnings inflection point. Q1 2026 results exceeded market expectations, with gross margin rising significantly, though investment-phase expenses weighed on net margin. Revenue for the quarter was RMB 7.986 billion, down 1.25% year-on-year; net profit attributable to shareholders was RMB 463 million, down 5.21% year-on-year; and adjusted net profit was RMB 326 million, down 31.85% year-on-year. The ratio of adjusted to reported net profit was 70.38%, indicating a relatively high proportion of non-recurring items. Gross margin reached 22.95%, up 5.12 percentage points year-on-year but down 0.43 percentage points quarter-on-quarter, marking the highest level in the same period over the past five quarters, reflecting a clear trend toward optimizing the product mix with higher value-added categories. Net margin was 5.58%, down 0.43 percentage points year-on-year, as the improvement in gross margin was not fully reflected in net profitability, primarily due to a substantial increase in expenses related to investment and capacity expansion: R&D expenses totaled RMB 705 million (an expense ratio of 8.82%, up 2.48 percentage points year-on-year), with continued investment in advanced processes such as AI PCBs, mSAP, and CoWoP; financial expenses were RMB 189 million (an expense ratio of 2.36%), compared to net interest income in the same period last year (an expense ratio of -1.42%), shifting from income to expense due to increased interest on new borrowings under the RMB 16.8 billion Capex plan and exchange losses from currency fluctuations; administrative expenses were RMB 380 million (an expense ratio of 4.76%, up 0.74 percentage points year-on-year). Weighted ROE was 1.35%, and net cash flow from operating activities was RMB 3.097 billion, significantly exceeding net profit, mainly due to substantial depreciation and amortization, indicating sound operational quality.
The planned capital expenditure of RMB 16.8 billion for 2026 is a record high, focusing on the construction of dual bases in Huaian and Thailand. Domestically, the Huaian park has sequentially planned two phases of high-end PCB projects totaling over RMB 8 billion and RMB 11 billion, with HDI, SLP, and HLC capacity expected to double by year-end. Internationally, the first plant in Thailand commenced trial production in 2025 and is undergoing certification by leading customers, while the second, third, and fifth plants, along with a drilling center, are accelerating construction. In the medium to long term, the company holds leading positions in several high-value segments: it is a global leader in mSAP PCBs for 1.6T optical modules (with an estimated market size of approximately RMB 25-30 billion by 2027), has a leading position in TSMC's CoWoP advanced packaging technology (optimistically expected to enter small-batch production in the second half of 2027), and possesses first-mover advantages in end-device products such as AI glasses. Currently, the company is in a challenging phase of "heavy asset investment—rising depreciation—capacity ramp-up," with both R&D and financial expense ratios significantly increased, weighing on short-term net margin. However, as high-end capacity in Huaian and Thailand gradually comes online in the second half of the year and into 2027, revenue scale expansion coupled with ongoing product mix optimization is expected to drive profitability into an upward trajectory.
Investment rating. Considering the company's recent positive developments in AI servers and 1.6T optical modules, our latest forecasts for 2026-2028 revenue are **/**/** billion, net profit attributable to shareholders is **/**/** billion, corresponding EPS is **/**/** yuan, and the PE ratio relative to the current stock price is **/**/** times, with a "****" rating. Risk warnings: intensifying geopolitical conflicts leading to potential tariff risks, demand falling short of expectations, increased competition, delays in expansion progress and capacity ramp-up, and slower-than-expected customer new product development.
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