With the upsurge of the copper-clad laminate market, the performance of listed PCB companies has further diverged. In particular, the data communication sector and rising raw material costs generally dragged down the semi-annual report.
As a leading A-share PCB company, Shennan Circuits (002916) both declined in revenue and net profit in the first half of this year. However, in the second quarter, the company received a capital increase from the North, and the well-known private equity Danshuiquan became the top ten shareholders.
Profits fell for the first time since listing
The semi-annual report released by Shennan Circuits shows that in the first half of this year, operating income was 5.881 billion yuan, down 0.58% year-on-year. And the profit was 561 million yuan, down 22.57% year-on-year. The company’s half-year revenue and net profit both fell for the first time since listing.
During the reporting period, Shennan’s basic earnings per share were 1.14 yuan, and the net operating cash flow remained stable. But the overall gross profit margin dropped by about two percentage points to 25%.
According to reports, affected by the epidemic, the global electronics industry supply chain production and logistics continue to be under pressure; on the demand side, the demand for some products continues to grow, and the demand for the communications industry lags behind, resulting in an overall imbalance in the overall supply and demand pattern of the electronics industry. The company predicts that problems such as shortages of chips and electronic components and price increases may be difficult to solve in the short term.
In this regard, Shennan Circuit stated that on the one hand, the company has effectively improved operational efficiency and reduced production costs through measures such as optimizing product structure, promoting intelligent manufacturing, and improving quality control capabilities; on the other hand, the company continued to deepen its cooperation with suppliers. Cooperation. Cooperation. Strengthen supply chain management capabilities, appropriately increase key raw material reserves, and deal with raw material shortages and price increases.
The communication sector drags down performance
From the perspective of the revenue sector, the communications sector was dragged down by market demand adjustments, which dragged down the performance of Shennan Circuits. According to data from the Ministry of Industry and Information Technology, 190,000 5G base stations were newly added in the first half of this year, a decrease of about 24.9% from the 253,000 in the same period last year. This has led to the adjustment of demand in the communications market and the decline in capacity utilization. During the reporting period, the company’s printed circuit board business achieved an operating income of 3.707 billion yuan, a year-on-year decrease of 13.88%.
In this regard, on the one hand, the company fills up some orders in a timely manner, improves capacity utilization, and shares fixed costs; on the other hand, it actively promotes the development of other markets to reduce the impact of changes in downstream demand on the communications market. In contrast, in the data center field, with the gradual switch and upgrade of the new-generation server platform Whitley, the company’s related orders were gradually imported in the first half of this year, and data center business revenue continued to grow; in the automotive electronics field, the company has completed a number of strategic priorities Customer authentication and import. During the reporting period, the construction of the automotive electronics professional plant (Nantong Phase III project) progressed smoothly, and it is expected to be put into operation in the fourth quarter of this year.
A similar situation also appears in Shengyi Electronics. As a leading company in communication electronics PCB, Shengyi Electronics achieved a net profit of about 100 million yuan in the first half of the year, a year-on-year decrease of nearly 60%. The company said that due to the cyclical influence of the communications industry, the overall demand in the first half of this year was relatively sluggish compared to 2020. It is expected that demand in the communications industry will increase in the second half of the year. In addition, the procurement cost of major raw materials continued to rise, the Wanjiang branch plant ceased production, and the subsidiary Ji’an Shengyi began production one after another. The fixed cost is relatively high, and the scale effect has not yet appeared, which will have a certain impact on the company’s short-term profitability.
Jingwang Electronics also increased revenue but did not increase profits: the company achieved year-on-year growth of nearly 40% from January to June, but operating costs increased by nearly 49% year-on-year, resulting in a net profit attributable to shareholders of 462 million yuan, a year-on-year decrease of 3.23%. According to the company, the new crown vaccination rate has increased, the downstream demand has gradually recovered, and the global macroeconomic recovery has driven the development of the industry, while the fluctuation of the price of bulk raw materials and exchange rate fluctuations has brought pressure on profits. In contrast, automotive electronics accounted for an increase in the revenue contribution of Jingwang Electronics.
Overweight packaging substrate business
Compared with the delays caused by printed circuit boards, during the reporting period, Shennan Circuit’s packaging substrate business achieved substantial growth, with a year-on-year increase of about 45%, and achieved main business revenue of 1.095 billion yuan. According to reports, in the first half of this year, the global semiconductor industry’s prosperity rose to a high level, driving demand for packaging substrates. Among them, customers in the storage market developed smoothly, which effectively supported the ramp-up of the Wuxi substrate factory’s production capacity. If the subsequent market demand continues to remain high, it is expected to achieve production in a single month before the end of the year; FC-CSP product technical capabilities continue to improve, and customer introduction progress Smoothly, orders maintained relatively rapid growth, laying a solid foundation for follow-up development.
The company is also continuing to increase its investment in the packaging substrate business. On the evening of August 2nd, Shennan Circuit disclosed a fixed increase plan. The company plans to raise funds not exceeding 2.55 billion yuan to invest in high-end flip-chip IC substrate product manufacturing projects and supplement liquidity. Among them, the high-end flip-chip IC substrate project was constructed by the Wuxi subsidiary. According to reports, the company plans to invest in the construction of packaging substrate factories in Guangzhou and Wuxi respectively. Among them, the Guangzhou packaging substrate project plans to invest 6 billion yuan. The main products are organic packaging substrates such as FC-BGA, RF, and FC-CSP; the Wuxi packaging substrate project plans to invest 2.016 billion yuan, mainly for high-end flip-chip packaging substrates.
Since May of this year, the share price of Shennan Circuits has continued to rebound, with a cumulative increase of more than 57% as of August 2, but then continued to decline; however, the second quarter attracted foreign investment and well-known private equity to increase positions. Specifically, in the second quarter, Lu Stockcom increased its holdings of Shennan Circuit and became the second-largest shareholder. The Canadian Annuity Plan also entered the ninth-largest shareholder; in addition, the well-known private equity Danshuiquan passed the global growth phase 1 and balance 5 trusts. The top ten shareholders of listed companies have a total shareholding of about 0.59%, and the corresponding reference market value at the end of the period exceeds 300 million yuan.
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