Shenghong Technology1. Business OverviewShenghong is a core supplier of PCB for data centers, a global leader in AI PCB, and a key supplier of NVIDIA PCBs.
In the AI server field, high-end HDI is required for accelerator card module boards, while CPU motherboards and UBB can use high-layer PCBs.
2. Financial SituationFrom the company’s financial data, it is very impressive, with revenue growing rapidly and profits also showing an upward trend, achieving exponential growth in the past two years.
With the increase in shipments of AI PCBs, the company’s gross margin has reached over 35%. In the PCB industry, this level of gross margin is already very high.
On one hand, the company’s gross margin is increasing, while on the other hand, the company’s period expense rate is decreasing, so we can see a significant increase in the company’s net profit margin, which has reached over 20%.
Analysts predict a compound growth rate of over 50%, benefiting from the development of data centers.
3. Market SpaceResearch reports indicate that the industry compound growth rate for AI PCBs will be 20% over the next five years.As a leader, the company should grow faster than the industry. Taking NVIDIA’s GB series as an example, the price of GPU motherboards is around 3000 yuan. In addition to the motherboard (36 pieces), there are also intermediate boards (18 pieces), network card boards (72 pieces), switch boards (9 pieces), DPU boards (18 pieces), etc., with a single cabinet value of 200,000 yuan. The market space for 100,000 cabinets is 20 billion. The PCB value in the Rubin cabinets in the second half of next year is expected to be even higher, with a single cabinet value expected to reach 400,000 yuan.4. Competitive LandscapeAs the absolute leader in AI PCBs, Shenghong accounts for over 75% of NVIDIA’s high-end HDI, with the rest provided by Taiwanese company Xinxing Electronics. Pengding and Shennan are attempting to enter the market, while Huadian holds a certain share in the AI high-layer field. As the number of chips increases, the cabinet architecture is expected to adopt orthogonal backplanes, further increasing the PCB value.The overall AI PCB market is still in a stage of supply not meeting demand. Due to Shenghong’s insufficient production capacity, it is likely that new players will enter the market, but in terms of market structure, Shenghong can still maintain its leading position due to its advantages in equipment reserves, customer relationships, and technological accumulation.5. ConclusionI have been paying attention to Shenghong for a long time and have visited their company and factory in Huizhou. However, to be honest, I have not invested in this company because the market’s trading expectations are much more optimistic than what I see, and I always feel that I am not keeping up with the market, so I did not invest.The supply-demand imbalance of Shenghong is real, and the company is planning new production capacity, which will be released in the next year or two. The market expects a profit of 12 billion next year and over 20 billion the year after, but I cannot see this path clearly, so I will likely just keep watching.