Zhongfu Circuit1. Business OverviewThe company is engaged in the PCB business in niche areas, with its main products being high-power power supply PCBs. In terms of application fields, data center servers account for 50%, industrial photovoltaic energy storage for 20%, automotive for 20%, and consumer electronics for 10%.The company’s direct clients include leading power supply companies such as Delta, MPS, and TI, and through Delta, it reaches North American end customers like Google and Microsoft. The company’s products cover primary, secondary, and tertiary power supplies, with future growth mainly focused on secondary and tertiary power supplies.2. Financial SituationIn recent years, the company’s performance has been under pressure, with a significant decline in profits. The company’s factory in Thailand is still in a loss phase, dragging down the overall profit.
The company’s production capacity is in a ramp-up phase, and the gross margin is continuously declining. However, as shipments of high-value products such as tertiary power supplies increase, the gross margin is expected to recover.
The company’s net profit margin has also declined correspondingly, with increased R&D and sales expenses leading to a rise in the period expense ratio.
With the explosion of AI demand, the production capacity of the company’s Thailand factory is ramping up, and performance is expected to reverse, with sell-side analysts predicting a compound growth rate of over 30% for the company.
3. Market SpaceThe power supply market space has been introduced in previous articles, such as “New Leino – Military Power Supply Recovery, Data Center Tertiary Power Supply Brings New Opportunities.” The market space for primary power supplies is 40 billion, for secondary power supplies is 3 billion, and for tertiary power supplies is 30 billion. The cost of PCBs in server power supplies accounts for about 25%. Therefore, the market space for data center power supply PCBs is approximately less than 20 billion.The explosion of Google’s large models has driven new computing power demand, and Google’s ASIC is expected to bring new increments to power supply PCBs.4. Competitive LandscapePlayers in the PCB industry are mainly concentrated domestically, with a relatively poor landscape for primary and secondary power supply PCBs, facing many competitors such as Shenghong, Weiergao, Pengding, and Jingwang. The technical difficulty of tertiary power supplies is higher, with domestic players like Shennan Circuit and some overseas PCB manufacturers involved. Zhongfu has already made significant layouts in tertiary power supplies and is expected to capture a certain market share.5. ConclusionZhongfu is indeed part of the Google supply chain and has recently seen significant growth due to this catalyst, but it is unclear how much market share it can capture in the future. Assuming it captures 10% of the market share next year with a 15% net profit margin, it would add 300 million in profit, which is already well reflected in the company’s stock price.Currently, the new direction of AI collaboration is within the Google supply chain, and the operation of this stock is a significant test of market perception and trading ability; personally, I will focus on it.