Recently, the AI industry has been very lively, and foreign AI giants have continued to amplify their moves, among which the most popular is the Wensheng ** model Sora, which has been born out of nowhere.
As early as last year, AI companies such as Pika and Runway set off a round of AI boom, and SORA took AI production a big step forward, and the expected capabilities of large models were gradually verified. This has also directly led to multimodal AI concept stocks such as Huichang Communications, Insai Group, Wondershare Technology, Kunlun Wanwei, Chinese**, Danghong Technology, Gravity Media, Suzhou Keda, Neta Software, and Hanwang Technology.
However, at the same time, the flaws in the generated products also indicate that training still needs to continue, and the deployment needs of AI computing infrastructure are still expanding and upgrading, which is also increasing the requirements for AI chip manufacturers.
In the track of AI chips, you must follow the boss closely to have meat to eat.
So, who is the leader?
On a global scale, Nvidia is the boss. In our country, independent and controllable is to look at Huawei.
Nvidia is the representative of artificial intelligence in the US stocks, and its stock price has recently soared to more than $700, with a market capitalization of up to 1$8 trillion (equivalent to 5 times the market value of the entire semiconductor sector of A-shares).
Zhongji Innolight, Tianfu Communication, and Hudian are the strongest mapping of A-shares to Nvidia's industrial chain, and they will also benefit deeply in the future.
Among them, there is a core leader that supplies Nvidia and Huawei at the same timeShanghai Electric Co., Ltd
Let's first take a look at the specific business done by Shanghai Electric Co., Ltd.
Founded in 1992, Hudian Co., Ltd. is the world's leading high-end PCB leader, and the company focuses on the two major boom tracks of data communication board and automobile board. In the first half of 2023, the company's enterprise communication board revenue accounted for 5796%, automotive steel accounted for 2928%, accounting for 8724%。
Backed by the two big trees of Nvidia and Huawei, the performance of Shanghai Electric Co., Ltd. will naturally not be bad.
In recent years, the overall revenue and net profit of Shanghai Electric Co., Ltd. have grown steadily. In the first three quarters of 2023, Shanghai Electric Co., Ltd. achieved operating income of 608.2 billion yuan, a year-on-year increase of 553%；The net profit attributable to the parent company was 95.3 billion yuan, a year-on-year increase of 341%。
From 2018 to 2019, the gross profit margin of Shanghai Electric Co., Ltd. increased from 234% increase by 61 percentage point to 295%, mainly due to the optimization of product structure and the improvement of operational efficiency. In the following years, the company's gross profit margin stabilized at about 30%, and the net profit margin stabilized at about 15%.
According to the performance forecast, benefiting from the rapid development of AI and high-speed computing servers, the demand for PCB has increased significantly, and Shanghai Electric Co., Ltd. is expected to increase its revenue by 7% year-on-year in 20232%, and the net profit attributable to the parent increased by 11 year-on-year1%。
In all fairness, in the context of last year, this report card is very rare, especially for a manufacturing company like Shanghai Electric Co., Ltd. In the future, with the continuous optimization of product structure, the profit level of Shanghai Electric Co., Ltd. is expected to continue to grow.
So, what are the highlights of Shanghai Electric Co., Ltd.?
First, it attaches great importance to research and development, and has excellent technology
In recent years, the R&D expenses and rates of Shanghai Electric Co., Ltd. have increased simultaneously, and in the first three quarters of 2023, the company's R&D expenses will be 38.1 billion yuan, and the R&D expense ratio increased to 626%。
At present, 800G switch PCB manufacturers are very scarce, and there are only a handful in the world. The 800G switch products of Shanghai Electric Co., Ltd. have passed the sample certification and have begun to be delivered in batches.
Moreover, Shanghai Electric Co., Ltd. is also continuing to deploy cutting-edge technologies, and has large-scale mass production capacity for products in the fields of new platform servers, high-end data center switches and data center acceleration modules.
Second, strong profitability
In the first half of 2023, despite weak downstream demand and intensified competition in the industry, Shanghai Electric Co., Ltd. was still able to achieve a gross profit margin of 296% ranks first in the industry, far exceeding comparable companies in the same industry such as Xingsen Technology, Shenghong Technology, Kinwong Electronics, Aoshikang, Suntak Technology, and Shennan Circuit.
This is mainly because Shanghai Electric Co., Ltd. has been taking the high-end PCB route, and does not need to reduce prices like other companies.
Moreover, Shanghai Electric Co., Ltd. not only ranks among the best in the industry in terms of gross profit margin and net profit margin, but also is the only company with an ROE greater than 15% for five consecutive years, which shows its excellent profitability.
So, what are the growth points of Shanghai Electric Co., Ltd. in the future?
First, driven by AI demand, the industry is growing rapidly
Under the trend of AI and platform upgrades, servers and switches, two important hardware devices for high-speed communication, will open up new growth space for PCB boards. It is estimated that the server PCB market space will reach $13.5 billion in 2027, which is still 65% larger than the market size of $8.2 billion in 2023.
In fact, Shanghai Electric Co., Ltd. not only benefits from the development of AI, the company, as the leading provider of data communication board, its technical capabilities are in the first echelon in the world, and the revenue in the field of data communication accounts for nearly 60%, in addition to the AI field, the company also benefits from a new round of construction cycle of the overall data center.
Second, the automotive steel business
At present, the electrification of automobiles is accelerating, and the increase in the value of single vehicles and the increase in the penetration rate of new energy vehicles will drive the growth of the automotive PCB market. At the same time, ADAS and intelligent cockpits continue to evolve, and automotive PCBs will also benefit from the continuous demand brought by intelligence. Shanghai Electric Co., Ltd. has a first-mover advantage in the field of automotive PCB in advance.
Shanghai Electric Co., Ltd. invested in the layout of Shengweice P2Pack technology in technology; In terms of production capacity, the Shanghai Microelectronics and Huangshi plants continue to carry out capital expenditures, and the construction of the Thailand plant is also accelerating, which is expected to achieve rapid growth due to the electrification and intelligence of vehicles, and is expected to achieve mass production in the fourth quarter of 2024.
Third, backed by Nvidia and Huawei
Hudian Co., Ltd. is the first core supplier of NVIDIA server PCB, and a computing power part number is passing the NVIDIA certification. Moreover, the company is also the largest supplier of Huawei switch server PCB manufacturers.
1.Nvidia
Nvidia recently released the AI chip H200, and next year, Nvidia will also release the B100 based on the Blackwell architecture. Computing power servers continue to be iteratively upgraded, AI servers have higher requirements for chip performance and transmission rate, and the overall PCB value is expected to continue to increase.
Moreover, Nvidia's revenue for the second quarter of fiscal 2024 was 135$100 million, beating the 110 percent expected for the first quarterUS$0.0 billion, up 101% year-on-year and 88% quarter-on-quarter. The high increase in NVIDIA's performance will also provide a reliable guarantee for the subsequent growth of Shanghai Electric Co., Ltd.
2.Huawei
In 2023, the core of Huawei's return is a breakthrough in chip supply, whether it is Ascend AI chips, Kunpeng, Kirin and other chips, all of which effectively meet the high-end computing power needs of domestic partners and customers in related application fields.
Huawei's Ascend server is one of the few AI chips in China that can benchmark against the NVIDIA A100, ranking firmly in the leading position of domestic computing chips. The increase in computing power will increase the performance requirements of PCB boards such as transmission speed, material loss, and heat dissipation, which will increase the specifications and layers of PCB boards, resulting in a significant increase in the unit price of PCBs.
As a representative force in China's science and technology industry, Huawei's various businesses have been advancing in tandem throughout the year. Shanghai Electric Co., Ltd. is the largest supplier of Huawei switch server PCB manufacturers, and is expected to fully benefit from the wave of Huawei's rise and enjoy the dividends of Huawei's rise.
Finally, according to the 2023 annual report, a total of 276 institutions rushed to raise funds. With the development of the AI industry in the future, the proportion of high value-added products such as AI servers and high-speed switches will continue to increase, and it is expected to fully benefit from the rapid growth of industry development opportunities.
Follow Feijing Investment Research (ID: feijingtouyan) and get the most valuable "Growth 20: 20 Companies with the Most Growth Potential in 2024" investment report now!
**: Flying Whale Investment Research