The recovery of consumer electronics has driven the rebound of the PCB industry.

On the evening of August 13th, the leading PCB company, Peng Ding Holdings (002938.SZ), disclosed its financial report for the first half of 2024, achieving a revenue of 13.126 billion yuan, a year-on-year increase of 13.79%, and a net profit of 784 million yuan, a year-on-year decrease of 3.40%.

According to different downstream application fields, Peng Ding Holdings' PCB products can be divided into communication boards, consumer electronics and computer boards, automotive/server boards, and others. Among them, the revenue from the first two products accounts for more than 90% of the company's total revenue, and the cycles of related downstream industries have a significant impact on the company's performance.

In 2023, affected by the downward trend of industry prosperity, Peng Ding Holdings faced significant pressure in operations, with both revenue and net profit declining.

In the first half of this year, Peng Ding Holdings stated that, thanks to the recovery of the downstream consumer electronics industry and the arrival of a new wave of technological revolutions represented by AI, the company seized the development opportunities of the industry in a timely manner and achieved steady growth in operating income.

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However, it is worth noting that although Peng Ding Holdings' revenue has increased, the net profit has not yet stopped falling. In the stage where the industry as a whole is steadily recovering, Peng Ding Holdings needs to address issues such as the rise in raw material and energy prices, and exchange rate fluctuations, in order to obtain more profits.

On August 14th, Peng Ding Holdings' stock price plummeted at the opening, with a drop exceeding 5%. As of the closing, the stock was quoted at 33.9 yuan, down 3.86%, with a transaction volume of 1.115 billion yuan and a turnover rate of 1.42%.

AI brings innovative driving force

Entering 2024, the consumer electronics industry began to show a recovery trend. According to the latest forecast by IDC, the global smartphone shipment volume in 2024 will reach 1.21 billion units, a 4% increase from 1.16 billion units in 2023, and it is expected that by 2028, the global smartphone shipment volume will reach 1.3 billion units, with a compound annual growth rate of 2.3%.

At the same time, IDC data shows that after experiencing a decline for eight consecutive quarters, the consumer electronics market represented by PCs has finally warmed up again, achieving growth for two consecutive quarters. In the second quarter, the global PC shipment volume reached 64.9 million units, a year-on-year increase of 3%, and the market has gradually emerged from the trough."In 2024, the recovery of consumer electronics has led to a resurgence in the PCB industry," Peng Ding Holdings revealed, adding that this has driven an improvement in the company's performance, especially with revenue starting to stop falling and rise, with sales revenue in the first half of the year increasing by 13.79% compared to the same period last year.

Furthermore, it is worth noting that "the AI wave has brought an unprecedented driving force to the innovation of the electronics industry and has also brought new momentum to the recovery of the PCB industry," Peng Ding Holdings stated in its semi-annual report.

Reporters learned that since entering 2024, on the one hand, the market for PCB products led by AI servers has grown rapidly. On the other hand, major brand manufacturers have successively launched products such as PCs and mobile phones with AI capabilities.

Against this backdrop, PCB products will upgrade to high-quality, low-loss, high-heat dissipation, and fine-line high-end products. Peng Ding Holdings revealed that the company has made advance technical arrangements, and in response to the capacity demand for high-end HDI and SLP products brought by AI-related products, the company is accelerating the expansion project of high-end HDI and SLP printed circuit boards in Huai'an's third park.

So far, the first phase of the project has been put into operation, and the second phase is under accelerated construction. It is expected that after the completion of the project, it will further enhance the company's market share in the field of high-end HDI and SLP products.

In addition, in terms of AI servers, Peng Ding Holdings revealed that the company, on the one hand, promotes cooperation between Huai'an Park and domestic and foreign server manufacturers, with several new customers successively entering the certification, testing, and sample stages. On the other hand, the company aims to benchmark the highest-level server products and accelerates the construction process of the Thai Park.

Looking at the specific product performance, in the first half of this year, Peng Ding Holdings' PCB sales in the automotive and server and other fields have grown rapidly.

Data shows that in the first half of the year, Peng Ding Holdings' revenue from communication boards was 8.73 billion yuan, a year-on-year increase of 3.68%; revenue from consumer electronics and computer boards was 3.931 billion yuan, a year-on-year increase of 36.57%; the company's automotive and server boards achieved revenue of 430 million yuan, a year-on-year increase of 94.31%; other products achieved revenue of 35.4582 million yuan, a year-on-year increase of 127.96%.

Revenue increases but profit does not

It is worth noting that although Peng Ding Holdings' revenue has resumed growth, net profit is still declining.Data indicates that in the first half of this year, Peng Ding Holdings increased its revenue but not its profits, with a net profit of 784 million yuan, a year-on-year decrease of 3.40%.

Looking at the gross margin, the company's level was basically the same as the same period last year, with a slight decrease. In the first half of this year, the company's overall gross margin was 17.97%, a decrease of 0.34 percentage points from the same period last year.

Among them, looking at the products, the gross margin for communication boards decreased by 1.84 percentage points, while the gross margin for consumer electronics and computer boards increased by 2.66 percentage points. Looking at the regions, the gross margins in the United States and Greater China both decreased, by 0.27 percentage points and 1.53 percentage points, respectively.

The company revealed that on the one hand, global energy prices and commodity prices are volatile, and the company faces certain risks brought by the rise in raw material and energy prices.

On the other hand, the company's main customers and suppliers are foreign enterprises, and the company's export products and imported raw materials mainly use the US dollar for settlement. At present, affected by multiple factors, there is a large uncertainty in the foreign exchange market, so the company still faces the risk of exchange rate fluctuations.

Reflecting on the cash flow, in the first half of this year, the net cash flow from operating activities of Peng Ding Holdings also declined. The data shows that in the first half of the year, the net cash flow from operating activities of the company was 2.79 billion yuan, a year-on-year decrease of 37.48%, mainly due to the increase in cash outflows paid to employees.

At the same time, in the first half of the year, the net increase in cash and cash equivalents of the company was negative, at -515 million yuan, a year-on-year decrease of 914.62%, mainly due to the decrease in the net cash flow from operating activities and the net cash flow from investment activities.

As of June 30, the company's monetary funds were 10.392 billion yuan, the asset-liability ratio was 26.83%, the company's accounts receivable turnover days were 72 days, and the inventory turnover days were 57 days.

"Industry recovery is not something that can be achieved overnight, and the overall development of the industry is in a stage of steady recovery," said Peng Ding Holdings. Looking forward to the second half of the year, whether Peng Ding Holdings can achieve a stop in the decline of net profit and a rebound is still in question.

Peng Ding Holdings stated that the company still faces the risks of increased global macroeconomic fluctuations and the recovery of the industry not meeting expectations. The uncertainty of the global economy brings challenges to the recovery of the development of the downstream electronic industry, thereby affecting the PCB industry.