Shennan Circuits (002916.SZ): 3Q26: solid margin expansion driven by AI PCB

Shennan Circuits (SCC) reported 9M26 results on 22 October after market close and held an earnings call. Revenue/earnings grew 53.8%/77.5% y-y in 9M26, translating into 3Q26 revenue/earnings growth of 66.3%/94.4% y-y (up 20.4%/34.0% q-q). 9M26 earnings of CNY4.13bn was at the high end of the profit alert of CNY4.05-4.15bn. 9M26 GPM increased 4.4pp y-y to 32.6% and 3Q26 GPM improved 3.5pp y-y to 34.9% (+2.4pp q-q), driven by more favorable AI PCB product mix and continued IC substrate ramp-up. OCF declined 15.4% y-y in 9M26, likely due to raw material price hikes raising procurement. Capex rose 265% y-y to CNY2.9bn, and FY26F capex is expected to exceed CNY10bn; the private placement cap was cut to CNY4.37bn and approved on 14 October. AI PCB revenue contribution should reach ~60% in 3Q26. BT-substrate should gain share on tight supply, while ABF-substrate is on track to turn profitable in 4Q26F. Maintain Buy and TP of CNY518, based on 43x FY27F EPS of CNY12.05;