Shennan Circuit (002916 CH): 3Q26 earnings: Continued margin expansion fueled by AI demand

SCC delivered strong 3Q26 results, with revenue/net profit rising 66.3%/94.4% YoY and 20.4%/34.0% QoQ to RMB10.48bn/RMB1.88bn. Net profit was near the upper end of the profit alert range, while NPM expanded to 17.9%, from 16.1% in 2Q26 and 15.3% in 3Q25. GPM also improved to 34.9%, vs. 32.4%/31.4% in 2Q26/3Q25, driven by robust AI infrastructure demand, a richer product mix, high capacity utilization and the continued ramp-up of the Guangzhou plant. We adjust up the revenue estimates by 9.3%/9.8% and GPM estimates by 0.5ppt/0.3ppt in FY26/27E on surging demand and more favorable product mix. Maintain BUY but lower our TP to RMB432 from RMB462, as we reduce our target multiple to 31x 2027E P/E from 37x, broadly in line with the peer average. In 9M26, revenue/net profit increased 53.8%/77.5% YoY to RMB25.77bn/RMB4.13bn, while GPM expanded 4.4ppt to 32.6%. We expect AI-related PCBs, BT substrates, FC-BGA and ABF products to remain the key growth drivers into 2027E, supported by capacity e