Other components: the price of raw materials has stabilized, and the downstream market is booming. The profitability of PCB industry is expected to rise

The price fluctuation of raw materials has stabilized, and the profitability of the PCB industry is expected to improve: the material cost of PCB accounts for up to 60%, of which copper clad laminate (CCL) accounts for the highest proportion, accounting for about 30% of the cost of PCB. The three raw materials of copper clad laminate, copper foil, electronic glass fiber cloth and epoxy resin account for 42.1%, 19.1% and 26.1% of the cost respectively, and the total cost accounts for nearly 90%. The copper price has been rising all the way since April 2020, reaching the highest point of 10725 US dollars / ton in May 2021, and then entering the stage of fluctuation and decline. At present, it is between 9000-10000 US dollars / ton. It is expected that the price will be further loosened in 2022. In 2021, the price of epoxy resin fluctuated and rose sharply. At present, it is about 27000 yuan / ton. With the introduction of environmental protection equipment and the improvement of foreign climate, it is expected that the epoxy resin will fluctuate and stabilize gradually in the future. Electronic yarn accounts for 90% of the cost of electronic glass fiber cloth. According to Zhuo Chuang information, from October 2021, the price of glass fiber yarn gradually began to fall, and the overall quotation has been less than 17000 yuan / ton. At present, the market price of 7628 electronic cloth in the downstream of the market has dropped to about 6 yuan / meter. With the gradual fluctuation and stabilization of the prices of the three major raw materials, the increase in the price of copper clad laminate slows down, and the profitability of the PCB industry is expected to improve.

New energy vehicles, servers, IC carrier boards, miniled and other city scenes are looking up, driving the growth of PCB demand: according to the data of China Automobile Association, the sales volume of Shanxi Guoxin Energy Corporation Limited(600617) vehicles in mid December 2021 reached 531000, with a year-on-year increase of 114.11% and a month on month increase of 18%. China Automobile Association predicts that the sales volume will exceed 5 million in 2022. Compared with traditional fuel vehicles, the three core systems of battery, motor and electronic control of new energy vehicles have increased the demand for PCB. According to prismask's prediction, the global output value of vehicle PCB is expected to reach 8.8 billion US dollars in 2024. With the maturity of 5g, cloud computing, AI and other new technologies, the construction of data center is accelerated, and the server shipment continues to rise. According to IDC data, the global server shipment will reach 12.2 million units in 2020, with a shipment amount of US $91.01 billion, which will also maintain a growth trend in the future. Server demand drives the PCB incremental market. According to prismark's prediction, the global server PCB output value will increase from US $5.692 billion in 2020 to US $6.765 billion in 2024. In addition, IC carrier board is expected to become a golden track in the PCB field, with huge domestic substitution space. According to prismark's prediction, the scale of the global IC carrier board industry will reach US $12 billion in 2021 and US $16-17 billion in 2025. Assuming that the market penetration of Chinese manufacturers' IC carrier board increases from 4% to 6%, the scale of China's IC carrier board industry is expected to reach US $7 billion in 2025. In addition, PCB scheme is the mainstream scheme of miniled substrate. According to the prediction of cinnorresearch, the shipment volume of miniled backlight module will reach about 170 million pieces in 2025, and the market scale of PCB for mini LED is expected to reach 3.4 billion US dollars.

The trend of PCB industry in China is not decreasing, and Chinese enterprises are actively expanding their production: according to Prismark data, the proportion of PCB output value in China's Chinese mainland has accounted for the total value of PCB industry in the world from 31.1% in 2008 to 53.8% in 2020, ranking the first in the world. In the future, the transfer of PCB industry to China will continue. Prismark predicts that the output value of China's PCB industry will reach US $46.04 billion in 2025, accounting for more than half of the global output value. In order to meet the escalating demand of the downstream market and comply with the development trend of the industry, Chinese enterprises actively expand production: on February 9, 2022, Shennan Circuits Co.Ltd(002916) disclosed that the company issued 23694500 shares to 19 specific objects at the issuance price of 107.62 yuan / share, raising a total of 2.55 billion yuan, which is mainly used for the manufacturing project of high-end flip chip IC carrier products, so as to enhance the company's core competitiveness Improve revenue level and profitability; On February 8, 2022, Shenzhen Fastprint Circuit Tech Co.Ltd(002436) the board of directors deliberated and approved the proposal on investing in the construction of Guangzhou FCBGA packaging substrate production and R & D base project, which will invest about 6 billion yuan to build an FCBGA packaging substrate intelligent chemical plant with a monthly capacity of 20 million pieces in two phases. After the investment project is completed, it is expected to become a new performance growth point of the company.

Investment suggestions: it is suggested to pay attention to Shennan Circuits Co.Ltd(002916) , Wus Printed Circuit (Kunshan) Co.Ltd(002463) , Shenzhen Kinwong Electronic Co.Ltd(603228) , Victory Giant Technology (Huizhou)Co.Ltd(300476) , Shenzhen Fastprint Circuit Tech Co.Ltd(002436) , Suntak Technology Co.Ltd(002815) , Guangdong Ellington Electronics Technology Co.Ltd(603328) , Olympic Circuit Technology Co.Ltd(603920)

Risk warning: technology R & D risk; The relevant expansion projects are less than the expected risks; Tight supply of raw materials and price fluctuation risk.

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