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2 Jul, 2025 (Wednesday)

            
KB LAMINATES(1888)
Analysis¡G
As the electronics industry emerges from a cyclical trough and enters a new growth phase, Kingboard Laminates (1888) reported a significant recovery in its 2024 performance. Revenue increased by 11% year-on-year to HK$18.541 billion. Despite a HK$82.9 million credit impairment provision for bond investments, basic net profit attributable to shareholders surged 36% to HK$1.349 billion. In the laminates business, demand from traditional consumer electronics markets gradually recovered, with particularly strong growth in air conditioning and optoelectronic panels. The rapid development of the AI industry, along with ongoing advancements in automotive electronics and intelligence, further boosted the demand for laminates. The laminates market is shifting toward small-batch, diversified production. The Group's laminates division actively developed new products to meet varied customer needs in performance and pricing, while exploring new market segments. Product portfolio optimization progressed well, with sales of high-end, high-value-added products steadily increasing. The laminates division's revenue rose 11% to HK$18.345 billion. Additionally, significant copper price increases were offset by orderly price adjustments in laminates, which not only mitigated cost pressures but also improved the division's gross margin. By enhancing production efficiency, reducing energy consumption through technological improvements, and cutting labor costs via increased automation, EBITDA rose 26% to HK$3.023 billion.The Group's financial and liquidity position remained robust. As of December 31, 2024, net current assets were approximately HK$8.036 billion, with a current ratio (current assets divided by current liabilities) of 2.39. The net debt ratio (bank borrowings minus cash and bank balances divided by total capital) dropped significantly to 9% from 16% the previous year. Entering 2025, strong electronics market demand drove significant shipment growth in the first two months compared to the prior year, with prices for laminates and its matrerials such as fibreglass fabric and fibreglass yarn all rising. The rise of AI technology has spurred growth in cloud data centers, robotics, autonomous driving, and smart wearables, while high-speed network upgrades continue to stimulate demand for electronic products. Robust performance from downstream printed circuit board (PCB) customers will further drive laminates demand growth. Leveraging vertical integration and economies of scale, the Group's competitive pricing, industry-leading gross margins, and resilience are expected to sustain revenue and profit growth.The Group has heavily invested in its lamibate R&D center, successfully developing high-frequency, high-speed products for AI server GPU motherboards, as well as ultra-thin VLP copper foil for AI server HVLP3 and IC packaging substrates. Data centers and cloud computing have significantly increased demand for thick copper foil. The Group's latest 1,500-ton monthly copper foil production capacity in Lianzhou, Guangdong, will be fully utilized in 2025, greatly enhancing cost efficiency. Meanwhile, low-dielectric fibreglass yarn, critical for AI components, is in short supply. The Group's 500-ton annual low-dielectric fibreglass yarn project in Qingyuan, Guangdong, is set to commence production in the second half of this year to meet market demand. In 2024, the Group expanded its laminate production capacity in Thailand to 400,000 sheets per month, reaching 1 million sheets by year-end. It plans to further increase capacity in Thailand by two phases of 400,000 sheets each, reaching a total of 1.8 million sheets per month to support overseas customers, including the growing overseas operations of Kingboard Group's PCB companies.(I do not hold the above mentioned stock)
Strategy¡G
Buy-in Price: $9.35, Target Price: $11.00, Cut Loss Price: $8.90


®õ®æÂåÃÄ(3347)
Analysis¡G
In 2025Q1, the company's operating revenue was 1.56 billion yuan (RMB, the same below) with a year-on-year decrease of 5.79%; net profit attributable to the parent company was 165 million yuan with a year-on-year decrease of 29.61%; cash flow from operating activities was 198 million yuan with a year-on-year increase of 37.26%, reflecting the improvement of collection efficiency; EPS was 0.19 yuan with a year-on-year decrease of 29.63%. The number and amount of the company's new orders continued to grow well, and new orders from domestic customers recovered significantly. In 2025Q1, the company's net new contract amount exceeded 2 billion yuan with a year-on-year increase of 20%. The company incurred related expenses in the development and promotion of digital and intelligent technologies, and it was expected to continue to invest. The company focuses on North America, Europe and Asia-Pacific to expand its international layout; strengthen comprehensive R&D service capabilities; provide professional services in key therapeutic areas such as endocrinology and metabolism, nuclear medicine, cell and gene therapy, and ophthalmology, and establish differentiated competitive advantages. The company's delivery capabilities in many regions around the world have been greatly enhanced. At the same time, the company is accelerating its AI-driven transformation to improve operational efficiency and management effectiveness. The company completed the local deployment of the open source large model DeepSeek-R1 in 2025, and its subsidiary Taiya Technology launched the AI medical solution "Yiya AI Platform", covering scenarios such as intelligent translation and medical Q&A, to improve the efficiency of clinical trials. We are cautiously optimistic about the company's prospects, and the international layout and AI technology are expected to drive the company's performance recovery in 2025.
Strategy¡G
Buy-in Price: $38.25, Target Price: $42.40, Cut Loss Price: $35.65



Shuanghuan Driveline(002472.CH) - Accelerated Overseas Expansion and Diversified Product Portfolio Advance in Tandem

Company profile:

Shuanghuan Driveline specializes in the manufacturing of gear transmission products, with the gear business accounting for about 80% of the Company's total business. The Company has gradually shifted from traditional gear products to high-precision gears and parts. Its main products span gear products (gears for passenger vehicles, commercial vehicles, engineering machinery, motorcycles and electric tools), reducers and other products, which are mainly applied in the electric drive systems, gearboxes and axles of vehicles, as well as electric tools, rail transit, wind power, industrial robots and other sectors. The Company operates five production bases in Zhejiang, Jiangsu, Chongqing, Dalian and other places.

Investment Summary

Strong Performance in New Energy Business Drives Rapid Net Profit Growth

In 2024, the Company recorded revenue of RMB8,781 million (RMB, the same below), up 8.76% yoy; net profit attributable to the parent company amounted to RMB1,024 million, up 25.42% yoy; net profit attributable to the parent company excluding non-recurring items was RMB1,001 million, up 24.64% yoy. EPS was RMB1.22, with a dividend per share of RMB0.226, representing a dividend payout ratio of 18.5%.

In Q1 2025, the Company reported revenue of RMB2,065 million, down 0.47% yoy, mainly due to the contraction of the steel trading business. Excluding this impact, core business revenue grew 12.5% yoy; net profit attributable to the parent company reached RMB276 million, up 24.70% yoy; and net profit attributable to the parent company excluding non-recurring items was RMB269 million, up 28.27% yoy.

Among the various business segments, the new energy vehicle (NEV) gear business delivered standout performance. In 2024, this segment generated revenue of RMB3.37 billion, accounting for 38.38% of the Company's total revenue, up 51.21% yoy, showing a strong upward trend. In Q1 2025, this segment continued to grow at a pace exceeding that of downstream NEV sales, further increasing its share of total revenue and becoming a key driver of performance growth.

The traditional internal combustion engine (ICE) vehicle gear segment recorded revenue of RMB1,954 million in 2024, down 1.99% yoy. In Q1 2025, this segment remained stable, with a yoy decline of approximately 5%.

The intelligent actuator segment posted revenue growth of over 69% yoy in 2024 and maintained a similar growth rate in Q1 2025.

The commercial vehicle gear segment saw a revenue decline of 18.01% yoy in 2024, mainly due to a significant yoy decrease in H2 2023. However, Q1 2025 revenue data suggests a gradual recovery from the bottom, with revenue surpassing that of Q3 and Q4 2024, although still down on a yoy basis. The Company is intensifying efforts to expand its presence in the commercial vehicle market by actively targeting leading overseas clients and strategically investing in NEV e-drive gear products for commercial vehicles.

The construction machinery gear segment remained stable across all quarters of 2024 and Q1 2025, with revenue in Q1 2025 performing slightly better than that in Q3 and Q4 2024.

Improved Sales Structure Significantly Boosts Gross and Net Margins

The Company's gross margin increased from 22.24% in 2023 to 25.01% in 2024, up 2.8ppts yoy. In Q1 2025, gross margin further rose to 26.82%, up 4.17ppts yoy. This improvement was mainly due to a reduced share of low-margin steel trading and the scale effects of high value-added passenger vehicle gear business.

The Company maintained effective cost control and stable expense ratios: the period expense ratio stood at 10.59% in 2024, up 0.3ppt yoy, with selling/administration/R&D/financial expense ratios at 0.98%/3.99%/5.19%/0.43%, respectively, representing yoy changes of -0.03/-0.08/+0.44ppts/flat. In Q1 2025, the respective ratios were 1.0%/3.8%/5.4%/0.4%, up 0.06/0.1/0.6/-0.03ppts yoy, benefiting from ongoing cost reduction and efficiency enhancement measures, as well as scale effects. The Company will continue to implement such initiatives in the coming years, including smart manufacturing and big data systems. The rise in R&D expense ratio reflects sustained investment in innovation.

The Company's net profit margin reached 11.66% in 2024, up 1.55ppts yoy; and rose further to 13.37% in Q1 2025, up 2.7ppts yoy, indicating continued improvement in profitability.

Accelerated Overseas Expansion and Diversified Product Portfolio Advance in Tandem

In the high-profile NEV gear field, the Company had established an annual production capacity of 6,500 thousand sets for NEV transmission gear shafts by the end of 2024, with full capacity utilisation. The production base for NEV transmission components in Hungary is currently in the equipment commissioning phase, with capacity to be gradually released based on existing orders. As construction of the Hungary plant progresses, delivery lead times and logistics costs will be reduced, laying a solid foundation for further global market expansion.

Centred on gear technology, the Company continues to advance its diversified product layout. Looking ahead to the next two to three years, development across business segments includes: first, driven by growing sales of domestic B-class and above models, demand for high-precision, low-noise gear products is surging. As a leading player in China's NEV gear market, the Company is expected to further increase its market share by leveraging its technological advantages and optimising its sales structure. Additionally, the coaxial reducer gear (used in industrial robots) and intelligent actuator (used in robotic vacuum cleaners) segments offer vast market potential and are likely to become new growth drivers. Other segments, including commercial vehicles and construction machinery, are expected to remain generally stable over the next two years..

Investment Thesis

Shuanghuan Driveline is a pacesetter in the domestic automotive gear industry and robotic RV reducer industry. By leveraging its advantages in capacity, management, R&D and customer base, the Company has seized the opportunities for upgrading brought by gear outsourcing and high industry barriers as a result of the booming new energy vehicle industry. Looking forward, the Company is expected to continuously benefit from the boom of new energy passenger vehicles, expansion of the industrial chains of automatic gearboxes of commercial vehicles, and rapid development of robotic reducers and gears for daily use.

As for valuation, we expected diluted EPS of the Company to RMB 1.48/1.72/2.07 of 2025/2026/2027. And we accordingly gave the target price to RMB35 respectively 24/20/17x P/E for 2025/2026/2027. "Accumulate" rating. (Closing price as at 24 June)

Risk

Progress of new production line is below expectations

Electric vehicle sales fall short of expectations

Macroeconomic downturn affects product demand

Sharply rising raw material prices or sharply falling product prices

Financials

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Recommendation on 2-7-2025
RecommendationAccumulate
Price on Recommendation Date$ 31.270
Suggested purchase priceN/A
Target Price$ 35.000
Writer Info
Zhang Jing
(Research Analyst)
Tel: (+86 21 51699400-103)
Email:
zhangjing@phillip.com.cn

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