The "mother of electronic system products" printed circuit board (PCB) industry has welcomed a new member on the GEM.

On October 31, Q&D Circuit (301628. SZ) was officially listed on the Growth Enterprise Market of the Shenzhen Stock Exchange, with 18.844 million new shares issued at an issue price of RMB 28.18 per share, raising RMB 531 million and a price-to-earnings ratio of 24.98 times.

As a "veteran" who has been deeply involved in the PCB market for 20 years, Q&D Circuit's IPO has attracted much attention. According to the online subscription, the effective number of shares subscribed by Q&D Circuit is 12.3685 million shares, and the number of effective subscribers has reached 11.3126 million, setting a new high in the number of subscribers on the GEM since September 2022, and more than 4 million new investors have increased compared with the number of new investors in mid-September this year.

The layout of mid-to-high-end models has been 20 years, and the delivery capacity is outstanding

PCB is a printed circuit board, which exists in almost all electronic devices, and is an indispensable basic component of electronic information products, known as the "mother of electronic system products". Its downstream is mainly used in communications, optical modules, consumer electronics and servers and other fields.

The PCB industry is further subdivided into templates, low-volume boards, and high-volume boards. Generally speaking, there are many varieties of sample and small batch boards, a high degree of product personalization, a large and scattered number of customers, and relatively professional customer needs, so the bargaining power of sample and small batch board PCB manufacturers is higher, and the gross profit margin is higher than that of large batch board manufacturers.

Q&D Circuit is mainly engaged in the production and manufacturing of PCBs for medium and high-end models and small batch boards.

According to the prospectus, Q&D Circuit was founded in Shenzhen in 2004, seizing the market opportunity of the lack of high-end model production capacity in the early stage of the domestic PCB industry to develop rapidly, after 20 years of deep cultivation in the PCB industry, the company has grown into a leading PCB enterprise in the model market, and its products are widely used in industrial control, communication equipment, automotive electronics, consumer electronics, medical health and semiconductor testing and other fields.

In 2023, the company will sell more than 94,500 PCB models, with a variety of product models, which can meet the personalized needs of enterprises and scientific research units, and meet the needs of product research, development and trial production in various industries.

From 2021 to 2023 and the first half of 2024, the company continued to maintain a high level of R&D investment, which was 39.573 million yuan, 44.2428 million yuan, 43.4899 million yuan, and 22.2233 million yuan, respectively, with a cumulative R&D investment of 150 million yuan, accounting for 5.88% of the cumulative operating income. As of the first half of 2024, the company has a total of 142 technical R&D personnel, with the ability to provide customized engineering solutions for customers.

With the production of Jiangxi Q&D in 2018, Q&D Circuit has gradually completed the ramp-up of production capacity and run-in of production lines, gradually improved production efficiency and product quality, and increased the gross profit margin level year by year. From 2021 to 2023, the company's gross profit margin will be 27.38%, 29.55%, and 31.38%, respectively.

Based on the excellent technical research and development team and the company's technological innovation capabilities, at present, the company's orders present a competitive advantage of "multi-variety, small batch, high quality, and fast delivery", and can provide 7×24-hour PCB product engineering services to domestic and foreign customers, single/double-sided boards can be delivered within 24 hours at the earliest, and multi-layer boards can be delivered within 48 hours at the earliest.

With the advantages of rich customized product system and production technology, Q&D Circuit has served nearly 3,000 customers, of which more than 100 are listed companies and hundreds of "specialized, special and new" enterprises, including Kuohua Xingyuanchuang (688001. SZ), Tatfook Technology (300134. SZ), Yibo Technology (301366. SZ) and other well-known listed companies, with nearly 100,000 product models delivered annually.

From 2021 to 2023, the company's production and sales rates are relatively high, 102.20%, 101.13%, and 99.80%, respectively, with an average production and sales rate of 101.04%.

Therefore, Q&D's performance is relatively stable. According to the prospectus, from 2021 to 2023, the operating income of Q&D Circuit will be 710 million yuan, 731 million yuan, and 713 million yuan respectively; The net profit was 68.0691 million yuan, 90.9007 million yuan and 91.0641 million yuan respectively. In the first half of this year, Q&D Circuit achieved an operating income of 389 million yuan and a net profit of 56 million yuan, achieving steady growth.

Raise 600 million yuan to expand production and strengthen competitive advantage

In the first half of 2024, the recovery trend of the PCB industry is obvious. According to Prismark's estimates, the PCB market as a whole will achieve positive growth, with the output value expected to increase by about 5.0% year-on-year, and the area is expected to increase by about 7.2% year-on-year. Prismark predicts that the PCB market will grow from $69.5 billion in 2023 to $90.4 billion in 2028, with a five-year compound annual growth rate of about 5.4%, and China will continue to maintain the industry's leading manufacturing center position, and it is expected that the PCB market output value will reach about $46.474 billion by 2028.

With the downstream electronics industry entering a new round of technological innovation, such as digital industrial control systems, communication AI servers, intelligent automotive electronics and AI mobile phones and other emerging electronic products iterative upgrading, the product application field is new, the technical content is high, so the basic capacity building in the domestic high-end PCB field needs to be strengthened urgently.

High-end PCB has become the development trend of the industry to improve the accuracy requirements of exposure equipment. In the next five years, it is expected that packaging substrates, multilayer boards, and HDI will show a relatively strong growth momentum. Generally speaking, as the number of layers increases, the more complex the process and the more material consumed per unit of output, the higher the PCB unit price.

From 2021 to 2023 and the first half of 2024, Q&D's multilayer board revenue accounted for 77.31%, 78.40%, 81.94%, and 84.36% of PCB revenue in each period, respectively, and model product revenue accounted for 39.40%, 42.87%, 48.70%, and 52.54% of PCB revenue in each period, respectively.

Thanks to the optimization of the company's product structure and the increase in the proportion of sales of multilayer boards and model products, from 2021 to 2023 and the first half of 2024, the average sales price of Q&D Circuit's PCB products is on the rise, which is 1390.43 yuan/square meter, 1554.29 yuan/square meter, 1609.04 yuan/square meter, and 1757.20 yuan/square meter, respectively. In addition, the company plans to increase the production capacity of multi-layer boards and HDI products through the implementation of this fundraising project.

It is reported that in this IPO, Q&D Circuit plans to invest 600 million yuan to focus on the company's main business, of which 120 million yuan will be used to supplement the working capital project, and 480 million yuan will be used for Nantong Q&D Circuit Technology Co., Ltd. with an annual output of 960,000 square meters of multi-layer board and HDI board project (hereinafter referred to as the "Nantong project").

The Nantong project applies core technologies such as high-multi-layer, high-end high-density interconnection boards and other special processing, and will cooperate with Shenzhen and Jiangxi production bases to further enrich the product matrix.

In the prospectus, Q&D Circuit predicted that in 2024, the company's operating income is expected to be 788 million yuan, a year-on-year increase of 10.52%; the net profit attributable to the parent company was 99.2757 million yuan, a year-on-year increase of 9.02%; The net profit after deducting non-attributable to the parent company was 92.7452 million yuan, a year-on-year increase of 9.07%.

As a leading enterprise in the field of mid-to-high-end PCB templates and small-batch boards in China for 20 years, Q&D Circuit will keep up with the development trend of the industry after its issuance and listing, strengthen the advantages of PCB technology and technological innovation, enhance market competitiveness and brand influence, and further consolidate the leading position of medium-to-high-end models and small-batch boards by virtue of rapid response, flexible production, fine management, intelligent manufacturing and excellent service level.

(The IPO market has a high investment risk, investors should remain rational, recognize the possible market risks, and realize that short-term speculation may bring losses.) Invest prudently, avoid blindly following the trend, and guard against irrational investment behavior. ）