The PCB (Printed Circuit Board) concept sector experienced a rapid afternoon surge on July 14th.

Data from Flush shows the sector closed with an overall gain of 4.13%, with 11 constituent stocks hitting the daily price limit.

Specifically, Xintong Electronic secured two consecutive limit-up boards, while Bojie Co., Ltd. and Dongshan Precision both recorded two limit-up boards in four trading days.

Zecheng Electronic surged by the 30% limit, and seven other stocks, including Firststar, Guanghe Technology, Wus Printed Circuit, Jin'an Guji, Shengyi Technology, Huazheng New Material, and Xianfeng Holding, also reached the daily limit.

Key Drivers of the Rally

Analysts point to two primary reasons for the sector's current strength.

First, a concentration of better-than-expected interim earnings reports has ignited market sentiment.

Profit growth forecasts from several leading industry players for the first half of the year have broken through prior pessimistic expectations, activating a valuation recovery trend.

Second, rising upstream raw material costs have initiated a cycle of both volume and price increases.

Leading copper-clad laminate manufacturers issued a wave of price hike notices in July, with core material costs like resin and electronic glass cloth continuing to climb.

With smooth cost pass-through along the supply chain, the PCB industry is entering a phase of simultaneous price increases and volume expansion, directly boosting profits.

Long-Term Growth Engine

Looking at a longer horizon, the demand driven by AI computing power is considered the core engine for the PCB industry's upward cycle.

Statistics from Soochow Securities indicate that the global market size for server PCBs is projected to grow from $3 billion in 2024 to over $20 billion by 2027.

This corresponds to year-on-year growth rates exceeding 100% in 2026 and 70% in 2027.

The trend of "rising volumes and prices" is clear, with tight supply-demand conditions likely to persist until 2027, and a supply gap for high-end products expected to continue.

Strong Financial Performance

Supported by sustained demand growth, several listed PCB companies have reported impressive financial results for the first half of this year.

Flush data shows that as of July 14th, 58 listed PCB companies had disclosed performance forecasts for the first half of 2024.

Of these, 45 companies anticipated positive results.

Specifically, 27 companies forecast a minimum increase in net profit exceeding 100% for H1, with Eedoo Information and Dongfang Materials projecting minimum profit growth of 1,442.02% and 1,330.00%, respectively.

Investment Outlook

Regarding investment opportunities, fund managers express optimism about AI demand driving the upgrade of China's entire PCB industry chain.

They see medium-to-long-term allocation value across the entire spectrum, from materials and equipment to high-end computing boards.

Analysts note that AI chips are expected to drive sustained volume growth for high-layer-count PCBs, and continued price hikes by copper-clad laminate leaders support upward valuation revisions for PCB companies.

It is suggested to focus on leading companies related to AI PCBs.

Furthermore, with July marking the peak period for interim report disclosures, attention is also advised on companies demonstrating high earnings growth.