Author: Yang Qichao / Editor: Shi Feng / Source: Jinjiyan

Printed Circuit Board (PCB) is a fundamental component of electronic information products. As most industries trend towards intelligence, electronization, and interconnection, there is a massive and diverse demand for emerging electronic components across the entire production chain. Meanwhile, the diversification of end-user electronic products has driven an increasing proportion of PCB prototypes and small-batch boards. Shenzhen Qiangda Circuits Co., Ltd. (hereinafter referred to as "Qiangda Circuits") adapts to the growth in PCB market size and structural optimization trends, precisely targeting the mid-to-high-end prototype and small-batch PCB markets, and holds a leading position in the domestic prototype market.

In recent years, Qiangda Circuits has maintained overall stability in revenue and net profit attributable to shareholders, with a PCB business gross margin higher than the industry average and a gradually decreasing asset-liability ratio. Leveraging quick response, flexible production, and exceptional service levels, Qiangda Circuits provides customers with a wide variety of small-batch, high-quality PCB products delivered swiftly, fully meeting customers' needs at all stages. In terms of product quality, timely delivery, and rapid response, Qiangda Circuits has earned high customer satisfaction and accumulated high-quality and stable customer resources. Through years of accumulation, Qiangda Circuits has built a rich customized PCB product system with a wide range of applications and plans to increase scale through fundraising to enhance PCB manufacturing capabilities.

I. Overall stable revenue and net profit attributable to shareholders, with a decreasing asset-liability ratio year by year

As an indispensable basic electronic component for electronic products and information infrastructure, PCB is known as the "mother of electronic systems products." In the long run, benefiting from the development of emerging technologies and the expansion of downstream applications, the PCB market demand will continue to grow steadily.

From the perspective of the downstream PCB market, the demand for terminal electronic products is increasingly diversifying, customized, and moving towards small-batch production. The mid-to-high-end prototype and small-batch PCB production capacity in Europe, the United States, and Japan is further shifting to mainland China, and the demand for mid-to-high-end prototypes and small-batch PCBs in China will substantially increase.

With two decades of experience in the PCB industry, Qiangda Circuits is one of the few enterprises specializing in mid-to-high-end prototypes and small-batch PCBs among the top 100 PCB companies. Based on its precise strategic positioning, Qiangda Circuits has maintained stable revenue and profitability in recent years.

From 2021 to 2023 and January to June 2024, Qiangda Circuits' revenues were RMB 710 million, 731 million, 713 million, and 389 million, respectively.

Over the same period, Qiangda Circuits' net profits attributable to shareholders were RMB 68.0691 million, 90.9007 million, 91.0641 million, and 56.0195 million, respectively.

According to the prospectus, Qiangda Circuits predicts a 2024 revenue of RMB 788 million, a 10.52% increase from 2023; and a 2024 net profit attributable to shareholders of RMB 99.2757 million, a 9.02% increase from 2023.

In recent years, Qiangda Circuits' PCB business gross margin has been higher than the industry average of comparable companies listed in the prospectus, demonstrating outstanding profitability.

Since Qiangda Circuits' main business is PCB products, accounting for over 99% of its main business revenue on average, the PCB business gross margins of comparable companies in the same industry are selected for comparison.

From 2021 to 2023 and January to June 2024, Qiangda Circuits' PCB business gross margins were 25.42%, 26.87%, 28.63%, and 28.22%, respectively.

Over the same period, the average gross margins of the main businesses (PCB business) of comparable companies in the same industry as Qiangda Circuits, including Zhongfu Circuits, Jinbaze, Benchuan Smart, Swift, Sihui Fushi, Suntd Tech, Xingsen Tech, and Mingyang Circuits, were 23.49%, 22.34%, 20.44%, and 19.32%, respectively.

Meanwhile, Qiangda Circuits' net cash flow generated from operating activities has exceeded RMB 100 million for the past three years. From 2021 to 2023 and January to June 2024, Qiangda Circuits' net cash flow from operating activities was RMB 104 million, 101 million, 136 million, and 38 million, respectively.

In addition, Qiangda Circuits' overall asset-liability ratio has been decreasing year by year in recent years, with its debt-repaying ability continuously enhancing. According to the prospectus, at the end of each period from 2021 to 2023 and January to June 2024, Qiangda Circuits' asset-liability ratios were 50.97%, 41.26%, 35.26%, and 31.95%, respectively.

In summary, based on its precise strategic positioning, Qiangda Circuits has maintained stable revenue and profitability in recent years. Its PCB business gross margin is higher than the industry average, demonstrating outstanding profitability. Furthermore, Qiangda Circuits' asset-liability ratio has shown a downward trend year by year, with its debt-repaying ability continuously enhancing.

II. Possessing high-quality and stable customer resources, honored as a top 100 enterprise in the industry for three consecutive years

High-quality and stable customer resources are crucial for the sustainable development of Qiangda Circuits' performance.

In recent years, Qiangda Circuits has served nearly 3,000 active customers, mainly categorized as professional electronic product manufacturers, PCB traders, and PCB producers. Key customers include nearly 100 listed companies, all with professional production, manufacturing, or trading experience in the PCB industry.

Among them, Qiangda Circuits' electronic product manufacturer customers include specialized terminal manufacturers, Electronic Manufacturing Services (EMS) providers, and PCB design enterprises. Key customers among electronic product manufacturers include Huaxing Source (688001.SH), Dafutech (300134.SZ), Scanfil, Phoenix, Yibo Tech (301366.SZ), Inovance (300124.SZ), Chunxing Precision (002547.SZ), Wuhan Fangu (002194.SZ), and Shengjing Micro (603375.SH), among others.

Qiangda Circuits' trader customers are professional PCB traders, primarily including Fineline, PCBConnect, and ICAPE. Its PCB producer customers are enterprises whose main business is also PCB production, primarily including Würth and HT.

Qiangda Circuits has maintained nearly a decade-long cooperative relationship with most major customers, ensuring long-term stable customer resources. From 2021 to 2023 and in the first half of 2024, Qiangda Circuits' existing customers contributed over 95% of order revenue.

Over the years, Qiangda Circuits has fully met customers' needs at all stages, earning high customer satisfaction in terms of product quality, timely delivery, rapid response, and other aspects of service. Qiangda Circuits has received awards such as "5-Year Strategic Partner" and "Best Quality Award" from its largest customer, Fineline; "Best Supplier" from its second-largest customer, PCB Connect; "Best Supplier Collaboration Award" from Huaxing Source; and "Best Collaboration Award" and "Excellent Supplier" from Wuhan Fangu.

While consolidating stable cooperative relationships with existing customers, Qiangda Circuits actively explores new customers. Leveraging quick response, flexible manufacturing, and exceptional service levels, it strives to meet customers' professional PCB needs during research, development, testing, and small-batch production stages, converting potential downstream customers into new customers, continuously exploring new needs from existing customers, and expanding sales scale.

Currently, Qiangda Circuits has established a complete domestic and international sales system, with Shenzhen as its headquarters and marketing bases, and marketing offices in Ganzhou, Beijing, Shanghai, Nanjing, Wuhan, Chengdu, Chongqing, Xi'an, and California, USA. It has also established good cooperative relationships with multiple professional PCB traders, possessing the ability to respond quickly to customer needs.

Compared to manufacturers that purely provide mass-produced or prototype boards, Qiangda Circuits offers full-stage services from research and development, pilot testing, small-batch, to mass production, allowing customers to avoid frequent supplier changes and effectively saving customers' research and production costs.

Furthermore, Qiangda Circuits' PCB business enjoys brand recognition within the industry, facilitating its domestic and international market expansion.

From 2021 to 2023, Qiangda Circuits was honored as a top 100 enterprise in China's electronic circuit industry by the China Electronics Circuit Industry Association for three consecutive years. Meanwhile, as a "quick-turn/prototype" enterprise, Qiangda Circuits was also selected into the top ten list of "Major Enterprises with Featured Products" evaluated by the association.

In brief, with two decades of experience in the PCB industry, Qiangda Circuits has earned high customer satisfaction and steadily accumulated high-quality and stable professional customer resources. Simultaneously, with its ability to quickly respond to customer needs and provide full-stage services, Qiangda Circuits has established a high-quality corporate image, facilitating deeper cooperation with existing customers and active exploration of new customers.

III. Wide application fields of PCB products, with an average model number approaching 100,000

As a PCB enterprise specializing in mid-to-high-end prototypes and small-batch boards, Qiangda Circuits' products feature "multiple varieties, small batches, high quality, and quick delivery," involving numerous downstream industries.

Through cooperation with numerous professional PCB customers, Qiangda Circuits has developed extensive mid-to-high-end PCB process capabilities covering special processes or materials, possessing a rich customized PCB product system. Its mid-to-high-end PCB products with special processes or materials primarily include high-layer count boards, high-frequency boards, high-speed boards, HDI boards, thick copper boards, rigid-flex boards, metal-based boards, semiconductor test boards, and millimeter-wave radar boards.

In terms of application fields, Qiangda Circuits' products are widely used in industrial control, communication equipment, automotive electronics, consumer electronics, healthcare, and semiconductor testing.

Among them, Qiangda Circuits' PCB products for industrial control are mainly applied in machine tools, numerical control systems, industrial robots, machine tool electrical appliances, and related products; those for communication equipment are primarily used in communication base station controllers, transceivers, base station antennas, radio frequency components, and related products; automotive electronics products are mainly used in millimeter-wave radars, driving control systems, and complete vehicle control systems in automotive control systems; consumer electronics products are mainly used in audio-visual equipment and display devices; healthcare products are primarily used in optical/magnetic therapy devices and ventilators; and semiconductor test products are primarily used in semiconductor test equipment and display test equipment.

In recent years, Qiangda Circuits has continuously optimized its product structure, further strengthening its positioning in mid-to-high-end prototypes and small-batch boards. The average order area of PCB products has decreased, the number of product models has increased, and the average number of layers has risen.

According to the prospectus, from 2021 to 2023 and January to June 2024, the average order area of Qiangda Circuits' products was 3.88 m²/order, 3.48 m²/order, 3.04 m²/order, and 2.66 m²/order, respectively; the average number of layers was 3.87, 4.00, 4.12, and 4.32, respectively; and the average number of models was 83,600, 87,300, 94,500, and 59,200, respectively.

Qiangda Circuits' PCB products are classified into single/double-sided boards and multilayer boards by layer count and into prototypes, small-batch boards, and mass-produced boards by order area.

From 2021 to 2023 and January to June 2024, Qiangda Circuits' multilayer board revenue was RMB 534 million, 550 million, 560 million, and 312 million, respectively, accounting for 77.31%, 78.40%, 81.94%, and 84.36% of PCB revenue in each period. Among them, revenue from high-layer count boards with 8 or more layers was RMB 137 million, 163 million, 187 million, and 122 million, respectively, accounting for 19.91%, 23.15%, 27.36%, and 33.18% of PCB revenue.

Over the same period, Qiangda Circuits' prototype product revenue was RMB 272 million, 301 million, 333 million, and 194 million, respectively, accounting for 39.40%, 42.87%, 48.70%, and 52.54% of PCB revenue in each period. Notably, revenue from prototypes with an order area of less than 1 m² increased significantly, with an average annual compound growth rate of 14.98% over the past three years.

From 2021 to 2023 and January to June 2024, Qiangda Circuits' revenue from prototypes with an order area of less than 1 m² was RMB 153 million, 177 million, 203 million, and 122 million, respectively, accounting for 22.23%, 25.20%, 29.69%, and 33.12% of PCB revenue in each period.

Evidently, Qiangda Circuits has built a rich customized PCB product system with extensive application fields and is continuously enhancing its core competitiveness and profitability through product structure optimization.

IV. Core technology products contribute 95% of revenue, innovation empowers key processes to stay at the cutting edge

The PCB manufacturing industry is technology-intensive. For PCB products, especially mid-to-high-end prototypes, their diversity, stability, and innovation require extremely high technical standards.

As a high-tech enterprise and a national-level specialized and new "little giant" enterprise, Qiangda Circuits insists on independent research and development, continuously enhancing its technological innovation capabilities by improving the research and development system, strengthening the research and development team, and increasing investment in research and development.

Regarding the research and development system, Qiangda Circuits has established a three-tier research and development system, with the group's technology center as the foundation, setting up secondary technology centers in Shenzhen and Jiangxi factories, and further establishing three-tier research and development departments including process, engineering, and quality groups to provide technical support in these areas for the company's technology center.

In terms of research and development team building, Qiangda Circuits has always focused on the reservation and cultivation of research and development personnel. As of June 30, 2024, Qiangda Circuits had 142 technical research and development personnel, accounting for 10.23% of the total number of employees, possessing the ability to provide customized engineering solutions for customers.

In terms of research and development investment, Qiangda Circuits has consistently maintained a relatively high level of investment. From 2021 to 2023 and January to June 2024, Qiangda Circuits' cumulative research and development investment reached RMB 150 million, accounting for 5.88% of cumulative revenue.

After years of research and development, Qiangda Circuits has accumulated profound expertise in high-layer count boards, ultra-thick copper boards, HDI boards, high-frequency and high-speed boards, special boards, and other special processing technologies, forming multiple core technologies. As of the prospectus signing date on October 17, 2024, Qiangda Circuits and its subsidiaries held 11 invention patents and 111 utility model patents.

Currently, Qiangda Circuits has applied its major proprietary or patented core technologies to its existing products. In recent years, core technology products have accounted for over 95% of Qiangda Circuits' revenue.

According to the prospectus, from 2021 to 2023 and January to June 2024, the revenue from Qiangda Circuits' core technology products accounted for 97.18%, 96.03%, 95.83%, and 95.00% of its operating revenue, respectively.

In recent years, Qiangda Circuits has continuously conducted research and development projects on high-difficulty PCB product technologies such as HDI boards, millimeter-wave radar boards, semiconductor test boards, and optical module boards, continuously deepening its technological reserves.

Currently, Qiangda Circuits' key processes closely follow market trends, with various technical indicators maintaining mainstream industry standards. Its PCB products' number of layers, line width/spacing, hole diameter, thickness-to-diameter ratio, copper thickness, and other main manufacturing capabilities are superior to the industry average, with individual indicators like maximum copper thickness at a relatively leading level in the industry.

Qiangda Circuits' products can reach a maximum of 50 layers, with a minimum inner layer line width/spacing of 2.0 mil/2.0 mil, a minimum outer layer line width/spacing of 3.0 mil/3.0 mil, a minimum mechanical drill hole diameter of 4.0 mil, a minimum laser drill hole diameter of 3.5 mil, a maximum thickness-to-diameter ratio of 20:1, and a maximum copper thickness of 30 ounces.

It is worth mentioning that the scientific and technological achievements of Qiangda Circuit's PCB product, 'Research and Development of Key Technologies and Industrialization of 77GHz Millimeter-Wave Radar Board', have been evaluated and appraised by experts from Tsinghua University Shenzhen International Graduate School, Harbin Institute of Technology (Shenzhen), and Shenzhen University. They believe that the project's technology has independent intellectual property rights and overall reaches the domestic leading level.

5. Raise funds to enhance PCB manufacturing capabilities and increase scale to enhance market competitiveness

Compared to the traditional large-scale "rigid manufacturing" effect in the PCB industry, the flexible manufacturing capabilities and management methods required for prototype and small-batch boards are better suited to meet the growing demand for R&D prototyping and small-batch professional applications in the PCB industry.

Qiangda Circuit adheres to rapid delivery of high-quality products, continuously optimizes the mobility of equipment and personnel in various processes, continuously improves the changeover efficiency when mass-producing different models of products, ensures on-time delivery and early delivery as needed, thereby efficiently meeting customer needs and building core competitiveness.

In terms of flexible production, Qiangda Circuit orderly controls each stage of order management, engineering data design, scheduling, and product production based on the characteristics of PCB processes, deeply integrating the concept of flexible production into specific links from order to output.

In the order management stage, Qiangda Circuit promptly confirms the actual delivery date and quickly completes communication and confirmation of the order delivery date. In the engineering data design stage, Qiangda Circuit accurately and completely converts customers' original design data into engineering data. In the scheduling stage, the planning department distributes production orders to each production process for execution in a refined manner. In the product production stage, each process completes production tasks in an orderly manner according to modularization, improving production efficiency and ensuring timely delivery of products.

In terms of refined management, Qiangda Circuit has established order delivery specifications based on different layers and processes, supplemented by an order load balancing mechanism, and monitors production line operations in real-time to ensure the timely delivery of each order.

Qiangda Circuit's PCB products can be delivered quickly, with single/double-sided boards delivered within 24 hours and multilayer boards delivered within 48 hours. In 2023, the average delivery cycle for Qiangda Circuit's PCB products is generally 5-10 days, with average delivery cycles for prototypes and small-batch boards being approximately 5 and 8 days, respectively, faster than the industry average.

With this IPO, Qiangda Circuit raised funds of 531 million yuan for the "Nantong Qiangda Circuit Technology Co., Ltd. Annual Production of 960,000 Square Meters of Multilayer and HDI Boards Project" and the "Supplementary Working Capital Project".

Among them, the "Nantong Qiangda Circuit Technology Co., Ltd. Annual Production of 960,000 Square Meters of Multilayer and HDI Boards Project" has a total investment of 1 billion yuan. It applies core technologies such as high-multilayer, high-order high-density interconnect boards, and other special processing to expand the production capacity of mid-to-high-end PCB products such as multilayer and HDI boards by a total of 960,000 square meters.

After the project is put into production, it will increase the overall scale of Qiangda Circuit, which is conducive to further leveraging its technological, product, customer, brand, and management resource advantages, consolidating Qiangda Circuit's advantages of rapid delivery and response, and effectively enhancing its market competitiveness, sustainable development capabilities, and resistance to market change risks.

As one of the top 100 PCB enterprises in China, Qiangda Circuit has accurately positioned itself in mid-to-high-end prototypes and small-batch boards, with overall stable performance. Its PCB business gross margin is higher than the industry average, and its asset-liability ratio has gradually decreased year by year. Relying on its competitive advantages in product systems and quality, process technology, flexible production, customer resources, etc., Qiangda Circuit has maintained steady development and has become a relatively leading prototype enterprise in the domestic PCB industry.