On Tuesday, Jefferies upgraded shares of SICC Co Ltd (688234:CH), a prominent conductive substrate manufacturer, from Hold to Buy, while adjusting the stock price target to RMB66.00 from the previous RMB69.00.

This decision was influenced by the company’s financial performance, with fourth-quarter 2023 and first-quarter 2024 revenues meeting expectations and net profit surpassing both Jefferies’ and consensus estimates.

The optimism for the upgrade is partly due to SICC’s Lingang fabrication plant reaching a capacity of 25 kilowatts per month by the end of 2023. This expansion has positioned SICC among the top three conductive substrate makers.

The analyst noted that overseas customers now contribute approximately 40% to the company’s revenue with a gross margin (GM) of 29% in 2023. The expectation of a higher mix of overseas business in the forthcoming years is a driving factor behind the positive outlook.

The upgrade reflects the company’s short-term financial prospects, which are expected to remain strong. The analyst emphasized this by stating the company’s revenue alignment with forecasts and the substantial outperformance in net profit as key indicators of SICC’s robust financial health.

The revised stock price target of RMB66.00, despite being a slight reduction from the prior target, aligns with the upgraded stock rating and the anticipation of SICC’s continued growth and expansion in market share, especially with its increased capacity and international customer base.

The company’s strategic positioning and financial results are the primary reasons behind Jefferies’ confidence in SICC’s stock performance.

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