Nomura: Victory Giant’s third-quarter revenue rises while profit falls: Nomura cuts capacity and earnings forecasts but remains upbeat on HDI upgrades

Why did net profit fall despite third-quarter revenue growth?

Third-quarter revenue in 2026 was RMB 6.831 billion, up 34.3% year on year and 11.8% quarter on quarter. Reported net profit was RMB 527 million, down 52.2% year on year and 66.4% quarter on quarter, mainly due to investment losses.
Excluding the related impact, recurring net profit was RMB 1.28 billion, up 16.2% year on year and 9.99% quarter on quarter, showing that underlying earnings continued to grow.
Gross margin for the quarter was 34.2%, down 1 percentage point year on year but up about 2.1 percentage points quarter on quarter. Nomura believes the company may offset some material cost pressure by raising PCB prices.

Nomura lowered its revenue forecasts for 2026–2028 by 2%–3%, mainly reflecting a slower-than-expected ramp-up in high-density interconnect (HDI) board capacity and intensified competition for procurement share at a key AI customer.
The capacity ramp-up and rising raw material costs also prompted the bank to cut its gross margin forecasts for the same period by 1.3–2.7 percentage points and its earnings forecasts by 7%–10%. Even after the revisions, Nomura’s revenue and earnings forecasts remain 5%–16% and 8%–18% below the Wind market consensus, respectively.

HDI can be used in switches and compute boards. In addition to existing strategic customer Nvidia, Nomura believes more cloud service providers may adopt HDI in the future; the company could benefit given its substantial existing capacity, equipment and years of research and development.
Nomura expects the company’s HDI revenue to grow at a compound annual rate of 82% over 2026–2028 and account for 64% of total revenue by 2028. Higher sales value and margins will make it a key earnings driver.
The company is also expanding capacity for high-layer-count PCBs and mSAP HDI. Nomura sees potential in cloud computing, ASIC customers and the optical module market, although these businesses currently have a low base.

Management believes that, from the fourth quarter of 2026, increased PCB usage and specification upgrades for GPUs and ASICs will support further gross margin improvement. Nomura also expects platform upgrades to increase PCB value, but pressure from materials such as copper-clad laminates and depreciation costs will persist for the next few quarters.
Nomura maintained its buy rating and lowered its Hong Kong share price target from HK$447 to HK$289. The new target is based on forecast earnings per share of RMB 13.22 for 2027 and a price-to-earnings multiple of 19, versus 27 previously. Based on the closing price of HK$136 on 29 October 2026, the target implies 112.5% upside.