P.C.B’s stock has surged over 120% in the past year, driven in part by its expansion in the defense sector, which now accounts for 62% of its printed circuit board (PCB) segment revenue. However, the company’s order backlog dropped to $175 million from $186 million in the previous quarter, raising concerns that new orders may not be keeping pace. In an interview with Bizportal, CEO Oved Shapira explains that the decline is due to seasonal fluctuations and anticipates new orders in the coming months.

A Stock Surge Fueled by Defense Growth

P.C.B. (TASE: PCB) has seen its stock price more than double over the past year, largely due to its growing role in the defense industry. In its latest earnings report, the company revealed that 62% of its core business—PCB manufacturing—now comes from defense-related contracts. Investors favor this sector because it offers stability, with longer-term contracts that are more likely to be renewed, especially as global defense budgets continue to expand.

The company has reported several new orders in recent months, including a $16 million contract in December. Some investors may have expected a higher order backlog this quarter, assuming there were additional, undisclosed smaller orders. Instead, the backlog fell to $175 million from $186 million in the previous quarter. It’s unclear whether this played a role in the stock’s recent fluctuations, but it is something to consider.

Q4 Financial Performance and Capacity Expansion

For the fourth quarter, P.C.B. reported revenue of $40.9 million, a 16% increase year-over-year, while gross profit surged 80% to $8.5 million. Net income came in at $2.3 million, a sharp turnaround from a $700,000 net loss in the same period last year. Meanwhile, the order backlog declined to $175 million. The stock is currently trading at a market capitalization of approximately 603 million NIS.

At the same time, P.C.B. is expanding its production capacity, investing $6 million to boost PCB output by 50%—from 250-300 boards per day to 375-400 boards per day. Speaking with Bizportal, CEO Oved Shapira explains that the average selling price per board is around $1,600 or even higher. With production costs decreasing as output scales, this expansion is expected to drive further growth. But after a 120% stock rally, has the market already priced in these gains? Here’s what Shapira had to say.

What are the key takeaways from the earnings report?

"The results continue the trend of recent quarters, with improvements across all key metrics. The bottom-line growth comes from two main factors: an improved product mix and operational efficiency gains from our capacity expansion plan. As production volumes increase, profitability follows, and we are seeing that play out.

It’s also important to compare backlog growth year-over-year rather than quarter-to-quarter. Our industry has seasonal bidding cycles. For example, one of our major medical customers holds a large tender every June, and we fulfill that backlog throughout the following quarters. Just in our PCB segment, backlog has grown over 30% compared to last year."

Could investors have expected a quarter-over-quarter backlog increase due to the defense segment?

"It’s a matter of timing. There are several major defense tenders in the pipeline, and we’ll begin reporting results over the next couple of months. The growth trajectory we are seeing will continue as those contracts materialize."

The backlog has a relatively short duration of about a year. Will this remain the case going forward?

"Orders placed this year will extend into 2026-2027. Typically, our contracts range from one to two years."

What is P.C.B.’s market share in Israel’s PCB industry?

"Including imports from China, our market share is around 14%. However, among customers who do not source from China, our market share is closer to 30%. We believe there’s room to grow beyond that. It's also important to remember that many of our customers manufacture for export—especially in the defense sector. Given the expected increase in military exports, we see further growth opportunities ahead."

How much does P.C.B. currently produce, and what is the average selling price per board?

"We currently produce 250-300 circuit boards per day, each selling for an average of around $1,600 or more."

Where does the expansion project stand, and will it improve production efficiency?

"We expect to fully benefit from this investment starting in early 2026. The ramp-up will begin this year, but full implementation will take longer. Our goal is to operate at no more than 80% capacity utilization to ensure we can flexibly meet customer needs."

How will exchange rates impact P.C.B.’s financial results?

"Our business is primarily priced in U.S. dollars, so currency fluctuations have minimal impact. However, we make adjustments where necessary."

How optimistic are you about the impact of rising global defense budgets on P.C.B.?

"We’ve said it before, and it's even more evident today—over the next three years, demand for defense and aerospace systems will rise consistently, and we will benefit from that. Global defense spending is expected to grow at a CAGR of 8.5% annually.

There’s no doubt that European nations now recognize the need to invest more in their own security, especially given recent geopolitical shifts. We are also seeing similar trends in India. The world is set to invest heavily in defense, and we are well-positioned to capitalize on that."