Shenwan Hongyuan has released a research report stating that KB LAMINATES (01888) is poised for a significant improvement in profitability. The firm forecasts the company's revenue for 2026-2028 to reach HKD 26.8 billion, HKD 35.6 billion, and HKD 38.3 billion, respectively, with corresponding comprehensive gross profit margins of 30%, 31%, and 32%. This margin assumption is primarily based on the company's gradual price increases and product mix upgrades. It is projected that net profit attributable to shareholders for 2026-2028 will be HKD 4.62 billion, HKD 6.66 billion, and HKD 7.54 billion, respectively, translating to valuation multiples of approximately 37x, 26x, and 23x. While the company's valuation is lower than that of comparable peers, considering valuation disparities across different markets and applying a principle of prudence, Shenwan Hongyuan initiates coverage with an "Add" rating. The key points from the report are as follows:
As a global leader in CCL (Copper Clad Laminate) with vertically integrated operations, the company is presented with a threefold opportunity for transformation. KB LAMINATES is the world's largest seller of rigid CCL, accounting for 14.4% of global sales in 2024. The company possesses the rare advantage of a vertically integrated supply chain, with in-house capabilities for upstream CCL materials such as copper foil, glass fiber, resin, and fillers. Its parent company, Kingboard Holdings (00148), is also a core supplier for PCBs. Amid an AI-driven raw material price increase cycle, the company is currently in a triple-transition phase: "multiple price hikes in traditional CCL to restore profitability, revaluation of growth in high-end AI-CCL materials, and a shift from a leading CCL enterprise to a leading supplier of AI electronic fabric." These three transformations are expected to profoundly impact the company's profit outlook and valuation levels, and the capital market is in the process of recognizing this significant shift.
A cyclical inflection point for traditional business, with multiple rounds of CCL price hikes restoring profitability. The CCL segment within the PCB industry chain is relatively fragmented, historically exhibiting weaker profitability compared to downstream PCB and upstream material segments, and facing greater difficulty in implementing price increases. Since 2025, driven by demand, the industry has gradually implemented CCL price increase plans, leading to a revaluation of traditional CCL profitability.
Revaluation of growth in high-end AI materials. The performance of the company's CCL products is continuously being upgraded, with M7-M8 grade CCL products under development and slated for launch. The company plans to expand copper foil capacity in 2027 for high-frequency, high-speed, low-dielectric-loss RTF and HVLP copper foils. It has already ignited its first production line in 2025 for a 500-ton annual capacity of low-dielectric first-generation glass fiber yarn. Further plans for 2026-2027 include adding 11 production lines for low-dielectric first-generation, second-generation, and Low CTE glass fiber yarn and fabric products. The company is poised to fully upgrade from a vertically integrated player in traditional materials to one with an integrated layout for AI materials.
The industry position of the CCL segment is being reshaped. The market perceives CCL price hikes merely as a pass-through of improved downstream demand and rising upstream raw material costs. However, the report argues that a more profound trend is the increasing customization, specialization, and premiumization of CCL, which will drive a reshaping of CCL's position within the industry chain. The superior characteristics of the CCL industry structure are expected to become more evident, potentially leading to sustained margin improvements for CCL. As the world's largest CCL enterprise, KB LAMINATES stands to benefit continuously from this trend.
Risk warnings include: slower-than-expected pace of capacity ramp-up, slower-than-expected growth in downstream demand, and intensifying competition.