Shenwan Hongyuan Group: "buy" rating for KB LAMINATES (01888), firmly establish its integrated moat.

Shenwan Hongyuan Group released a research report stating that KB LAMINATES (01888) profitability may significantly increase. The bank predicts that the company will achieve revenues of 26.8, 35.6, and 38.3 billion Hong Kong dollars respectively from 2026 to 2028, with corresponding comprehensive gross profit margins of 30%, 31%, and 32%. The gross profit margin assumptions are mainly based on the company gradually increasing prices and upgrading product structures. It is expected that the company will achieve net profits attributable to shareholders of 4.62, 6.66, and 7.54 billion Hong Kong dollars respectively from 2026 to 2028, with corresponding valuations of 37, 26, and 23 times. The company's valuation is lower than comparable companies, but considering the differences in valuation in different markets, the bank, with a conservative principle, initiates coverage and gives the company a "buy" rating. The main points from Shenwan Hongyuan Group are as follows: The leading global CCL company in the integrated industry chain construction will encounter three transformation opportunities KB LAMINATES is the world's largest rigid copper-clad laminate sales company, accounting for 14.4% of global sales in 2024. The company has the industry's rare advantage of an integrated industrial chain layout, with asset capabilities in upstream copper foil, glass fiber, resin, filler, and other materials in copper-clad laminates. Its parent company, KINGBOARD HLDG (00148), is a core supplier of PCBs. In the raw material price increase cycle driven by AI demand, the company is currently in a phase of "traditional CCL multiple price increases to repair profits, AI-CCL high-end material growth reassessment, transitioning from a leading CCL company to a leading supplier of AI electronic fabrics." The three transformations will profoundly affect the company's profit expectations and valuation levels, and the capital market is currently in the process of recognizing the company's profound transformation. Traditional business cycle turning point, traditional CCL multiple price increases to repair profits In the PCB industry chain, the profit capabilities of CCL are relatively dispersed in the past and weaker than downstream PCB and upstream material sectors, and the difficulty of price increases is also relatively high compared to other parts of the industry chain. Since 2025, driven by demand, the industry has gradually implemented a CCL price increase plan, and the profit capabilities of traditional CCL have been reassessed. Reassessment of AI high-end material growth The performance of the company's CCL products is continuously upgrading, and M7-M8 level CCL products are currently under development and launch; plans to increase copper foil capacity in 2027, high-frequency high-speed, low dielectric loss RTF and HVLP copper foil. The company has already ignited the first annual production of 500 tons of low dielectric first-generation glass fiber yarn in 2025 and plans to further increase 11 production lines to produce low dielectric first-generation, second-generation, Low CTE glass fiber yarn, and products in 2026-2027. The company is expected to upgrade from a traditional material integrated layout enterprise to a comprehensive upgrade in AI material integrated layout. Reshaping the industry chain position of the CCL link The market believes that CCL price increases are only a transmission of downstream demand improvement and upstream raw material price increases. However, the bank believes that the more profound trend is the obvious customization, specialization, and high-end trend of CCL, which will drive the reshaping of the industry chain position of CCL. The better characteristics of the CCL industry structure will gradually be reflected, which is expected to continue to increase the profit margin of CCL. As the world's largest CCL company, KB LAMINATES will continue to benefit. Risk warning: The pace of capacity production may be slower than expected, downstream demand growth may be slower than expected, and competition may intensify.