Citigroup: Initiates a 30-day catalyst observation on KINGBOARD HLDG (00148), reaffirming a "buy" rating.

Citigroup's research report stated that the profit forecast for KINGBOARD HLDG (00148) for the years 2026 to 2028 has been increased by 16% to 28%. It reiterates its "buy" rating and significantly raises the target price based on sum-of-the-parts valuation method (SOTP) from 89.6 Hong Kong dollars to 202 Hong Kong dollars to reflect the profit increase. The discount rate for the holding company has also been narrowed from the previous 45%-50% to 20%. The bank has initiated a 30-day catalyst observation period for KINGBOARD HLDG. It mentioned that the frequent increase in profit forecasts for KINGBOARD HLDG's 62% subsidiary, KB LAMINATES (01888), is mainly due to the assumption of higher average selling prices for copper-clad laminates (CCL) and electronic glass fiber cloth, which is enough to offset the recent decrease in KINGBOARD HLDG's ownership from 67% to 62% due to equity placement. Citigroup expects KINGBOARD HLDG to evolve structurally into almost pure concept stocks of printed circuit boards (PCB) and copper-clad laminates (CCL) in the AI era, with these two businesses accounting for the majority of its expected total net profit in 2028, projected to increase from 63% in 2025 to 87%. The bank predicts that KINGBOARD HLDG may release strong earnings guidance for the first half of 2026 next month, with a strong year-on-year increase of 55.6% to 4.016 billion Hong Kong dollars in net profit, a 33% increase in revenue to 28.739 billion Hong Kong dollars, and an expected acceleration in profit growth to nearly 5.01 billion Hong Kong dollars in the second half of the year. Strong growth drivers include KB LAMINATES' net profit expected to triple year-on-year, becoming the largest profit contributor for KINGBOARD HLDG this year; followed by the printed circuit board business gaining market share due to vertical integration advantages (ensuring upstream supply in the current shortage of copper-clad laminates), leading to margin expansion; furthermore, the profit margin of the chemical business is expected to expand due to the surge in oil prices caused by the US-Iran conflict in the second quarter. Additionally, the company sold shares of KB LAMINATES on June 16, with cash flow per share increasing by 10.6 Hong Kong dollars, reducing the net debt ratio from 28% in 2025 to an expected 15% in 2026, which will partially support its capital expenditure plan of over 6 billion Hong Kong dollars annually in the period from 2026 to 2027.