J.P. Morgan: Initiates KB LAMINATES (01888) with "Overweight" rating, target price HK$65

J.P. Morgan released a research report initiating coverage of KB LAMINATES (01888) with an "Overweight" rating and a target price of HK$65, equivalent to 21x and 13x forecast P/E for 2026 and 2027, versus a past 10-year average of 12.5x. The bank noted that the company is the world's largest conventional copper-clad laminate (CCL) manufacturer and one of only two companies with a fully integrated printed circuit board (PCB) materials supply chain, the other being Taiwan's Nan Ya Plastics. The bank noted that surging demand from AI and general servers has caused a significant shortage of glass fabric, with electronic-grade glass fabric prices up over 100% year-to-date, which is expected to boost the company's integrated profit margins and market share. The bank forecasts EPS to rise 8x between 2025 and 2028, driven mainly by industry shortages and a shift toward high-end CCL that will drive a cumulative 150% increase in blended CCL ASPs, capacity expansion projects in Jiangxi and Guangdong, a 75% increase in loom fleet size over the next two years, and the ramp-up of HVLP1-3 copper foil and potential customer qualification for HVLP4. J.P. Morgan stated that KB LAMINATES has locked in approximately 35% to 40% of Toyota's loom slots for the next two years, with its fleet expanding from about 3,300 units in 2026 to about 5,800 units in 2028, driving a roughly 55% increase in glass fabric output (including specialty) from 2025 to 2028 and contributing over HK$5 billion in net profit growth. The bank expects the glass fabric shortage to persist at least until 2027, with price increases continuing. On copper foil, the company currently has about 63,000 tonnes/year of capacity, and its new Fogang plant will begin ramping HVLP1-3 (21,000 tonnes/year) from Q3 2027; the bank expects processing fees to rise 20% to 60% in 2026. The bank believes this CCL upcycle could be longer than those of 2015-2017 and 2019-2021, due to accelerated AI specification migration and capacity conversion losses, while general server shipments are expected to grow 22% and 25% year-on-year in 2026 and 2027, which is expected to stimulate demand for M4-M7 grade CCL products. In addition, KB LAMINATES is moving toward the AI-grade materials supply chain, with the company expanding "T-glass" capacity 5x and having begun supplying core CCL customers such as Shengyi Technology (600183.SH). The bank said KB LAMINATES' valuation is attractive, with placement risk already reflected in J.P. Morgan's target price discount. Although the company lags most peers in specification upgrades, it currently trades at only 15x and 10x forecast P/E for this year and next, while J.P. Morgan expects its 2028 net profit to rise 8x. Investors have been focused on the founding family's reduction of its stake in Kingboard during June to July 2026, which coincided with a 72% decline in KB LAMINATES' share price, while the Hong Kong Hang Seng Index rose 12% over the same period. The bank believes the situation is now in the past, because if the founding family's vehicle seeks to regain control, further reduction below 30% (currently 31.8%) could trigger a mandatory general offer requirement under HKEX rules. Exchange filings show that the founding family/management has resumed buying shares of Kingboard (00148) and KB LAMINATES after strong H1 2026 results. The bank's HK$65 per share target price for KB LAMINATES is based on 20x forecast 2027 P/E, in line with the Asian PCB supply chain average, and incorporates a 30% discount to reflect investors' ongoing concerns about changes in the founding family's shareholding.