BofA Securities: CCL specification upgrades for PCB to advance toward 2027/28; prices have upside; reiterate "Buy" on KB LAMINATES (01888)

BofA Securities released a research report stating that specification upgrades and demand growth for copper-clad laminates (CCL) used in the production of printed circuit boards (PCB) are still progressing as planned. The bank maintains a positive view on continued specification upgrades and strong demand in 2027-2028, and believes that concerns related to CPO adoption have largely been reflected in CCL stock valuations. The bank reiterates its "Buy" rating on KB LAMINATES (01888), bullish on its strong price hike cycle and high-end mix improvement. The bank also believes that rated "Buy" Taiwan Union Technology (2383.TW) and Taiwan Printed Circuit Board Tech (6274.TW) present attractive opportunities, and raises their earnings forecasts, maintaining target prices of NT$8,200 and NT$2,600 respectively. For mainland A-share Shengyi Technology (600183.SH), BofA Securities holds a relatively conservative view due to lower growth forecasts and less attractive valuation, but raises its EPS forecasts for the next two years by 21% and 18% respectively, and lifts its target price from RMB83 to RMB99, while reiterating its "Underperform" rating. The bank notes that specification migration across AI GPU/ASIC, network switches, and optical modules is clear, and CCL revenue growth will be driven by capacity expansion, product mix improvement, and cost-push price increases, with gross margins also expected to expand; the pricing environment remains benign, and rising copper foil and glass fiber cloth costs are expected to be passed through. The bank believes that hydrocarbon resin and PTFE solutions will coexist and complement each other at the M9/M10 grade CCL level, and that Rubin Ultra customer feedback and specifications will be key observation points from end-2026 to early 2027. BofA Securities also reiterates its "Buy" rating on Doosan (000150.KS), bullish on its NVIDIA GPU and Amazon switch positioning. The bank provides scenario analysis, assuming future CCL price increases are mainly driven by glass fiber cloth tightness, and that copper foil and resin input costs remain relatively stable. Assuming a 100% CCL price increase, KB LAMINATES' gross margin could expand by approximately 28 percentage points, with EPS growth of over 200% versus 2026 levels. Specifically, assuming a pre-hike gross margin of approximately 20%, and that price increases can be fully transmitted to earnings growth, a 100% CCL price increase could boost KB LAMINATES' EPS by 217%. Even if CCL prices increase by only 20% or 40%, it could still boost its EPS by 67% and 105% respectively. BofA Securities adds that year-to-date, low-end CCL and high-end CCL prices have already increased by over 40% and over 20% respectively. Due to expectations of continued copper price increases from end of this year into next year, further CCL price increases cannot be ruled out. In terms of glass cloth, amid supply shortages, there is potential upside for second-generation low dielectric glass fiber cloth (Low Dk2) price increases, while low-end electronic glass cloth prices remain on an upward trend, potentially reaching RMB15-16 per square meter by end of this year. The bank believes these conditions all point to a benign pricing outlook for CCL producers.