Citi: KB LAMINATES (01888) confirms average price increase of 15% for thin fabric copper-clad laminates starting from October; reiterates "Buy" rating.

Citi released a research report stating that KB LAMINATES (01888) has announced, as expected, an average selling price increase of 15% starting from October for thin fabric copper-clad laminates (CCL) with specifications of #2116 or below, used in high-end applications such as 5G equipment, automobiles, and smartphones. The bank reiterates its "Buy/High Risk" rating, maintaining a target price of HK$96. The bank noted that the latest cost increases for electronic glass fabric are also divergent: thin fabric (#2116 or #1080) rose by approximately RMB 2.5 per meter per month in September and October, while thick fabric (#7628) saw a price increase of approximately RMB 1.5 to 1.6 per meter over the same period. This price hike does not cover all CCL, but only targets high-end products. The bank believes that as long as inflationary pressure persists, it is only a matter of time before thick fabric #7628 also sees a price increase. The bank estimates that after this price increase, FR4 CCL selling prices will rise by 15% to RMB 370-390 per sheet; #2116 or below accounts for approximately 40% of the company's total electronic glass fabric value. The bank expects the company may raise average selling prices by another approximately 10% in November or December, bringing the year-end average selling price to approximately RMB 420 per sheet, compared to a spot average selling price of RMB 150 per sheet at the end of 2025 a sharp increase of approximately 1.8 times. Gross margin is expected to surge from 19.6% in 2025 to 36.9% in 2026, with gross margin expected to expand from approximately 31% in the first half of 2026 to approximately 40% in the second half on a half-year basis. The bank stated that KB LAMINATES' share price has fallen more than 15% over the past week due to negative macroeconomic news, but this is not a problem with the company itself; the bank prefers KB LAMINATES over KINGBOARD HLDG (00148).