Kingboard Laminates Holdings Ltd. (01888) Report Interpretation

Overview

This conference-feedback update focuses on Kingboard Laminates' PCB-material supply conditions, pricing outlook, capacity expansion and progress in specialty glass cloth and HVLP copper foil. Morgan Stanley presents an Overweight view, supported by constrained industry capacity and the company's move into higher-value materials.

Core views

The central message from the conference is that supply expansion in PCB fiberglass cloth and copper foil is constrained by equipment availability. Kingboard expects the fiberglass-cloth shortage to continue through 2027, which it views as creating room for further price increases. The company indicated that capacity additions are limited by equipment supply rather than simply by demand or capital availability. Kingboard plans to expand fiberglass-cloth production by adding 450-500 Toyota looms in 2026 and another 1,100 looms in 2027, at an indicated pace of roughly 100 looms per month. In pricing, the company expects larger September increases for thin E glass 1080 than for thick E glass 7628; in August, the magnitude of price increases for the two products was broadly similar. These comments frame thin glass as the tighter and potentially more price-responsive part of the market. In specialty glass cloth, Kingboard expects four LDK1/2/CTE production lines from mid-2026 and two additional lines from late 2026. Its specialty glass cloth has passed qualification with six new CCL customers. The reported gross-margin figures are approximately 40% for LDK1, approximately 50% for LDK2, and above 50% for low-CTE products, underscoring the potential value of product upgrading. For copper foil, Kingboard has passed customer qualifications for HVLP1/2/3 and is pursuing qualification for HVLP4. It primarily sources surface-treatment equipment for high-end HVLP foil from Mifune, while it may consider local equipment suppliers for lower-end products. Surface-treatment-line lead times are currently nine to 12 months, reinforcing the report's broader capacity-constraint thesis. Morgan Stanley's valuation base case uses a residual-income model with a 9.7% cost of equity, comprising beta of 1.0, an 8.7% equity premium and a 1% risk-free rate; it assumes 8% medium-term growth and 3% terminal growth. The report shows a HK$75.00 price target, a September 17, 2026 closing share price of HK$46.62, and 61% indicated upside. Its model forecasts EPS of HK$2.73 in 2026e, HK$4.51 in 2027e and HK$5.40 in 2028e, versus HK$0.78 in 2025. The stated upside factors are stronger AI demand, share gains and faster-than-expected material upgrades; slower-than-expected CPO adoption is also listed as an upside factor. Downside factors are weaker AI demand, share loss, slower material upgrades and faster-than-expected CPO adoption.

Analysis framework

Morgan Stanley combines conference feedback on supply, equipment lead times, pricing, capacity plans, customer qualification and product margins with forward financial estimates. It values the company using a residual-income model and tests the investment case against demand, market-share, material-upgrade and CPO-adoption outcomes.

Methodology notes

• Valuation methodsRIM (Residual Income Model)

  Residual-income valuation model

  The base case values Kingboard Laminates using a residual-income model with explicit cost-of-equity, medium-term-growth and terminal-growth assumptions.

• Industry AnalysisSupply-demand framework

  Supply constraints and pricing analysis

  The report links equipment shortages and long lead times to restricted additions of glass-cloth and copper-foil capacity, supporting its pricing discussion.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Customer qualification and materials upgrading

  The report assesses Kingboard's specialty material progress through CCL-customer qualifications and movement from established HVLP grades toward HVLP4.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Kingboard Laminates Holdings Ltd. (01888.HK)

  Primary covered company benefiting from constrained PCB-material supply and progression into specialty glass cloth and HVLP copper foil.

  Strengths

  Expected fiberglass-cloth shortage through 2027, planned loom additions, six new CCL-customer qualifications, and higher reported margins for specialty glass cloth.

  Weaknesses

  Capacity growth is constrained by equipment availability and surface-treatment lines have 9-12 month lead times.

  Comparison

  Thin E glass 1080 is expected to see larger September price increases than thick E glass 7628.

  Risks

  Weaker AI demand, share loss, slower material upgrades and faster-than-expected CPO adoption.

Key data

• Stock ratingOverweightMorgan Stanley rating for Kingboard Laminates
• Price targetHK$75.00Target price shown in the report
• Closing share priceHK$46.62As of September 17, 2026
• Upside to price target61%Reported upside versus the stated share price
• Fiberglass-cloth shortage outlookThrough 2027Kingboard expectation
• Toyota loom additions450-500 in 2026; 1,100 in 2027Approximately 100 looms per month in 2027
• Surface-treatment-line lead time9-12 monthsFor copper-foil equipment lines
• Specialty glass-cloth gross marginsLDK1 ~40%; LDK2 ~50%; low CTE 50%+Reported product-level margins
• EPS forecastHK$2.73 / HK$4.51 / HK$5.402026e / 2027e / 2028e, versus HK$0.78 in 2025

Impact & implications

The report argues that equipment-constrained supply can sustain favorable pricing for fiberglass cloth, while Kingboard's capacity additions, customer qualifications and higher-margin specialty materials could strengthen earnings growth. The investment case depends on AI-related demand, execution on material upgrades, market share and the pace of CPO adoption.

Risks

• Weaker-than-expected AI demand could reduce demand for Kingboard's materials.
• Share loss could weaken the company’s growth outlook.
• Slower-than-expected material upgrades could delay the benefits of specialty products.
• Faster-than-expected CPO adoption is identified as a downside risk.

What to watch

• The duration of the fiberglass-cloth shortage and the scale of subsequent price increases.
• Execution of planned Toyota-loom additions in 2026 and 2027.
• Qualification progress for HVLP4 and adoption by new CCL customers.
• AI-demand trends, market-share developments, material-upgrade timing and CPO adoption.