Taiwan CCL upcycle, BofA raises EMC/TUC target prices

Overview

This report focuses on Taiwan's copper clad laminate (CCL) industry. Its core view is that strong downstream PCB demand, along with AI servers and high-end networking switches, is driving growth in high-end CCL demand, while industry price hikes are improving the earnings outlook for EMC and TUC. BofA therefore raises the target prices of both companies and maintains Buy ratings.

Core views

The report believes the CCL industry's pricing environment has improved significantly, and the price hikes by Panasonic and TUC validate tight supply-demand conditions. EMC benefits more directly from the revenue uplift from 2Q26 price hikes; TUC, due to its greater exposure to the low- to mid-end market and larger room for product mix optimization, may benefit from price hikes for longer. Over the long term, capital expenditure and capacity expansion plans by downstream PCB makers for AI servers, high-end PCB/HDI, and data center applications will support growth visibility for CCL suppliers in 2027-2028.

Analysis framework

The report uses a combination of industry supply-demand analysis, pricing assumptions, downstream PCB expansion plans, earnings forecast revisions, and P/E valuation multiples to evaluate revenue, margins, EPS, and target prices for EMC and TUC separately.

Methodology notes

• Industry supply-demand analysisCCL S/D analysis

  Use high-end PCB capacity expansion and AI server demand to assess the CCL supply-demand landscape

  The report summarizes 2026-2028 capacity expansion and capital expenditure plans of multiple high-end PCB suppliers and believes demand expansion will help keep the CCL supply-demand balance favorable after 2027.

• Valuation methodP/E valuation

  Derive the target price by multiplying expected EPS by the target P/E multiple

  EMC's target price uses 30x 2H27-1H28E P/E; TUC's target price uses 27x 2027E P/E, both at the high end of their historical valuation ranges.

• Earnings forecast revisionEPS revision

  Incorporate stronger revenue growth and more favorable pricing into 2026-2028E earnings forecasts

  The report raises EMC 2026-2028E EPS by 1-2% and TUC 2026-2028E EPS by 10-18%.

Asset mapping & comparison

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

• Elite Material (EMC, 2383 TT / ETMCF)

  One of the core beneficiaries

  Strengths

  Strong position in the high-end CCL market, with structural growth opportunities in server and networking applications; the report expects operating margin to exceed 25% in 2027-2028.

  Weaknesses

  Valuation already uses a historically high-end multiple, implying high reliance on sustained growth and market share expansion.

  Comparison

  Compared with TUC, EMC has a stronger dominant position in high-end CCL, so its valuation horizon is rolled forward to 2H27-1H28E.

  Risks

  Loss of iPhone market share, intensifying competition in high-end CCL, and unfavorable changes in exchange rates and raw material costs.

• Taiwan Union Technology Corporation (TUC, 6274 TT / TWUNF)

  One of the core beneficiaries

  Strengths

  Greater exposure to the low- to mid-end market means benefits from price hikes may last longer; meaningful capacity additions emerge earlier in 2027, with substantial room for product mix improvement.

  Weaknesses

  Gross margin is more vulnerable to raw material price fluctuations, and intensifying CCL competition could compress margins.

  Comparison

  Compared with EMC, TUC sees a larger EPS upgrade, mainly driven by stronger revenue growth and product mix optimization potential.

  Risks

  Raw material price volatility, intensifying CCL competition, substitution by new upstream materials, and underwhelming execution leading to market share loss or weaker customer momentum.

Key data

• EMC target priceNT$4,600, previously NT$3,900Valuation is based on 30x 2H27-1H28E P/E.
• TUC target priceNT$1,180, previously NT$1,000Valuation is based on 27x 2027E P/E.
• 2Q26 revenue outlookBoth EMC/TUC are expected to grow 17% QoQMainly driven by CCL price hikes and demand growth.
• EMC EPS revision2026-2028E EPS raised by 1-2%Reflects slightly stronger revenue growth assumptions.
• TUC EPS revision2026-2028E EPS raised by 10-18%Reflects stronger revenue growth and room for product mix improvement.
• TUC revenue growth outlookRevenue CAGR of about 60% in 2026-2028The report expects TUC's revenue to grow rapidly during this period.
• TUC margin assumptions2026-2028E gross margin of about 26%, operating margin of about 19-20%Used to support a higher valuation multiple.

Impact & implications

If the report's view plays out, CCL suppliers will benefit from price hikes, AI servers, and high-end networking demand, and earnings forecasts and valuation anchors may continue to move higher. From an investment perspective, EMC offers stronger long-term visibility tied to high-end CCL, while TUC has greater upside from product mix optimization and price hike elasticity in the low- to mid-end segment.

Risks

• Raw material price volatility may compress or disrupt gross margins for CCL companies.
• Intensifying competition in high-end CCL may weaken price increases and margin improvement.
• If downstream expansion in AI servers, high-end PCB/HDI, or networking equipment falls short of expectations, demand support will weaken.
• Changes in exchange rates and raw material costs may adversely affect earnings.
• Adoption of new upstream materials may introduce uncertainty to industry business models and demand.

What to watch

• The actual implementation of TUC's 20-40% ASP increase on some products.
• Whether EMC and TUC achieve about 17% QoQ revenue growth in 2Q26.
• The progress of capacity expansion by high-end PCB suppliers in Taiwan, Thailand, China, Malaysia, and other locations.
• Whether demand for AI servers and high-end networking switches continues to exceed expectations.
• Trends in EMC/TUC 2026-2028E gross margin, operating margin, and EPS revisions.