Kingboard Laminates (01888.HK) Report Interpretation

Overview

The report summarizes key takeaways from BofA's meeting with Kingboard Laminates management on August 27, 2026. Its core view is that the upstream fiberglass cloth shortage is structural, copper-clad laminate price increases remain sustainable and will be reflected in profit with a lag in 2H, while the company's progress in AI-related products such as low-dielectric fiberglass, T-glass, high-end copper foil, and M6+ copper-clad laminates has exceeded expectations and should support earnings growth and a valuation rerating.

Core views

The near-term earnings theme for Kingboard Laminates is the delayed realization of copper-clad laminate price increases. Management said that because delivery lead times have lengthened from the previous 7-10 days to 1-2 months, the impact of price changes on profit also lags by 1-2 months. For example, profit of approximately HK$1.1bn in July 2026 mainly reflected copper-clad laminate prices in May-June, while the July-August price increases are not expected to be reflected until August-October profit. The chairman is confident that 2026 earnings will reach HK$10bn, implying 2H earnings of more than HK$7bn and indicating that earnings growth may strengthen further in 2H. The report believes the price increases are sustainable rather than merely a short-term restocking phenomenon. The supply-demand imbalance in fiberglass cloth, a key upstream material, remains structural, and the industry is unlikely to switch to domestically produced looms on a large scale because of their lower yields and the higher costs caused by yarn wastage. Meanwhile, facing tighter PCB supply, automotive and smartphone original equipment manufacturers are proactively negotiating with copper-clad laminate and material suppliers to secure supply, indicating a greater willingness among downstream brands to absorb higher costs. As the world's largest traditional copper-clad laminate manufacturer, with vertically integrated upstream capabilities spanning copper foil, fiberglass yarn, fiberglass cloth, and epoxy resin, Kingboard Laminates can directly benefit from this supply-demand and pricing environment, in the report's view. The published 1H26 results provide a foundation for this view: revenue was HK$14.904bn, up 38% HoH and 55% YoY; gross profit was HK$4.580bn, up 106% HoH and 160% YoY; and gross margin rose to 30.7%, increasing 10.1 percentage points HoH and 12.3 percentage points YoY. Operating profit was HK$3.868bn, up 149% HoH and 236% YoY; net profit was HK$2.887bn, up 91% HoH and 209% YoY, 12.4% above consensus; and net margin reached 19.4%, increasing 5.4 percentage points HoH and 9.6 percentage points YoY. The second theme is that diversification progress in high-end and AI-related materials is better than BofA previously expected. The company has obtained qualification from six copper-clad laminate customers for low-DK1, low-DK2, and T-glass products and plans to add another T-glass furnace within the year, bringing the total number of new furnaces added in 2026 to four. Low-DK1 has already achieved relatively high capacity utilization and yield, while the target for low-DK2 and T-glass is to ramp up to full capacity utilization by year-end. The company's 2027 capacity for specialty fiberglass, high-end copper foil, and M6+ copper-clad laminates is fully booked. Based on this, the report believes the company's expansion into the AI server supply chain may succeed; the rising mix of high-end AI products is also a key reason for the higher valuation multiple. BofA consequently made significant revisions to its earnings forecasts. Its 2026 revenue forecast was raised by 5.5% from HK$35.930bn to HK$37.909bn, its gross profit forecast was raised by 21.1% to HK$14.277bn, and gross margin was increased from 32.8% to 37.7%. Its operating profit forecast was raised by 23.8% to HK$12.690bn, its net profit forecast was raised by 19.7% to HK$10.023bn, and EPS was raised by 18.0% from HK$2.67 to HK$3.15. Revenue forecasts for 2027 and 2028 were lowered by 8.2% and 8.6%, respectively, to HK$59.750bn and HK$68.014bn due to lower assumptions for Thailand capacity, as facilities operated by local PCB suppliers have yet to see meaningful demand growth. However, higher gross margins offset the revenue reductions: gross margin forecasts for both 2027 and 2028 were raised by approximately 3.5 percentage points to 43.1%, while net profit forecasts edged up 0.6% and 0.2%, respectively, to HK$19.393bn and HK$22.003bn, and EPS was adjusted slightly to HK$6.10 and HK$6.93, respectively. The report forecasts an earnings CAGR of 48% from 2024 to 2028. BofA's 2026-2028 net profit and EPS forecasts are 24.1%, 55.7%, and 57.5% above consensus, respectively, with the main differences arising from higher revenue, gross margin, and net margin assumptions. It forecasts revenue of HK$37.909bn, HK$59.750bn, and HK$68.014bn for 2026-2028, respectively; net profit of HK$10.023bn, HK$19.393bn, and HK$22.003bn; and operating margins of 33.5%, 40.3%, and 40.2%. On valuation, BofA raised its price objective from HK$53 to HK$65, applying a 13x P/E multiple to forecast earnings from 2H26 to 1H27, versus 12x previously. The 13x multiple is approximately 0.5 standard deviations above the mean of the company's historical trading range and is also comparable to the previous earnings upcycle in 2021, which was driven by rising prices for electronic-grade fiberglass. It also reflects the increasing mix of high-end AI-related products. The report also notes that the company was then trading at approximately 9x one-year forward P/E, below its historical average. Based on the realization of price increases, progress in high-end products, and improving investor confidence, BofA reiterates its Buy rating.

Analysis framework

The report first uses information from the management meeting to identify the time lag between copper-clad laminate prices and their impact on profit. It then assesses the sustainability of price increases based on fiberglass cloth supply constraints, the yield and cost of substitute equipment, and the procurement behavior of downstream PCB companies and end customers. It subsequently evaluates progress in the AI business using the qualification, utilization, capacity expansion, and order status of low-dielectric fiberglass, T-glass, high-end copper foil, and M6+ copper-clad laminates, revising annual revenue, gross margin, net profit, and EPS forecasts accordingly. Finally, the report determines the target valuation by combining the company's current and historical P/E ranges, the 2021 earnings cycle, and changes in the mix of high-end products.

Methodology notes

• Industry/Sector Analysis FrameworkSupply-demand framework

  Fiberglass cloth and copper-clad laminate supply-demand analysis

  The report assesses whether copper-clad laminate price increases can be sustained based on the structural shortage of fiberglass cloth, the yield and cost limitations of domestically produced looms, and downstream customers' efforts to secure supply.

• Industry/Sector Analysis FrameworkUpstream-Midstream-Downstream Supply Chain Transmission

  Price transmission from fiberglass materials to copper-clad laminates, PCBs, and end brands

  The report analyzes how upstream material shortages push up copper-clad laminate prices along the supply chain and explains the mechanism for passing prices downstream through tight PCB supply and end brands' willingness to absorb higher costs.

• Valuation MethodPE/PEG valuation

  Price objective based on forward P/E

  The HK$65 price objective is based on a 13x P/E multiple applied to forecast earnings from 2H26 to 1H27. The report compares this multiple with the historical range and the 2021 earnings upcycle, while using the higher mix of high-end AI products to support the valuation increase.

• Company Fundamentals and Financial Framework

  Annual earnings forecast revisions and consensus comparison

  Based on the timing of price increase realization, high-end product margins, and Thailand capacity demand assumptions, the report adjusts revenue, margins, net profit, and EPS for 2026-2028 and compares them with consensus to highlight expectation gaps.

Asset mapping & comparison

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

• Kingboard Laminates (01888.HK)

  The report views fiberglass cloth shortages as supporting copper-clad laminate price increases, while the lagged realization of higher prices and volume growth in AI-related high-end materials are considered the main drivers of earnings growth and a valuation rerating.

  Strengths

  One of the world's largest traditional copper-clad laminate manufacturers, with vertically integrated upstream capabilities spanning copper foil, fiberglass yarn, fiberglass cloth, and epoxy resin; six customers have qualified its low-DK and T-glass products, and multiple categories of high-end capacity for 2027 are fully booked.

  Weaknesses

  Low-DK2 and T-glass are still in the utilization ramp-up stage, while facilities operated by PCB suppliers in Thailand have not seen meaningful demand growth.

  Comparison

  The report states that the company is the world's largest traditional copper-clad laminate manufacturer and one of the few suppliers capable of vertically integrating multiple upstream materials; its approximately 9x one-year forward P/E is below its historical average.

  Risks

  Earnings and valuation depend on copper-clad laminate price increases, upstream fiberglass cloth supply, AI server demand, and the progress of external fiberglass cloth sales.

Key data

• 1H26 net profitHK$2.887bnUp 91% HoH and 209% YoY, 12.4% above consensus
• 1H26 revenueHK$14.904bnUp 38% HoH and 55% YoY
• 1H26 gross margin30.7%Up 10.1 percentage points HoH and 12.3 percentage points YoY
• July 2026 profitHK$1.1bnMainly reflects copper-clad laminate prices in May-June 2026
• Management's 2026 earnings targetHK$10bnImplies 2H26 earnings of more than HK$7bn
• Lag in profit transmission from price increases1-2 monthsDelivery lead times lengthened from the previous 7-10 days to 1-2 months
• 2026 net profit forecastHK$10.023bnRaised 19.7% from the previous forecast
• 2026 EPS forecastHK$3.15Raised 18.0% from the previous forecast of HK$2.67
• 2027 EPS forecastHK$6.10Lowered 0.9% from the previous forecast of HK$6.16
• 2028 EPS forecastHK$6.93Lowered 1.3% from the previous forecast of HK$7.01
• EPS premium to consensus24.1% / 55.7% / 57.5%Corresponding to 2026E, 2027E, and 2028E, respectively
• 2024-2028 earnings CAGR48%BofA model forecast
• High-end material customer qualifications6 copper-clad laminate customersCovering low-DK1, low-DK2, and T-glass
• New furnaces added in 20264 furnacesPlans to add another T-glass furnace within the year
• Price objectiveHK$65Raised from HK$53, based on 13x forecast P/E for 2H26 to 1H27

Impact & implications

The report believes price increases have not yet been fully reflected in published profits, meaning 2H26 earnings could be significantly stronger than in 1H. The structural shortage of fiberglass cloth and downstream demand to secure supply provide a degree of sustainability for this improvement. If low-DK2, T-glass, and other AI materials raise utilization as planned and fulfill 2027 orders, the company's growth drivers will expand beyond price increases for traditional copper-clad laminates to include a higher-end product mix, which is also the main basis for raising the target valuation multiple from 12x to 13x. Weak demand for Thailand capacity reduces long-term revenue forecasts, but higher gross margins leave 2027-2028 earnings forecasts largely unchanged.

Risks

• One downside risk is that copper-clad laminate prices increase more slowly than expected.
• Better-than-expected industry supply of upstream materials, particularly fiberglass cloth, could weaken price support.
• Weaker-than-expected AI server demand could delay volume growth in high-end materials.
• External sales of fiberglass cloth could progress more slowly than expected.
• Upside risks include stronger-than-expected copper-clad laminate price increases.
• A slower-than-expected recovery in the supply of upstream materials, particularly fiberglass cloth, could further strengthen the pricing environment.
• Stronger-than-expected AI server demand could accelerate growth in high-end products.
• Faster-than-expected external sales of fiberglass cloth could provide an additional earnings contribution.

What to watch

• Monitor whether the July-August 2026 copper-clad laminate price increases are reflected in August-October profit after the expected 1-2 month lag.
• Monitor whether full-year 2026 earnings can reach management's target of HK$10bn.
• Monitor whether low-DK2 and T-glass can ramp up to full capacity utilization by the end of 2026.
• Monitor the commissioning of the new T-glass furnace and the capacity ramp-up of the four furnaces added in 2026.
• Monitor whether the fully booked 2027 capacity for specialty fiberglass, high-end copper foil, and M6+ copper-clad laminates can be delivered smoothly.
• Monitor whether demand for PCB capacity in Thailand shows meaningful improvement.