BofA reiterates Buy ratings on Unimicron, NYPCB, and Kinsus, and raises target prices for all three companies

Overview

This report focuses on major Taiwan substrate suppliers Unimicron, NYPCB, and Kinsus within Asia-Pacific technology hardware. BofA believes that tightening supply of upstream raw materials, especially T-glass cloth, as well as substrate supply itself, has extended lead times for some substrates to as long as three quarters, creating a more favorable supply-demand backdrop. This backdrop should help major Taiwan substrate suppliers further raise ASP and improve gross margins in their ABF and BT substrate businesses.

Core views

The core view is that the supply-demand gap in the substrate industry is likely to continue widening, and major suppliers should broadly benefit. The report reiterates Buy ratings on Unimicron, NYPCB, and Kinsus, and simultaneously raises target prices after lifting earnings forecasts. The earnings upgrades stem from stronger pricing and margin assumptions, especially more favorable ABF supply-demand conditions and additional indirect support for BT substrates from tighter E-glass supply. The report also notes that its 2030 margin and expense ratio assumptions remain relatively conservative; if persistent shortages and operating leverage strengthen further, earnings forecasts could still surprise to the upside.

Analysis framework

The report uses two types of scenario analysis to assess 2030 EPS potential: first, a top-down approach deriving EPS upside from demand growth, market share, and an ASP assumption of about US$0.0008/mmsq; second, a bottom-up approach estimating long-term EPS potential based on company-level business mix, gross margin, and operating leverage. On valuation, the methodology for all three companies remains unchanged: Unimicron uses 29x 2H27-1H28E P/E, while NYPCB and Kinsus use 27x 2Q27-1Q28E P/E.

Methodology notes

• Valuation methodsForward P/E method

  Set target price based on a P/E multiple for the target period

  Unimicron's target price is based on 29x 2H27-1H28E P/E; NYPCB's and Kinsus's target prices are both based on 27x 2Q27-1Q28E P/E, unchanged from the previous valuation approach.

• Scenario analysisTop-down 2030 EPS scenario

  Derive long-term EPS from demand CAGR, market share, and ASP assumptions

  The base case uses midpoint assumptions for demand growth and market share, along with an ASP assumption of about US$0.0008/mmsq, to estimate upside in 2030 EPS relative to the 2028 forecast.

• Scenario analysisBottom-up 2030 EPS scenario

  Derive long-term earnings power from company operating assumptions

  The report estimates 2030 EPS potential for Unimicron, NYPCB, and Kinsus from the perspectives of business growth, gross margin, and operating leverage, and compares it with 2028 forecast levels.

Asset mapping & comparison

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

• Unimicron (3037 TT / UMCRF)

  Core coverage company; one of Taiwan's major substrate suppliers

  Strengths

  High-end technology products support earnings, with end demand relatively more resilient; target price raised to NT$875.

  Weaknesses

  Valuation multiple is above the historical average and requires earnings delivery to support it.

  Comparison

  Under the top-down base/bull scenarios, 2030 EPS upside is 33%/74%; under the bottom-up approach it is 76%/108%.

  Risks

  Peer ABF capacity expansion, lower-than-expected increase in AI server ASP content, and weakening consumer electronics demand.

• NYPCB (8046 TT / NANYF)

  Core coverage company; major Taiwan substrate and PCB supplier

  Strengths

  The report expects ROE and operating margin to expand in 2027-2028E, and the company has an approximately 33% net cash equity position; target price raised to NT$960.

  Weaknesses

  Sensitive to ABF supply-demand, SiP/AiP adoption rates, and the PCB competitive landscape.

  Comparison

  Under the top-down base/bull scenarios, 2030 EPS upside is 33%/90%; under the bottom-up approach it is 70%/98%.

  Risks

  Peer ABF capacity expansion, weaker-than-expected SiP/AiP adoption, intensifying competition in the PCB business; disclosures indicate Nan Ya PCB has investment banking or non-investment banking relationships with BofA.

• Kinsus (3189 TT / KNSUF)

  Core coverage company; Taiwan substrate supplier

  Strengths

  The report expects gross margin to reach about 30% in 2027-2028 and benefit from stronger gross margin and operating leverage; target price raised to NT$565.

  Weaknesses

  The volatility risk rating was changed from B to C, indicating potentially higher share price volatility.

  Comparison

  Under the top-down base/bull scenarios, 2030 EPS upside is 63%/109%; under the bottom-up approach it is 28%/39%.

  Risks

  Peer ABF capacity expansion, slower SiP/AiP adoption, intensifying competition, and adverse technology substitution.

Key data

• Unimicron target price changeNT$875, previously NT$740Rating maintained at Buy; valuation based on 29x 2H27-1H28E P/E.
• NYPCB target price changeNT$960, previously NT$810Rating maintained at Buy; valuation based on 27x 2Q27-1Q28E P/E.
• Kinsus target price changeNT$565, previously NT$480Rating maintained at Buy; valuation based on 27x 2Q27-1Q28E P/E; volatility risk rating changed from B to C.
• Magnitude of 2026-2028 EPS forecast increasesUnimicron 6-11%; NYPCB 16-25%; Kinsus 17-22%Mainly reflects improved pricing and gross margin outlook for the substrate business.
• Top-down 2030 EPS upsideBase case: 33%/33%/63%; bull case: 74%/90%/109%Order is Unimicron/NYPCB/Kinsus, relative to current 2028 EPS forecasts.
• Bottom-up 2030 EPS upsideBase case: 76%/70%/28%; bull case: 108%/98%/39%Order is Unimicron/NYPCB/Kinsus, relative to current 2028 EPS forecasts.
• Current pricesUnimicron NT$710; NYPCB NT$789; Kinsus NT$473.5From the report recommendation table.

Impact & implications

If the report's view plays out, major Taiwan substrate suppliers may gain stronger pricing power from longer lead times, upstream material constraints, and demand support from AI/high-end applications, thereby driving upgrades to ASP, gross margin, and EPS. From an investment perspective, BofA believes all three companies still have upside to target prices, while long-term EPS scenarios indicate that 2030 earnings power could be meaningfully higher than 2028 forecasts.

Risks

• If ABF supply tightness eases due to peer capacity expansion, upside to ASP and gross margin may weaken.
• If SiP and AiP adoption rates come in below expectations, substrate demand and long-term EPS scenarios will be affected.
• If competitive pressure in the PCB business intensifies, margins may be compressed.
• A lower-than-expected increase in AI server ASP content or a decline in consumer electronics demand could weigh on Unimicron.
• Faster-than-expected development of substitute technologies could weaken the value of existing substrate technology roadmaps.
• Taiwan securities investment is subject to market and regulatory risks such as foreign ownership restrictions, exchange rates, currency conversion, and tax limitations.

What to watch

• Whether tightness in T-glass cloth, E-glass, and ABF substrate supply continues to intensify.
• Whether substrate lead times remain elevated and support further price increases.
• Whether Unimicron, NYPCB, and Kinsus deliver on gross margins in 2026-2028.
• Whether demand growth related to AI servers, SiP, and AiP exceeds or falls short of expectations.
• The pace of peer ABF capacity expansion and the intensity of industry competition.
• Changes in revenue CAGR, ROE, operating margin, and operating leverage in future financial reports from the three companies.