BofA raises target prices for three Taiwan ABF substrate companies, keeps constructive view

Overview

This report focuses on Taiwan's ABF substrate supply chain. Its core view is that AI server CPUs/GPUs are driving continued gains in packaging substrate usage, package size, and process complexity, and that the industry's supply/demand balance should remain favorable over the next few years. Based on this, BofA raises the target prices and earnings forecasts for Unimicron, NYPCB, and Kinsus while keeping its valuation methodology unchanged and reiterating Buy ratings.

Core views

The report argues that ABF substrate demand growth is not a short-term cyclical rebound, but a structural change driven by generational upgrades in AI CPUs/GPUs, larger package sizes, and higher process complexity. Demand is supported by expectations for AMD's expanding server CPU market, while supply expansion and de-bottlenecking are underway on the supply side, although upstream materials such as glass cloth may still constrain industry growth and keep supply tight.

Analysis framework

The analysis combines top-down industry supply/demand assessment with bottom-up company earnings forecasts: first evaluating the rising share of AI server CPUs/GPUs in ABF substrate demand, then using comments from AMD, AT&S, Ibiden and peers or customers to validate supply/demand strength, and finally reflecting stronger revenue growth, gross margin, and operating leverage assumptions in the 2026-2028 EPS forecasts and target prices for the three companies.

Methodology notes

• Valuation methodForward P/E valuation

  Target prices set based on 2H27-1H28E P/E

  Kinsus and NYPCB target prices are both based on 28.5x 2H27-1H28E P/E, while Unimicron is based on 30.5x 2H27-1H28E P/E; the report says the valuation method for all three companies remains unchanged.

• Industry analysisSupply/demand analysis

  AI servers drive ABF substrate demand, while supply is constrained by capacity and upstream materials

  The report supports its tight supply/demand view through rising CPU/GPU substrate consumption, a growing share of demand from server CPUs and accelerators, and comments from AMD and peers.

• Earnings forecastEPS revision framework

  Upward EPS revisions driven by revenue growth, gross margin improvement, and operating leverage

  BofA raises 2026-2028 EPS forecasts for Unimicron, NYPCB, and Kinsus by 10-20%, 4-11%, and 14-28%, respectively.

Asset mapping & comparison

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

• Unimicron (UMCRF)

  A Taiwan ABF substrate beneficiary; target price raised and Buy reiterated

  Strengths

  High-end product mix and relatively resilient end demand support earnings and valuation; target price raised to NT$1,300.

  Weaknesses

  The valuation multiple is already above the historical average, so it needs continued earnings delivery to justify it.

  Comparison

  Compared with NYPCB and Kinsus, Unimicron is valued at a higher 30.5x forward P/E.

  Risks

  ABF peers expanding capacity, lower-than-expected AI server ASP content increase, and weaker consumer electronics demand.

• NYPCB (NANYF)

  AMD-related substrate supplier; target price raised and Buy reiterated

  Strengths

  The report expects 2026-2028 revenue CAGR of 35-40%, expanding ROE and operating margin, and a net cash advantage.

  Weaknesses

  The earnings assumptions depend on high growth and gross margin improvement, making them sensitive to supply bottlenecks and competitive changes.

  Comparison

  Target price of NT$1,170, based on 28.5x 2H27-1H28E P/E and including 20% net cash to equity.

  Risks

  ABF peers expanding capacity, slower-than-expected adoption of SiP/AiP, and intensifying PCB competition.

• Kinsus (KNSUF)

  A Taiwan ABF substrate beneficiary; target price raised and Buy reiterated

  Strengths

  The report expects 2026-2028 revenue CAGR of around 25%, with ROE and operating margin recovering to higher levels in 2027-2028.

  Weaknesses

  Revenue growth and margin recovery still depend on tight supply/demand conditions and operating leverage materializing.

  Comparison

  Target price of NT$695, based on 28.5x 2H27-1H28E P/E, with valuation in the upper-middle range of its historical band since 2013.

  Risks

  ABF peers expanding capacity, weaker-than-expected SiP/AiP adoption, stronger competition, and adverse development in substitute technologies.

• Advanced Micro Devices Inc. (AMD)

  Demand-side read-through and supply-chain validation signal

  Strengths

  AMD reiterated a 35% CAGR for server CPU TAM through 2030 and confirmed substrate supply in Taiwan, providing a positive read-through for ABF demand.

  Weaknesses

  This is not a primary rating report on AMD; AMD is used mainly as demand-side evidence.

  Comparison

  AMD management's statements corroborate comments from ABF substrate manufacturers and global peers about tight supply/demand.

  Risks

  Server CPU growth falling short of expectations or advances in supply-chain substitute technologies could weaken ABF demand elasticity.

Key data

• Target price revisionsUnimicron NT$1,300; NYPCB NT$1,170; Kinsus NT$695Previous target prices were NT$1,100, NT$1,100, and NT$590, respectively.
• EPS revision rangeUnimicron 10-20%; NYPCB 4-11%; Kinsus 14-28%For 2026-2028, mainly reflecting stronger revenue growth, gross margin, and operating leverage.
• Server CPU and accelerator demand share54%/61%/66%Share of industry demand for 2026/2027/2028, respectively.
• AMD server CPU TAM outlook35% CAGR through 2030AMD management recently reiterated this growth outlook and visited Taiwan to confirm substrate supply.
• AT&S revenue guidanceFY2026/27 revenue growth of 30-35% YoYThe report says growth is still constrained by tight upstream glass cloth supply.
• NYPCB revenue outlook2026-2028 revenue CAGR of 35-40%The report believes stronger revenue growth and gross margin support upward revisions to earnings forecasts.
• Kinsus revenue outlookApproximate 25% revenue CAGR for 2026-2028Earnings revisions are mainly driven by stronger gross margin and operating leverage.
• Unimicron valuation multiple30.5x 2H27-1H28E P/EAbout 0.8 standard deviations above the 20x historical average since 2017; the report believes high-end technology and more resilient end demand can support this multiple.

Impact & implications

If the report's view proves correct, Taiwan's high-end ABF substrate suppliers will benefit from AI server packaging upgrades and a long-lasting tight supply/demand balance, with earnings upside likely to come from a combination of price, product mix, utilization, and operating leverage improvements. For the broader supply chain, the ability to supply upstream materials such as glass cloth may become the key bottleneck limiting further revenue upside.

Risks

• ABF capacity expansion by peers exceeds expectations, easing supply tightness.
• SiP and AiP adoption is slower than expected, weakening incremental demand for packaging substrates.
• Rising competition in PCB or ABF substrates compresses prices and margins.
• AI server ASP content increases less than expected, limiting upside for high-end ABF revenue.
• Consumer electronics, PC, or mainstream server demand declines more than expected.
• Substitute technologies develop faster than expected, potentially weakening long-term ABF substrate demand.
• Tight supply of upstream materials such as glass cloth may support prices but also limit substrate makers' revenue growth.

What to watch

• AMD server CPU TAM growth and the shipment pace of AI server platforms.
• The ramp-up of new plants and de-bottlenecking progress at Unimicron, NYPCB, and Kinsus.
• Whether supply of upstream materials such as T-glass eases.
• Whether the 2026-2028 EPS revision assumptions are validated by quarterly revenue, gross margin, and operating margin performance.
• Subsequent guidance from peers such as AT&S and Ibiden on ABF demand, supply, and packaging technology upgrades.
• The adoption pace of SiP, AiP, and potential substitute technologies.