Electronic materials and MEG drove revenue to a record high; J.P. Morgan maintains its bullish view on Nan Ya Plastics

Overview

This report is a company research update by J.P. Morgan on Nan Ya Plastics Corp (1303.TW). It focuses on May 2026 revenue data, second-quarter momentum in electronic materials revenue, tight supply-demand conditions in the CCL industry, contribution from Texas MEG, and the impact of NYPCB/NYT stake disposals. J.P. Morgan maintains an Overweight rating and recommends buying on dips amid a pullback in AI/technology stocks.

Core views

The core views are: first, electronic materials revenue has clearly accelerated, with the average monthly revenue since the second quarter began up 20% versus the first quarter, showing that the price hikes announced in mid-March and product mix improvement are materializing; second, CCL peer revenue continues to hit new highs, indicating that capacity for AI and specialty applications is crowding out supply for traditional grades, and industry pricing power remains strong; third, ramp-up at the Texas MEG facility pushed consolidated revenue to a more than 40-month high, helping second-quarter margin expansion; fourth, in valuation terms, the NT$125 target price reflects expectations for structural margin improvement in electronic materials and ROE rising above 15% over the next two years.

Analysis framework

The report uses monthly revenue tracking, segment revenue bridge analysis, peer CCL revenue comparisons, management AGM commentary, analysis of the accounting impact of stake disposals, and a P/B valuation framework to assess Nan Ya Plastics' earnings momentum and re-rating potential.

Methodology notes

• Valuation methodsOne-year forward P/B valuation

  Derive the target price using 2.5x one-year forward P/B

  J.P. Morgan sets its June 2027 target price of NT$125 based on 2.5x one-year forward P/B, referencing the historical peak multiples of 2010-2011, and believes structural improvement in electronic materials margins can support higher ROE.

• Industry analysisTight supply-demand and price pass-through

  Tight CCL supply-demand drives price and margin expansion

  The report observes price hike realization through monthly revenue data of Nan Ya Plastics and Taiwan CCL peers, arguing that capacity migration toward AI/specialty applications is squeezing supply for traditional grades, thereby strengthening industry pricing power.

• Earnings trackingMonthly revenue run-rate analysis

  Compare average monthly revenue since the second quarter began with the first-quarter monthly average

  Average monthly revenue in electronic materials since the second quarter began was about NT$14.4bn, up 20% from the first-quarter monthly average of NT$12.1bn, and is viewed as key evidence of improving earnings momentum.

Asset mapping & comparison

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

• Nan Ya Plastics Corp (1303.TW)

  Core covered name, rated Overweight

  Strengths

  Accelerating electronic materials revenue, tight CCL supply-demand, Texas MEG ramp-up, expected ROE improvement, and potential gains from NYT disposal.

  Weaknesses

  More than 90% of electronic materials sales are estimated to still be lower-margin commodity grades, while traditional polyester and plastics demand remains weak.

  Comparison

  Compared with broader electronic materials peers, the report believes the market still underappreciates its penetration into specialty-grade electronic materials and CCL margin expansion.

  Risks

  MEG/BPA demand below expectations, slower AI/data center capital spending, failed PCB/substrate price hikes, or loss of market share in electronic materials.

• Nanya PCB (NYPCB)

  PCB subsidiary held by and consolidated into Nan Ya Plastics

  Strengths

  Benefiting from strength in the PCB/CCL industry chain and synergies with upstream materials.

  Weaknesses

  Nan Ya Plastics plans to continue selling part of its NYPCB stake, reducing its ownership percentage.

  Comparison

  As a downstream PCB-related asset, it forms vertical integration with Nan Ya Plastics' upstream CCL materials.

  Risks

  Because Nan Ya Plastics will still hold more than 50%, the disposal will not generate a P&L disposal gain and will not directly boost EPS through disposal gains.

• Nan Ya Technology (NYT)

  Associated investment asset held by Nan Ya Plastics

  Strengths

  Disposal of a 1% stake could recognize about NT$8.8bn of gains in FY26 based on the report's estimate.

  Weaknesses

  Gains depend on disposal progress and market price.

  Comparison

  Unlike the NYPCB disposal, the NYT disposal can be recognized in profit and loss and may contribute to FY26 earnings.

  Risks

  Share price volatility or failure to complete the disposal as expected may affect the actual recognized gain.

Key data

• Current share priceNT$97.50The report cover page marks the price date as 2026-06-08.
• Target priceNT$125.00The target price horizon is June 2027.
• Implied upsideAbout 28.2%Calculated based on the NT$125.00 target price and NT$97.50 current price.
• May electronic materials revenueNT$14.6bn, +2.7% MoMAverage monthly run-rate since the second quarter began was about NT$14.4bn, up 20% from the first-quarter monthly average of NT$12.1bn.
• May consolidated revenueNT$28.8bn, +4.2% MoMA more than 40-month high, mainly driven by Texas MEG volume ramp-up and pricing.
• Peer CCL revenueElite Materials NT$15.6bn, ITEQ NT$3.8bn, TUC NT$4.8bnAll three continued to set records in May, up 12.2%, 8.3%, and 4.0% MoM, respectively.
• Valuation assumption2.5x one-year forward P/BCompared with Nan Ya Plastics' 10-year historical average P/B of about 1.6x and ROE of about 9%.
• ROE outlookAbove 15% over the next two yearsSupported by structural margin improvement in electronic materials.
• NYPCB stake changePlanned reduction to 60.97%As the stake remains above 50%, the disposal will not be recognized as a disposal gain in P&L, but will instead increase retained earnings.
• Estimated gain on NYT disposalAbout NT$8.8bnJ.P. Morgan estimates that disposal of a 1% NYT stake could be recognized as a gain in FY26 based on the closing price of the day.

Impact & implications

If price hikes and product mix improvement in electronic materials continue to materialize, Nan Ya Plastics' segment margins, ROE, and valuation multiple could all be revised upward. Contribution from Texas MEG provides short-term support for chemicals revenue. For investors, the report views the recent share price pullback alongside the AI/technology sector as a buying-on-dips opportunity, but AI capital spending, the success rate of CCL price hikes, and demand for MEG/BPA need to be monitored.

Risks

• Macro or tariff factors may cause MEG/BPA demand to be weaker than expected.
• Global AI and data center capital spending may slow, weakening demand for electronic materials and CCL.
• Unsuccessful PCB or substrate price hikes may affect price pass-through and margin expansion.
• Nan Ya Plastics may lose market share in the electronic materials market.
• Polyester and plastics demand may remain weak, offsetting contributions from MEG and electronic materials.

What to watch

• Whether second-quarter 2026 electronic materials revenue can continue to maintain a run-rate about 20% above the first quarter.
• Whether CCL price hikes since April continue to pass through to shipments and margins.
• Whether volume ramp-up and pricing contribution from the Texas MEG facility can continue.
• Whether capacity migration toward AI/specialty applications continues to squeeze supply of traditional-grade CCL.
• Progress of subsequent NYPCB share sales and their impact on capital, liquidity, and retained earnings.
• Whether disposal of the 1% NYT stake is recognized in FY26 as expected.