CCL Price Hike Exceeds Expectations, Citigroup Raises Kingboard Laminates Target Price to HK$120

Overview

Citigroup issued a research report stating that Kingboard Laminates Holdings (1888.HK) announced a 15% average price increase (ASP) for CCL and prepreg effective from June 16. This magnitude exceeds the 10% inflation level observed in the first five months of this year. The price hike is mainly to cope with significant increases in upstream electronic fabric prices, reflecting an electronic fabric shortage slightly exceeding expectations, potentially driven by faster-than-anticipated growth in AI-related demand (especially in areas like AI power supplies). Based on this, Citigroup upgraded the company's profit forecasts for 2026 to 2028 and significantly increased the target price from HK$100 by 20% to HK$120, corresponding to a 29x expected PE ratio for 2027. The report believes that although demand in non-AI areas (such as NEVs, home appliances, mobile phones, etc.) remains weak, AI-driven structural opportunities are sufficient to support higher valuation multiples.

Core views

Core views revolve around price inflation and AI demand. First, stronger price increase momentum for CCL and electronic fabric in June indicates that the electronic fabric shortage is more severe than previously expected. This is mainly attributed to exceeding expectations AI demand growth; some AI applications (such as AI power supplies) also use 1080 specification electronic fabric. In contrast, traditional demand growth in non-AI areas remains sluggish. This supply-demand mismatch supports a higher target PE ratio because profits still have upside potential. Secondly, Citigroup predicts that the full-year 2026 CCL average price will surge 84% YoY to HK$230/sheet, surpassing the 2021 historical peak of HK$221/sheet. If all price increase measures are fully implemented, spot prices will skyrocket from approx. RMB 150/sheet at end of 2025 to approx. RMB 270/sheet at end of 2026. Additionally, with Kingboard Laminates planning to launch high-end CCL (M6 and above grade) capacity of 2.4 million sheets/year starting mid-2027, there is further room for CCL average price increases in 2027 and beyond. Finally, at the corporate strategy level, Kingboard Laminates' goal is to enter the NVIDIA (NVIDIA) supply chain starting from 2027. Although Citigroup's current model does not include potential gains from successfully obtaining NVIDIA certification, Kingboard Laminates holds unique competitive advantages as one of the few global CCL suppliers offering vertical integration. In the industrial AI infrastructure industry chain, Citigroup's preferred order is: Kingboard Laminates > Han's Laser > Shengyi Technology.

Analysis framework

Citigroup's analysis logic mainly follows 'Volume-Price Split' and 'Supply-Demand Framework'. The institution first derives the pricing capability of downstream finished products (CCL) by tracking upstream raw materials (electronic fabric) price changes and supply tightness. Next, total demand is split into 'AI Demand' and 'Non-AI Demand', revealing that while traditional consumer electronics and auto demand remain weak, AI-related high-performance material demand is structurally growing, thus explaining the sustainability of price increases. In terms of valuation methods, the institution adopted the PE valuation method and referenced historical valuation ranges (standard deviation) to set target multiples, while combining revised profit forecasts to recalculate target prices. Additionally, competitive positions and valuation levels of other companies in the industry (such as Shengyi Technology, Han's Laser) were compared to establish investment preference rankings.

Methodology notes

• Industry/Industrial Analysis FrameworkSupply-demand framework

  Supply-Demand Framework

  The report analyzes upstream electronic fabric supply shortages (limited loom capacity) and downstream AI demand structural growth to judge CCL price trends. This is a typical analysis method to find price turning points through supply-demand imbalance.

• Industry/Industrial Analysis FrameworkVolume-Price Split

  Volume-Price Split

  The report breaks down the company's revenue growth drivers into 'Volume' and 'Price'. In this case, although non-AI area volume growth is muted, AI-driven price (ASP) increases became the core performance driver.

• Valuation MethodPE/PEG valuation

  PE/PEG Valuation

  Citigroup uses Target PE multiplied by Expected EPS to calculate the target price, referencing historical valuation bands (e.g., +3SD) to determine reasonable valuation multiples, implicitly considering high growth (PEG).

• Competition and Strategy FrameworkMoat / competitive advantage

  Vertical Integration Advantage

  The report emphasizes that Kingboard Laminates has vertical integration capabilities from upstream electronic fabric and copper foil to downstream CCL, which constitutes a significant competitive barrier and cost advantage during raw material shortages.

Asset mapping & comparison

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

• Kingboard Laminates (1888.HK)

  Direct Beneficiary, Profits Enhanced via CCL Price Hike and AI Demand Growth

  Strengths

  Strong Vertical Integration, Global Rigid CCL Market Share approx. 15%, China over 30%; Planning entry into NVIDIA supply chain

  Weaknesses

  Demand in non-AI areas (Auto, Home Appliances, etc.) remains weak

  Comparison

  Preferred choice in Industrial AI Infrastructure Chain, Superior to Han's Laser and Shengyi Technology

  Risks

  AI Demand Misses Expectations; Slow Macro Economic Recovery

• Han's Laser (Han's Laser)

  Secondary Choice in Industrial AI Infrastructure Chain, Benefits from PCB and IT Equipment Demand

  Strengths

  Laser Equipment Leader, Benefits from Apple orders and PCB expansion

  Weaknesses

  Facing intensified competition and risk of new technology substitution

  Comparison

  Preference lower than Kingboard Laminates

  Risks

  Apple Orders Decrease; Auto Sales Weakness Impact High-Power Laser Equipment Demand

• Shengyi Technology (Shengyi Technology)

  Third Choice in Industrial AI Infrastructure Chain, Already Entered NVIDIA Supply Chain

  Strengths

  Technology Leader, First Chinese CCL Manufacturer to Enter NVIDIA AI Supply Chain

  Weaknesses

  Valuation Already at High Levels (Target PE 56x)

  Comparison

  Preference lower than Kingboard Laminates and Han's Laser

  Risks

  AI CCL Order Demand Misses Expectations; CapEx Too Large

Key data

• June CCL Average Price Increase15%Higher than Jan-May 10% increase, effective from June 16
• 2026E Expected CCL Average Price230 HKD/sheetSurge 84% YoY, will break 2021 historical peak of HK$221
• Target PriceHK$120Raised 20% from HK$100, corresponding to 2027E 29x PE
• 2026E Net Profit Forecast860.5 million HKDYoY growth 245%, raised approx. 3% from previous forecast
• Electronic Fabric Price IncreaseRMB 0.70-0.95/meterJune electronic fabric price inflation reflects supply shortage
• High-end Capacity Plan2.4 million sheets/yearPlanned to launch from mid-2027, used for M6 and above grade CCL

Impact & implications

The report considers that this price hike and subsequent profit upgrade have obvious positive impacts on Kingboard Laminates. First, it confirms that AI demand's pull effect on upstream material prices is stronger than expected, providing the company with continuous profit upside elasticity. Second, the target price upgrade reflects market recognition of the company recovering from cyclical lows and entering a high-growth track. For investors, this means within the industrial AI infrastructure chain, Kingboard Laminates is seen as a beneficiary with greater certainty due to its vertical integration capabilities and price pass-through mechanism compared to pure equipment manufacturers or single material manufacturers. Meanwhile, parent company Kingboard Group (0148.HK) recently raised funds to expand capacity by allocating Kingboard Laminates shares at HK$76, which also helps reduce group debt ratios and supports subsequent capital expenditure.

Risks

• AI Product Upstream Materials (such as Electronic Fabric, Copper Foil) Demand Growth Faster or Slower Than Expected
• China Macro Economic Growth Performance Faster or Slower Than Expected
• China Stimulus Policy Intensity Stronger or Weaker Than Expected
• Consumer Electronics Terminal Demand (such as Auto, Home Appliances, Mobile Phones) Recovery Misses Expectations or Weakens Again

What to watch

• Mid-July Potential Release of Semi-Year Profit Warning Announcement
• Mid-August Release of Official 2026 Semi-Year Financial Report
• Continued Trend of Electronic Fabric and CCL Prices in Second Half of 2026
• Progress on Kingboard Laminates Entry into NVIDIA Supply Chain Certification