Citi released a research report stating that KB Laminates (01888) has announced, as expected, an average selling price increase of 15% from October for thin cloth copper clad laminate (CCL) with specifications of #2116 or below, used in high-end applications such as 5G equipment, automobiles and smartphones. The bank reiterated its "Buy/High Risk" rating with a target price maintained at HK$96.
The bank noted that the latest cost increases for electronic glass cloth are also divergent, with thin cloth (#2116 or #1080) rising by approximately RMB 2.5 per meter per month in September and October, while thick cloth (#7628) rose by approximately RMB 1.5 to 1.6 per meter over the same period. This price increase does not cover all CCL, but only targets high-end products.
The bank believes that as long as inflationary pressure persists, it is only a matter of time before thick cloth #7628 also sees a price increase. The bank estimates that after this price hike, FR4 CCL prices will rise 15% to RMB 370 to 390 per sheet; #2116 or below accounts for approximately 40% of the company's total electronic glass cloth value.
The bank expects the company may raise average selling prices by another 10% in November or December, bringing the average selling price to approximately RMB 420 per sheet by year-end. Compared with the spot average selling price of RMB 150 per sheet at the end of 2025, the spot average selling price will surge by approximately 1.8 times. Gross margin is expected to rise significantly from 19.6% in 2025 to 36.9% in 2026, and the bank expects gross margin to expand from approximately 31% in the first half of 2026 to approximately 40% in the second half on a half-year basis.
The bank stated that KB Laminates shares fell more than 15% over the past week due to negative macroeconomic news, but this was not due to problems with the company itself. The bank is more bullish on KB Laminates than on Kingboard Holdings (00148).
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