JPMorgan has released a research report initiating coverage on KB Laminates (01888) with an "Overweight" rating and a target price of HK$65, which corresponds to forecast price-to-earnings ratios of 21 times for 2026 and 13 times for 2027, compared to the historical 10-year average of 12.5 times.
The bank noted that the company is the world's largest producer of conventional copper-clad laminates (CCL) and is one of only two firms with a fully integrated printed circuit board (PCB) materials supply chain, with the other being Taiwan's Nan Ya Plastics.
JPMorgan highlighted that surging demand from artificial intelligence and general server applications has triggered a significant shortage of glass fabric, with electronic-grade glass fabric prices having risen over 100% year-to-date, which is expected to enhance the company's integrated margins and market share.
The bank forecasts that earnings per share will increase eightfold between 2025 and 2028, driven primarily by industry shortages and a shift toward high-end CCL products, leading to a cumulative 150% rise in the CCL blended average selling price, capacity expansion projects in Jiangxi and Guangdong, a 75% increase in the weaving machine fleet over the next two years, and the ramp-up of HVLP1-3 copper foil along with potential customer certification for HVLP4.
JPMorgan stated that KB Laminates has already secured approximately 35% to 40% of Toyota's weaving machine capacity for the next two years, allowing the fleet to expand from around 3,300 units in 2026 to roughly 5,800 units by 2028, which would drive a 55% increase in glass fabric output (including specialty grades) from 2025 to 2028 and contribute over HK$5 billion in net profit growth.
The bank expects the glass fabric shortage to persist at least through 2027, with continued price increases. For copper foil, the company currently has an annual capacity of about 63,000 tonnes, and the new plant in Fogang will start ramping up HVLP1-3 production (21,000 tonnes per year) from the third quarter of 2027, with processing fees projected to rise 20% to 60% in 2026.
JPMorgan believes this CCL upcycle could be longer than those seen in 2015-2017 and 2019-2021, due to accelerated AI specification migration and capacity conversion losses, while general server shipments are expected to grow 22% and 25% year-over-year in 2026 and 2027, respectively, which should stimulate demand for M4-M7 grade CCL products.
Additionally, KB Laminates is progressing toward an AI-grade materials supply chain, as the company is expanding its "T-fabric" capacity fivefold and has begun supplying core CCL customers such as Shengyi Technology (600183.SH).
The bank stated that KB Laminates valuation is attractive, with placement risks already reflected in JPMorgan's target price discount. Despite lagging most peers in specification upgrades, the stock currently trades at only 15 times and 10 times forecast earnings for this year and next, while JPMorgan projects net profit to rise eightfold by 2028.
Investors have been focused on the founding family's reduction of shares in KB Laminates between June and July 2026, which coincided with a 72% decline in the company's share price, while the Hang Seng Index rose 12% over the same period. The bank believes this situation has now passed, as further reduction below the 30% threshold (currently at 31.8%) could trigger a mandatory general offer requirement under Hong Kong Exchange rules if the founding family's vehicles seek to regain control.
Exchange filings show that the founding family and management have resumed buying shares in KB (00148) and KB Laminates following the strong first-half 2026 results. JPMorgan's HK$65 per-share target price for KB Laminates is based on a forecast 2027 price-to-earnings ratio of 20 times, consistent with the average for Asian PCB supply chain peers, and incorporates a 30% discount to reflect ongoing investor concerns about changes in the founding family's shareholding.
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