Citi Raises Kingboard Laminates Target Price to HK$95, Reiterates Buy
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Citi lifted its target on Kingboard Laminates to HK$95, after July standalone profit hit HK$1.1 billion above expectations; FY2026–2028 earnings forecasts raised roughly 10%, driven by CCL price hikes and an AI-linked fiberglass-cloth capacity build-out.
How strong was the first half?
Kingboard Laminates posted HK$28.9 billion in 1H 2026 net profit, up 209% year-on-year — slightly above its own profit alert of "at least HK$28.0 billion."
Revenue rose 55% to HK$14.9 billion; gross margin widened from 18.4% to 30.7%.
This means → the profit surge came not from volume alone but from higher prices per sheet and a sharply lower cost ratio — gross margin nearly doubled.
The CCL — copper-clad laminate, the base material inside circuit boards — division saw EBITDA jump 170% to HK$4.34 billion, the main profit engine.
Are CCL and fiberglass-cloth prices still rising?
Last week the company raised its blended CCL average selling price by 10% to above RMB 300 per sheet, triggered by rising electronic-grade fiberglass-cloth costs in August.
Citi expects a further 15–20% increase by year-end, pushing ASPs above RMB 350.
In plain terms = CCL is the "bread" of circuit-board making; fiberglass cloth is the "flour." Flour prices are climbing, bread follows — and Kingboard makes both, profiting on each leg.
August E-glass cloth — electronic-grade glass-fiber fabric — saw its sharpest monthly price gain in this cycle; pricing momentum is accelerating.
How big is the AI supply-chain expansion?
The company currently runs 5 fiberglass-cloth furnaces and plans to add 8 more by 2028, reaching 13 — with specialty electronic-grade cloth capacity hitting 100 million meters per year.
Shaoguan adds 95 million meters of E-glass capacity in Q3 2026; Nansha starts a 150-million-meter annual project in Q3 2027 — total target by 2028: 1.05 billion meters.
This means → capacity more than doubles in three years, a bet that AI-server demand for high-end board materials keeps surging.
The key bottleneck is looms: Kingboard has locked in roughly 2,400 units from Toyota Industries over the next two years — half of Toyota's 4,800-unit total output — and plans to grow its fleet from 3,333 to 5,833 looms.
Why isn't the copper-foil plant in the valuation yet?
A new 21,000-tonne-per-year premium copper-foil plant is slated for Q3 2027, capable of producing up to HVLP 4 grade — a low-signal-loss foil spec for high-frequency, high-speed boards.
The project has not yet received Nvidia certification, so Citi has excluded it from its model.
This reflects a built-in "cushion" in Citi's numbers — once certification comes through, earnings forecasts have room for another upgrade.
Is the stock expensive here?
On 2027 forecast earnings the stock trades at just 7.7× P/E; Citi's HK$95 target implies roughly 20–21× P/E, about 1.5 standard deviations above the historical mean.
Three-year EPS CAGR for 2026–2028 is projected at 94% — near-doubling earnings growth is the core reason Citi is willing to pay above-average multiples.
In plain terms = Citi believes the market has not yet priced in the new AI fiberglass-cloth growth; a re-rating from 7.7× to 20× still leaves upside.
Can dividends keep up with capex spending?
The 1H 2026 interim dividend was HK$0.28 per share, a 30.8% payout ratio; Citi expects management to restore a 50%+ payout for the full year.
Citi's full-year 2026 EBITDA forecast of HK$12.97 billion (up roughly 2.2× year-on-year) should comfortably cover HK$4 billion in capex and about HK$4.7 billion in dividends.
Forecast dividend yields stand at 4.5% for 2026 and 6.8% for 2027 — a mid-to-high yield even during a heavy expansion phase, underpinning the Buy call.
This means → the second-half litmus test is whether CCL and fiberglass-cloth prices keep climbing as Citi expects — that determines whether these earnings forecasts and the generous payout can be delivered.
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