Summary of Conference Call on China CCL Sector Industry Overview - The conference call focused on the China CCL (Copper Clad Laminate) sector, particularly in relation to advancements in AI and high-end CCL materials [1][2]. Key Companies Discussed - **Shengyi Technology (600183.SS)** - **Shennan Circuit (002916.SZ)** - **Kingboard Laminates Holdings (1888.HK)** - Other suppliers mentioned include EMC, Doosan, TUC, Panasonic, and ITEQ [1][2][3][4]. Core Insights and Arguments 1. **Growth in AI-CCL Materials**: - NVDA's recent results indicate a strong demand for high-end CCL materials, with a roadmap showing significant upgrades from 2020 to 2026 [1]. - The transition to advanced materials is expected to create opportunities for suppliers within the NVDA ecosystem [1]. 2. **Shengyi's Competitive Edge**: - Shengyi is the only certified supplier of M9 CCL by NVDA, achieving a production yield of over 90% for the Rubin platform [3]. - Projected earnings growth for Shengyi is over 33% to RMB 4.6 billion, with AI-CCL volume expected to double this year [3]. 3. **Market Demand Projections**: - AI-CCL volume is projected to reach 1.5-1.6 million sheets in 2026, accounting for over 15% of total capacity [3]. - The gross margin (GM) for AI-CCL is expected to exceed 40%, compared to an average of 28% for the CCL segment [3]. 4. **Shennan's Growth Potential**: - Shennan is expected to see a 39% CAGR in earnings from 2025 to 2027, driven by AI-PCB and BT substrate segments [10]. - The GM for AI-PCB is projected to be at least 45% in 2H25, supported by major customers like Huawei and increased AI capex among Chinese hyperscalers [10]. 5. **Kingboard Laminates' Strategy**: - KBL plans to enter the NVDA supply chain with its M9 CCL and is gaining momentum in upstream glass fabric production [4][9]. - The ASP of quartz fabric for M9 is significantly higher than E-glass, leading to a suspension of certain E-glass CCL products for a mix upgrade [7]. Additional Important Insights - **Material Shortages**: - There is a noted shortage of AI-fabric materials, particularly low Dk/gen 2 and Q-glass, with projected CAGRs of 387% and 471% respectively from 2025 to 2027 [8][11]. - Supply issues are expected to exacerbate delivery lead times, creating opportunities for price inflation [8]. - **Valuation and Risks**: - Target prices for Shengyi and Shennan reflect high P/E ratios due to expected earnings upgrades and market share gains [25][28]. - Risks include slower-than-expected customer certification, macroeconomic conditions in China, and demand fluctuations in electronic goods [24][26][29]. - **Future Production Plans**: - KBL aims to produce 2,000 tons of low Dk gen 1/gen 2 by 1Q26, with potential net profit contributions exceeding HK$400 million for 2026 [9]. This summary encapsulates the key points discussed during the conference call, highlighting the growth potential and strategic positioning of companies within the China CCL sector amidst the evolving landscape driven by AI advancements.

Summary of Conference Call Notes Company and Industry Overview - **Companies Involved**: Elite Material Co., Ltd. (EMC) and Taiwan Union Technology Corp. (TUC) - **Industry**: High-end Circuit Carrier Laminate (CCL) market, particularly focusing on AI server components and high-speed applications Key Points and Arguments Revenue Growth - EMC reported January revenue of NT$10,863 million, reflecting a **25% month-over-month (MoM)** and **55% year-over-year (YoY)** increase, while TUC reported NT$3,533 million, showing a **9% MoM** and **75% YoY** increase. These figures represent **41%** and **39%** of Bloomberg consensus for Q1 2026 revenue, indicating a stronger-than-expected performance for both companies in Q1 2026 [1][2] Pricing Dynamics - The solid revenue growth for high-end CCL players is attributed to stronger-than-expected pricing hikes across both mid- to low-end CCL products (estimated **+10-15% quarter-over-quarter (QoQ)** in Q1 2026) and high-end CCL products (estimated **+5-10% QoQ**) [2] Demand and Market Share - There is a gradual improvement in demand for AWS T3, with a total addressable market (TAM) projected to exceed **US$700 million** in 2026. T3 CCL orders have been improving weekly since December 2025, with mass production expected to start in late March/early April, which should enhance momentum in Q2 2026. EMC and TUC are expected to capture **70%** and **30%** of the total AWS AI server CCL market share in 2026, contributing **16%** and **20%** to their respective revenues [3][4] Capacity and Utilization - Both EMC and TUC are expected to experience a smooth ramp-up of new production capacity with minimal impact on gross margins during the transition. Demand is anticipated to remain strong not only from AI server customers but also from low Earth orbit (LEO) and general server customers, supporting high utilization rates and a favorable gross margin outlook [4][5] Industry Outlook - The high-end/high-speed CCL industry is viewed as undersupplied, particularly for high-quality products. EMC and TUC are expected to maintain full capacity utilization in the foreseeable future, with improving pricing and product mix leading to continued revenue and profitability upside. Proactive pricing strategies initiated in the second half of 2025 are expected to bolster financial performance in 2026 and beyond [5] Earnings Estimates - **EMC**: 2025 earnings estimate revised down by **1%** due to rising copper prices, with 2026 revenue estimates revised up by **4%**. Gross margin forecasts for 2025/26/27 were revised down by **0.2/0.6/0.6 percentage points (ppt)** [10] - **TUC**: 2026/27 earnings estimates revised up by **5%/1%** despite ongoing copper price increases, with gross margin forecasts revised down by **0.8/0.5 ppt** [13] Price Targets - **EMC**: Price target revised to NT$2,585 (from NT$2,250), implying a **33% upside** based on a **25x P/E multiple** [17] - **TUC**: Price target revised to NT$740 (from NT$650), implying a **42% upside** based on a **20x P/E multiple** [28] Risks and Considerations - Key downside risks for both companies include: - Potential replacement of high-end smartphone HDI designs by RCC - Rising trade tensions affecting smartphone and server shipments - Increased competition from mainland China peers [23][26] Conclusion - Both EMC and TUC are positioned favorably within the high-end CCL market, with strong revenue growth driven by pricing power and demand for AI-related products. The proactive strategies and market dynamics suggest a positive outlook for their financial performance in the coming years.

Summary of Key Points from Conference Call Industry Overview - **Industry**: ABF substrate and CCL (Copper Clad Laminate) within the Technology sector in the Asia-Pacific region - **Key Drivers**: The demand outlook is primarily driven by advancements in AI technology, which is expected to significantly influence supply and demand dynamics in the substrate market ABF Substrate Supply/Demand Outlook - **Supply/Demand Model Update**: - Expected undersupply of 1% in 2026 and 9% in 2027, revised from previous estimates of 1% and 6% undersupply respectively [2] - Anticipated oversupply of 5% in 2025, down from 6% [11][13] - **Demand Growth**: - Demand for substrates from AI accelerators projected to grow by over 50% CAGR towards 2027, up from approximately 40% [2] - Demand mix for AI accelerators expected to reach 38% in 2026 and 48% in 2027, compared to 25% in 2025 [2] CCL Market Developments - **Expansion Plans**: - Suppliers like EMC and Shengyi are expanding capacity, with Shengyi investing CNY 4.5 billion in Guangdong [3] - EMC is expected to gain market share in TPU, with potential for a 50-60% allocation if volume forecasts are revised upwards [3] - **Revenue Expectations**: - Record-high revenue anticipated for EMC and TUC in Q1 2026, attributed to new capacity and price hikes [3] Company Recommendations - **Buy Ratings**: - Reiterated Buy ratings for Unimicron, NYPCB, EMC, and TUC due to their higher exposure to AI server demand [4] - **Underperform Ratings**: - Underperform ratings for Kinsus and Shengyi due to stretched valuations [4] - **Price Objective Changes**: - Price objectives raised for Unimicron (NT$450), EMC (NT$2300), TUC (NT$665), and Shengyi (CNY 52) [8] Financial Adjustments - **Earnings Estimates**: - Unimicron's 2027E EPS raised by 10% reflecting a stronger pricing outlook and tighter supply/demand situation [23] - EMC's operating profit estimates for 2026 and 2027 raised by 2% and 5% respectively due to stronger revenue growth assumptions [27] Capacity Breakdown - **Market Leaders**: - Ibiden (22%) and Unimicron (18%) are the leading suppliers in terms of capacity for ABF substrates [21][22] Important Upcoming Events - **Watch for Updates**: - Commentary from Ibiden and AT&S on February 3, 2026, and Toppan on February 13, 2026, will be significant following upcoming results releases [2] Conclusion - The ABF substrate and CCL markets are poised for growth driven by AI advancements, with specific companies positioned favorably for this trend. Adjustments in earnings estimates reflect a positive outlook, while capacity expansions indicate a proactive approach to meet increasing demand.