EMC_AI PCB CCL shortage likely coming soon

Summary of Elite Material Conference Call Company Overview - Company: Elite Material (Ticker: 2383.TW) - Industry: Technology, specifically in the PCB (Printed Circuit Board) and CCL (Copper Clad Laminate) sector - Products: CCLs and PP, with applications in communication devices, networking infrastructure, and 5G communication products [11][12] Key Points and Arguments Market Outlook - AI PCB/CCL Shortage: Anticipated shortages in the AI PCB/CCL sector starting from Q2 2026, driven by increased demand for new AI architectures [1][2] - Earnings Forecast: Earnings for 2026 and 2027 have been raised by 11.1% and 17.1% respectively, reflecting the expected growth in peripheral PCB/CCL content in new AI platforms [1][2] - Target Price Increase: Target price raised to TWD 2,330 from TWD 1,680, indicating a potential upside of approximately 34% [1][4] Growth Drivers - Content Growth: New CPU and scale-up switch boards for AI platforms are expected to drive an additional 30-50% content growth beyond mainboard growth starting from H1 2026 [2] - Google's New Platforms: Google's Ironwood platform, utilizing TPU v6p and new ASIC Axion CPU boards, is expected to significantly benefit Elite Material due to its large scale and expansion capabilities [2] - Supply Chain Dynamics: Google has provided strong forecasts for TPU demand for 2027-28, which is expected to positively impact all suppliers, including Elite Material [2] Competitive Position - CCL Supply Shortage: A severe shortage of T-glass CCL in ABF substrates presents an opportunity for Elite Material and other manufacturers to become alternative suppliers, as over 90% of current supply comes from Resonac [2] - Capacity Expansion: Elite Material plans to increase its CCL capacity significantly, with expansions in Taiwan and China, aiming for a total capacity of 8,100 k sheets/month by 2027 [15] Financial Performance - Revenue Growth: Projected revenues for FY25, FY26, and FY27 are TWD 94,242 million, TWD 128,360 million, and TWD 164,263 million respectively, reflecting substantial growth [3][16] - Net Profit: Expected net profits for FY25, FY26, and FY27 are TWD 14,450 million, TWD 22,062 million, and TWD 30,582 million respectively [3][16] - EPS Growth: Normalized EPS is projected to grow from TWD 41.21 in FY25 to TWD 86.29 in FY27, indicating strong profitability [3][16] Valuation Metrics - P/E Ratio: Current trading at 20x 2027F P/E, with a target multiple of 27x based on historical ranges [1][12] - Dividend Yield: Expected dividend yield to increase from 1.4% in FY25 to 3.0% in FY27 [3][12] Additional Important Insights - Risks: Potential risks include fluctuations in smartphone demand, slower progress in high-speed CCL/RCC, and unexpected share losses in AI server/switch markets [12] - Sustainability Commitment: Elite Material emphasizes sustainability in its operations, focusing on minimizing environmental impact and recycling materials [13] This summary encapsulates the critical insights from the conference call, highlighting the company's growth potential, market dynamics, and financial outlook.