Kingboard Laminates (“KBL”) announced a set of strong 2016results with revenue and net profit increasing by 21.6% and 243.5%YoY to HK$15,532m and HK$4,347m in 2016 respectively. KBLdeclared a final and special final dividend of HK$0.185 and HK$0.30per share respectively. Coupled with the paid interim and specialinterim dividend, total dividend would be HK$1.12 per share for2016. We remain positive on the counter and reiterate our Buyrating.
Strong 2016 results. Kingboard Laminates (“KBL”) announced aset of strong 2016 results with revenue and net profit increasing by21.6% and 243.5% YoY to HK$15,532m and HK$4,347m in 2016respectively. The strong results are primary attributable to 1) anexceptional disposal gain of HK$2.1bn, 2) increase in averageselling price (“ASP”) of its laminates products, 3) lift of gross marginand 4) partial booking of pre-sales property projects.
Positive outlook. Supply of upstream materials remains tight andthis condition is unlikely to change significantly in the near futuredue to the lengthy process involved in capacity expansion. As such,undersupply of laminates will likely to continue. We therefore expectKBL’s laminates and upstream material production capacityutilisation to remain high.
Capacity expansion. In view of tight market supply, KBL plans toincrease the capacity of both upstream materials and laminates.Upon completion of its expansion plan, its monthly capacity of glassyarn will increase by 36% to 12,200 tonnes, glass fabric will grow by18% to 46.2 million metres and CEM and FR4 laminates will rise by10% to 6.6 million sheets.
Contribution from property projects to continue. KBL plans toactively schedule the pre-sales of its residential projects in Kunshan,Jiangsu province. We expect earnings from property redevelopmentprojects to provide fruitful contribution in the near future.
Reiterate Buy. We maintain our positive view of KBL and set ourtarget price at HK$11.5, equivalent to 14x 2017E PE, which is 20%below the median valuation of its peers. Reiterate Buy.
Key risks include 1) slowing China property market, 2) slowingglobal economy, 3) keen competition and 4) fluctuation of rawmaterial prices.