Original source：BofA Global ResearchFirst published on Unhidea：Original source date：
Key takeaway
Honghe Technology is creating room for profit growth through T-glass orders and higher prices for ultrathin electronic cloth, but Bank of America’s high-growth forecast depends on Huangshi capacity, equipment and financing arriving on schedule.
What has changed with the T-glass orders?
Honghe Technology has secured combined T-glass orders from Mitsubishi Gas Chemical and Resonac for 8 million meters in 2026 and 16 million meters in 2027, respectively; its products have also been incorporated into substrates made by Ibiden, Unimicron and EMC.
T-glass is used in substrates for advanced chip packaging, and its low thermal expansion helps reduce stress caused by temperature changes. New capacity from Japanese suppliers will only gradually come online in 2027. Bank of America expects Honghe Technology’s market share to reach 39% in 2026 and, if expansion goes smoothly, rise to 44% in 2027.
This year, the company also signed supply agreements with 8 new downstream customers, including Intel, AMD, Samsung and Nvidia, and received advance payments; management expects 2027 sales volume from these customers to exceed the existing order for 16 million meters.
Concentrated supply also supports prices: the company’s T-glass gross margin exceeded 70% in 2025, and after two price increases of 25% and 5% early this year, Bank of America expects the margin to approach 80%.
Why does the near-term profit outlook still depend on standard electronic cloth?
Bank of America expects standard electronic cloth to remain the bulk of the company’s sales volume in 2026, with successive price increases the main driver of near-term profit growth. Since the second half of 2026, prices for thinner electronic cloth have risen by about 2.5 yuan per meter each month, more than the 1.5 yuan per meter increase for thicker products.
After Japanese manufacturers exited the standard electronic cloth business, Honghe Technology shifted toward ultrathin and extremely thin specifications that command higher premiums; in 2025, its global shares in these two segments were approximately 13% and 37%, respectively.
Thinner products also reduce weaving efficiency. Bank of America expects the company’s standard electronic cloth sales volume to decline in 2026 before new looms arrive; the new Huangshi plant is scheduled to start operations in 2027, when additional loom capacity is expected to help restore sales growth.
How can new businesses sustain growth?
The company sold 5 million meters of specialty electronic cloth in 2025 and more than 7 million meters in the first half of 2026; management expects 20 million meters for the full year, implying that more than 12 million meters must be sold in the second half. Low-Dk1 accounted for most first-half sales, and Bank of America expects T-glass volumes to ramp up from the second half.
AI circuit boards have more layers and require thinner materials. Honghe Technology already supplies LG with Low-Dk2 electronic cloth used in Google TPU systems and has passed downstream qualification at EMC and Doosan; Bank of America believes it could become a source of growth after 2027.
However, Low-Dk2 has more qualified suppliers, and Bank of America expects sales volume expansion in this business to be more cautious; if more competitors qualify for T-glass and increase supply, prices and market share would also weaken.
Why does capacity expansion also create funding pressure?
The company expects capital expenditure of 8 billion yuan for the new Huangshi plant from 2026 through 2028, with most intended to be financed by a planned H-share listing; early construction will use customer advances, bank loans and cash on hand.
Bank of America forecasts free cash flow of negative 2.779 billion yuan in 2026 and negative 1.799 billion yuan in 2027. If the H-share listing is delayed, the Huangshi expansion could be postponed, in turn constraining specialty electronic cloth growth; equipment delivery, yields and customer qualification will also affect the capacity ramp-up.
How high are the profit expectations behind Bank of America’s valuation?
Bank of America forecasts net profit of 1.353 billion yuan, 3.736 billion yuan and 6.55 billion yuan for 2026 through 2028, respectively; its forecasts for 2027 and 2028 are 88% and 112% above market consensus, respectively.
Bank of America initiated coverage with a buy rating and a target price of 140 yuan, equivalent to 34 times its forecast 2027 earnings and a premium to the approximately 28 times for Hong Kong-listed and Chinese copper-clad laminate materials peers cited in the report; versus the report’s reference share price of 91.70 yuan, the target implies upside of approximately 53%.
