Value Investing: Latest Industry Research Report – Kinmax (3189-TW) Faces Tight AI Substrate Supply, Expansion and Price Hikes Boost Profits

Last Thursday, Professor Qinglong gave a key alert to investors—and today, the stock hit its third consecutive trading limit. Kinmax (3189-TW) has surged in the short term, but this rally isn't just speculative. The real driver is rising demand for high-end substrates from AI servers, with the company's product mix, pricing, and capacity utilization all moving in a positive direction.

Looking at the latest numbers: Kinmax reported Q2 revenue of NT$12.496 billion, up 13% quarter-on-quarter and 31% year-on-year. Gross margin reached 26.1%, a 4.9 percentage point increase from Q1. Net profit after tax was NT$1.311 billion, translating to earnings per share of NT$2.80—significantly better than the previous quarter. This shows that earlier price hikes and a shift toward higher-margin products are now clearly reflected in financial results.

Kinmax’s most important product is IC substrates, particularly ABF substrates used in server CPUs, graphics chips, and custom AI chips. As AI chips grow larger and more layered, the required substrate area and manufacturing complexity increase accordingly. Supplier capacity expansion has not kept pace with demand growth, shifting the industry from balanced to supply-tight conditions.

The company’s outlook has become more optimistic. It now acknowledges the possibility of supply shortages for high-end ABF substrates between 2027 and 2028. Financial institutions estimate that average prices for ABF and BT substrates could rise by approximately 8% each quarter in Q3 and Q4, with revenues potentially increasing by about 10% sequentially. Gross margin may climb from 26.1% in Q2 to around 27–28% in Q3 and 29% in Q4. These are still projections and depend on actual order intake and successful price implementation.

Another growth driver is increased market share with AI clients. Kinmax currently holds about 50% share in NVIDIA’s Grace CPU substrate supply and aims to supply nearly all of the next-generation Vera products. The company also targets increasing its share in AI graphics chip substrates from around 10% to about 20%. Additionally, it is actively pursuing orders from other major cloud operators developing their own AI chips.

Analysts project that AI-related products could account for about 10% of Kinmax’s revenue in 2026, rising to 15–20% by 2027. This shift is significant because high-end AI substrates not only require more volume but also larger area, more layers, and higher technical barriers—boosting both unit prices and gross margins. Kinmax is transitioning from a cyclical substrate manufacturer to a key supplier for AI servers.

To meet long-term demand, the company has begun capacity planning. Kinmax plans to double its monthly ABF substrate capacity from the current 40 million units to 80 million by the end of 2029. Factory construction is expected to cost around NT$45 billion, while equipment investments will be partially funded by key customers—already secured at approximately NT$60 billion, with total investment potentially reaching NT$60–80 billion. Customers’ willingness to co-invest in equipment indicates confidence not just in short-term orders, but in securing future capacity.

Beyond ABF, BT substrates are also seeing new growth avenues. Memory demand is recovering, and optical communication modules are adopting similar processes. Analysts estimate that revenue from optical modules could rise from less than 1% in 2026 to about 5% in 2027.

Going forward, three key factors need monitoring: whether price hikes are successfully implemented, whether new AI products ramp up on schedule, and whether large-scale expansion maintains yield rates. After consecutive trading limits, stock volatility will increase. If AI orders, pricing, or capacity progress fall short of expectations, correction risks should be watched. To get real-time alerts on stocks suitable for bottom-fishing, join Professor Qinglong’s official LINE account—enter @ai8085 or click the link below—for free trading signals during and after market hours.

"Value Investing" Latest Post-Market Analysis Program

Two free trading alerts daily + one bonus

Join the Value Investing Official LINE: https://lin.ee/3rueKmz

Source: Analyst Tsai Qinglong – Moore Investment Advisory

The securities analyzed by our company

Have no improper financial interests. Past performance does not guarantee future profits.

Investors should make independent judgments, conduct careful evaluations, and bear their own investment risks.