Technology - The CCL/PCB pricing and margin prospects in the Asia-Pacific region remain optimistic, with a favorable outlook for supply and demand.

CCL/PCB: pricing/margin prospect still rosyas supply/demand outlook remains benign Price Objective Change 01 June 2026 Reit. Buy on EMC, TUC & Dynamic Holding; U/P on ShengyiWe update the POsof EMC, TUC, Dynamic Holding and Shengyi along with the EPS EquityAsia-Pacific forecast adjustments. For the CCL group, we reiterate Buy on EMC/TUC given theirstronger growth profile and more significant margin expansion, while staying U/P onShengyi given its slower growth vs industry leaders. On PCB, we reiterate Buy onDynamic Holding, given its strong EPS growth after ramping AI projects from 2H26. Mike Yang>>Research AnalystMerrill Lynch (Taiwan)+886 2 2376 3729 EMC: upside from new capacity in 2028 & substrate CCL Following land acquisition in China by end-April, EMC now plans to increase its capacityto ~11mn sheets/month in 1H28, by adding capacity in Kunshan and Zhongshan. L-T, wealso flag its potential to enter the substrate supply chain via offering corresponding CCLmaterials (with likely doubling ASP vs CCL for PCB), and relevant output can be scaled upto ~900k sheets/month by-2026. As for N-T, we see no further delay of NVIDIA’s Rubinschedule. We raise 2026-28E EPS by 2-13%, as we 1) expect further price hike in high- EMC–Elite MaterialTUC–Taiwan UnionCCL–copper clad laminatePCB–printed circuit board TUC: ongoing demand overflow, faster margin expansion For low/mid-end CCL, we believe the concept of“opportunity costs”would beintroduced by TUC, which represents the loss of not being able to do more high-endbusiness (as it needs to support low-end supply continuously). Thus, there is a biggerASP increase in low/mid-end CCL by TUC (to compensate for such loss). On the otherhand, the benefit from demand overflow in high-end CCL continues, and this includesthe one seen in optical module (from Doosan). L-T, we note its Thailand capacity canincrease to 3.6mn sheet/month (or ~50% of total supply), to support local PCB NVIDIA supply chain: Dynamic/Shengyi to gain share ForDynamic Holding, we note the firm is discussing further price hike of PCB, followingan expected 15+% increase from 2Q26. We see a high chance for the firm to raise theASP continuously, as customers remain focused more on output/delivery (rather thancosts). Yet we slightly trim 2027E EPS by 3% to reflect the impact from ongoing CCLprice hike, and our PO on Dynamic Holding goes to NT$245 (from NT$260) based on anunchanged 18x 2H26-1H27E P/E. As for Shengyi, we note its share gain in NVIDIA andbenefits from ongoing CCL price hike (reflecting E-glass cost), but we see limited This research report provides general information only. No part of this report may be usedor reproduced or quoted in any manner whatsoever in Taiwan by the press or otherpersons without the express written consent of BofA Securities. >> Employed by a non-US affiliate of BofAS and is not registered/qualified as a research analystunder the FINRA rules. Refer to "Other Important Disclosures" for information on certain BofA Securities entities that takeresponsibility for the information herein in particular jurisdictions. BofA Securities does and seeks to do business with issuers covered in its researchreports. As a result, investors should be aware that the firm may have a conflict ofinterest that could affect theobjectivity of this report. Investors should consider thisreport as only a single factor in making their investment decision.Refer to important disclosures on page 12 to 16. Analyst Certification on page 9. PriceObjective Basis/Risk on page 8. Around half of the company’s capacity/output will be based in Thailand from 2028, according to ourexpectation We raise 2026-28E EPS by 2-13% after baking in the assumption of stronger revenue growth, gross margin and operating leverage We raise 2026-28E EPS by 6-10% after baking in the assumption of stronger gross margin We trim 2027E EPS by 3% after baking in a more conservative assumption on margin profile We are 25% ahead of consensus for 2027E EPS, due partly to the assumption of stronger revenue growth Exhibit14:Income statement–Dynamic HoldingWe expect the company’s net profit to grow by ~140% CAGR during 2025-28 We raise 2027/28E EPS by 6%/13% after reflecting the stronger revenue growth and gross margin profile We are largely in-line with consensus for 2027-28E EPS, given the assumption of stronger op-leverage Exhibit17:Income statement–Shengyi TechWe expect the company’s revenue to grow by ~25% CAGRduring 2026-28 Price objective basis & risk Dynamic Holding (XLHCF) PO of NT$245 is based on 18x 2H26-1H27E P/E, slightly above the company's averageP/E in its trading history, in view of the growing exposure to AI server market. Themultiple (18x) is also at 15-20% discount vs 22x we apply to major peers. Consideringthe company has been profit-making since being listed in 2022, we deem P/Eappropriate to value the stock. In our view, the 18x multiple can be justified byexpanding OPM (operating margin) and RO