DELTA-HANA-KCE to Recover in Second Half

Nvidia has committed at least $6.5 billion to photonics companies over the three months prior to May 2026, including $500 million to Corning for advanced optical connectivity solutions and $2 billion each to Lumentum, Coherent and Marvell, according to CNBC. The impact has been significant, with Marvell shares gaining 183.4% year to date, while Lumentum, Corning and Coherent have advanced 142.5%, 68.8% and 60.3%, respectively. Goldman Sachs projects the total addressable market for optical networking to grow from roughly $15 billion in 2026 to about $154 billion by 2028, a more than ninefold increase. Adoption of co-packaged optics is expected to accelerate starting in 2027, reaching roughly 20% to 30% penetration by 2028, while Mordor Intelligence estimates the global photonics market will reach $1.46 trillion by the end of 2026. Investors seeking diversified exposure can consider the Roundhill Photonics & Optics ETF LYTE, with $254.2 million in assets under management across 19 holdings; the KraneShares Photonic and Optical ETF LUMA, with $9.76 million in net assets; and the Tema Photonics & Optical ETF LAZR, with $94 million in net assets across 27 companies.

CGSI has revised up its earnings per share forecasts for KCE Electronics Public Company Limited, or KCE, by 18-35% for 2026-2028, and raised its target price to 70 baht from the previous level, while maintaining its Hold recommendation, as it views the current share price as having already priced in much of the recovery in the printed circuit board business. The revision reflects higher assumptions for sales volume, average selling prices, and improved operating leverage. CGSI raised its PCB sales forecasts for 2027-2028 by 12-20% on rising demand for server boards and the recognition of capacity from new plants. For third-quarter 2026 results, CGSI expects KCE to post normalized profit of 495 million baht, up 70% year on year and 105% quarter on quarter, on sales growth of 25% year on year and a gross profit margin expected to rise to 22.5% from 18.9% in the second quarter of 2026. On new capacity, management said at an analyst meeting in August 2026 that KCE plans to add about 1 million square feet per month of PCB capacity, or a 28% increase from the current capacity of 3.6 million square feet per month, with the new plant expected to start production in mid-2028. CGSI expects capital expenditure of about 6-8 billion baht, compared with cash on hand of 1.7 billion baht at the end of June 2026 and projected 2026 EBITDA of 2.05 billion baht, which could force the company to borrow more and cut its dividend payout ratio during the investment period.

Bualuang Securities says a new angle for KCE shares is the possibility that the selling price increase cycle could extend into 2027, even though the market has already priced in the July increase and another in the fourth quarter of 2026. The key driver is not direct demand for AI circuit boards, but the cost of standard E-glass, the upstream raw material for CCL, which continues to rise after producers gradually shifted capacity to higher-grade materials for AI that offer better returns. Morgan Stanley's price index for standard E-glass fiber rose from 1.0 times in September 2025 to 3.7 times in August 2026 and 4.1 times in September 2026, while KCE's fiberglass purchase price rose from 0.49 US dollars per meter in the second quarter of 2025 to 0.74 US dollars per meter in the second quarter of 2026, an increase of 51% year on year, which is still much smaller than the rise in upstream raw material prices, leaving a risk that cost pressure will feed through further. The research team has not yet included a third price increase in 2027 in its base-case estimates, because the general-grade CCL market is not yet entirely in shortage. It keeps its assumptions for the July and fourth-quarter 2026 price increases, maintains its TRADING BUY rating with a 70 baht target price, and views any additional price increase in 2027 as upside rather than part of the base case. Core profit is expected at 1.44 billion baht in 2026, up 78% year on year, 2.07 billion baht in 2027, up 43.9%, and 2.30 billion baht in 2028, up 11.1%.