Isu Petasys: Positioned in a Supply-Constrained AI PCB Supercycle

Core Conclusion

Isu Petasys (007660.KS) is a primary beneficiary of a sustained, supply-driven upcycle for AI server PCBs, with visibility extending into 2027. Earnings growth will be powered by a structural mix shift towards high-layer-count (40+ layers) and MultiLam products, coupled with aggressive capacity expansion in South Korea and Thailand. The company's guided trajectory for product mix improvement is steeper than consensus likely anticipates, supporting a premium valuation.

Evidence Chain

AI PCB supply tightness is structural and persistent, underpinning pricing and mix. Management reaffirmed that supply lags demand by approximately two years, with the tight environment expected to last into 2027. This is driven by capacity and technology constraints in high-end MLB/MultiLam production, which limit the ability of Chinese and Taiwanese competitors to quickly respond. Customers are now providing mid-term forecasts, enabling allocation-based supply. This durable scarcity supports the company's ability to pass through raw material cost inflation and secure favorable pricing for advanced products, creating a stable backdrop for its mix upgrade strategy.

The product mix shift is the core earnings driver, with magnitude exceeding expectations. The transition from lower-end to high-layer and MultiLam boards is accelerating. MultiLam penetration is projected to surge from 9% in 2025 to 31% in 2026. The long-term target is for 40+ layer and MultiLam products to reach 70-80% of the mix. This rapid re-rating directly drives higher ASPs and margin expansion, as these products command significant price premiums and operate in a less contested segment of the market. This shift is a fundamental re-rating of the company's business model, not merely cyclical volume growth.

Multi-geography capacity expansion supports growth and supply chain diversification. Isu Petasys is accelerating capex across Plant 5B, Plant 6, and an additional ~26k sqm site in South Korea, targeting partial demand fulfillment by 1H27. Concurrently, the Thailand APEX joint venture is key to capturing demand for low-layer/server PCBs and aligning with the industry's de-risking of China-centric supply chains. This dual-track expansion provides both the volume capacity for near-term growth and the geographic flexibility demanded by global customers, securing its position in the supply chain.

Key Risks & Disagreements

• End-demand volatility: A slowdown in AI accelerator investment or delays in 800G adoption could weaken underlying demand, negating the supply tightness thesis.
• Competitive pressure: The company faces competition from regional peers capable of supplying 40+ layer MLB, potentially limiting market share gains or pricing power in that segment.
• Cost inflation: Sustained increases in the prices of key raw materials (e.g., gold, tungsten, chemicals) could pressure margins if not fully passed through to customers.

Valuation & Trade Implication

Our 12-18 month price target is W114,000, derived from a Residual Income Model (RIM). This implies a 35x P/E on 2026e EPS, a premium to the peer average of 26x. This premium is justified by the company's direct exposure to NVIDIA/Google, the accelerated product mix improvement (MultiLam to 31% in 2026e), and an expected ~40% EPS growth in 2026. The stock offers exposure to a prolonged AI infrastructure upcycle with a clear path to mix-driven margin expansion.

Appendix: Product Mix Evolution