MS-Gold Circuit Electronics Ltd. New expansions to fuel growth-20251126

New capacity to fuel further growth from 2026 onwards... Over the past fewquarters, GCE has been constrained by capacity, running at full utilization ratesacross its key Taiwan and Suzhou production sites since 2H24. With customerdemand even stronger next year, our checks indicate that GCE is looking to expandimmediate capacity to de-bottleneck certain production processes to churn outmore PCB for customers next year. We believe there will be new capacity comingonline in Taiwan from 2Q26 onwards and Suzhou from 3Q26 onwards to supporthigher growth. Additionally, GCE has also recently announced capex plans for: 1) anew plant bought from CMC Magnetics (2323.TW, NC) – with MP slated for CY28,and the second phase in Thailand (although MP timing is not yet confirmed, wethink it should be CY28 or after). With capex plans already in place for CY28, wethink this implies that the company is confident and has good visibility on its futurecustomer roadmaps and potential project wins. This gives us further confidence toraise our numbers for CY26e and beyond.

...with the new capacity used to support existing and new ASIC AI servercustomer, and networking growth: We believe GCE is poised to win several otherASIC projects from CY26, especially if it has sufficient capacity. We have alwaysbelieved capacity is the main block to GCE's growth and it continues to hold truetoday. We believe ASIC server PCB ASPs will also continue to expand in futuregenerations as layer count continues to increase. This will also benefit margins,which should mean that as AI server revenue % continues to improve, marginsshould continue to expand. At the same time, we believe there is further room foryield improvements as well, which will also support margin expansion.