KeyBanc Capital Markets on Wednesday initiated coverage on Element Solutions (NYSE:ESI) with an Overweight rating, citing strong growth prospects driven by advancements in semiconductor packaging and a rebound in the broader electronics market.

Research analyst Aleksey Yefremov said the firm expects ESI’s (NYSE:ESI) growth in earnings before to accelerate to high-single-digit levels over the next three years, a meaningful step up from the company’s historical mid-single-digit growth range.

“Among the main factors, we expect ESI’s electronics segment to benefit from growth in advanced packaging technologies,” Yefremov said in an April 2 research note. He highlighted that ESI (ESI) is currently supplying and developing materials essential to cutting-edge semiconductor processes, including Taiwan Semiconductor Manufacturing’s (TSM) (OTC:TSMWF) CoWoS and Intel’s (INTC) Foveros platforms — both critical to high-performance computing.

Yefremov pointed to TSMC’s CoWoS capacity as a major catalyst for ESI’s growth. “CoWoS capacity... could more than double in 2025, illustrating growth opportunity for ESI,” he said.

Strategic growth drivers

According to the note, ESI (ESI) is capitalizing on the growing demand through organic product innovation, strategic acquisitions, and cross-selling efforts across its product portfolio. The company also stands to benefit from rising electric vehicle adoption and a cyclical rebound in the semiconductor and electronics sectors.

ESI (ESI) has guided for 5% to 6% sales growth and high-single-digit ebitda growth through the cycle. Yefremov said this growth is supported by structural tailwinds in the semiconductor industry, especially as manufacturers push toward smaller chip features and more complex packaging — a dynamic that creates demand for ESI’s (ESI) advanced materials.

“Advanced packaging is increasing chip density in addition to rising density within chips themselves,” Yefremov said.

ESI’s (ESI) revenue tied to advanced packaging is currently estimated between $150 million and $200 million, representing around 15% of its electronics segment (excluding metals pass-through), and is growing at a double-digit rate (15% to 20%-plus).

Outperformance already showing

KeyBanc’s report noted that ESI (ESI) has already started outperforming its underlying end markets, including microelectronics substrate interface and printed circuit boards, with improvements in 2023 and 2024 compared with 2019 to 2022 averages.

The company’s products are used throughout the semiconductor supply chain—from foundries and integrated device manufacturers to printed circuit board makers and final assembly. Although ESI’s (ESI) materials make up a small portion of the total device cost, Yefremov said their critical role in improving manufacturing yields.

Valuation and target

KeyBanc’s $29 price target for ESI (ESI) is based on a 14.0 times multiple of projected 2026 ebitda. The stock currently trades at 12.5 times 2025 estimated ebitda and 11.4 times 2026E ebitda, both below its five-year historical average of 13.2 times, suggesting upside potential.

“We believe management is successfully taking advantage of this growth opportunity,” Yefremov said.