FST Corp (KBSX) - Initiation Report
KBS Golf Shafts - Trip to Taiwan
FST Corp (Ticker: KBSX)
FST Corp. (Femco Steel Technology, Nasdaq: KBSX) is a Taiwan-based manufacturer of KBS golf shafts. I use “KBS,” “FST,” and “the company” interchangeably; all three refer to FST Corp. KBS is one of three major producers of steel golf shafts, alongside True Temper (Dynamic Gold, Project X) and Nippon. FST came public via a SPAC in January 2025 through a business combination with Chenghe Acquisition I Co. I visited the facility and management in Chiayi, Taiwan, earlier this year. As a golf enthusiast, what an unforgettable experience it was.
KBS spent 2021 through 2024 building capacity from roughly 900,000 to 1.2m shafts per month and opening retail and fitting centers, which depressed margins and increased capex. Like many companies during the pandemic, KBS mistook a demand shock (overordering) for normalized demand. Over time, through increases in golf participation, market share gains, and new opportunities, capacity should be absorbed.
Based on my estimates, utilization sat near 51% at the end of 2025, which should steadily increase due to two factors. Management is focused on new OEM programs, some of which they could not previously bid on due to not having a graphite shaft line, and share gains (notably Japan). Beyond their existing core steel shaft business, their new graphite shaft business is, in my opinion, a significant opportunity that has the opportunity to grow from a rounding error to roughly 21% of shaft revenue by 2028 (my estimate). Together, both shaft lines should grow revenue at high incremental margins, resulting in sustainable and profitable growth. Q1 2026 marked a turning point for the business, with revenue of $14.6m, up 36%; net income of $1.9m; and a gross margin of 51.6%, with growth led by a 70% jump in OEM sales and a 64% jump in graphite shaft sales behind the new KBS TGBlack driver shaft.
Business Overview
KBS makes the steel tube (shaft) that connects a golfer’s hands to the clubhead. Steel shafts go into irons, wedges, and putters, and steel is roughly 58% of the golf shaft market, which ran about $483m in 2025. The other 42% is graphite, which dominates drivers and fairway woods. KBS built its name and nearly all of its revenue in steel. Historically, they did not have a presence in the graphite shaft market, which is now not the case (Jason Day, for example, plays the KBS TG Black 60g TXX shaft).
FST has been a metal manufacturer in Taiwan since 1976. It started as Femco, a maker of precision metal parts, moved into golf shaft R&D and OEM production in 1992, and in 2007 and 2008 created the KBS brand to climb from an anonymous contract manufacturer to a name golfers and tour players ask for. The “KB” is Kim Braly, the shaft designer hired to lead the move. KBS debuted on tour in 2008 with the original KBS Tour iron shaft, won its first major in 2012 (the Open Championship), and has expanded the line steadily since: C-Taper in 2011, Tour Hybrid in 2017, the Tour-TGI graphite iron in 2018, the TD Driver graphite shaft in 2020, and the TGBlack driver shaft now driving the 2026 numbers.
FEMCO Museum
That metalworking did not start with golf, which may provide context as to where and how they got their start. Femco Steel Technology is the shaft arm of Far East Machinery (FEMCO). This Taiwanese industrial group dates back to 1949, when its founder began making bicycle wheel rims out of salvaged oil drums, then moved into high-frequency welded pipe and, by 1970, precision boring machines built to Japanese industrial-standard tolerances. The two competencies a steel shaft actually requires, forming and welding precision tube and controlling its metallurgy, are the exact competencies this group has compounded for more than seventy years. When KBS seam-welds a strip into a one-inch tube or cold-draws it to a programmed wall profile, it is running a refined version of what the parent company has done since before golf shafts were a product line, which is part of why the in-house steel cost position is hard for a newer entrant to copy.
Original golf shafts made by FEMCO
Steel shafts are made in-house in Taiwan, start to finish, except for two outsourced steps. Around that manufacturing core sit the KBS Golf Experience retail and fitting centers (Carlsbad in 2019, Tokyo in 2021, Taipei in August 2024). KBS designs, however, outsources the manufacturing production of graphite shafts.
How a steel shaft is actually made
Manufacturing Facility
1. Raw steel. Carbon steel arrives in coils. KBS sources primarily from China Steel Corporation in Taiwan. One coil yields several thousand shafts.
Steel Rolls
2. Tube formation. Flat strip is rolled and seam-welded into a tube about an inch in diameter, then the weld flash is removed so the wall thickness stays uniform. Wall consistency is what makes flex consistent, so this step matters more than it looks.
3. Annealing and phosphate coating. The welded tube goes through a normalizing or annealing furnace above 1,500 degrees to relieve weld stress. KBS uses a long, low-temperature spherodizing anneal to improve ductility, then phosphate-coats the tube, which both resists corrosion and acts as a lubricant for the next step. On the factory floor, these were the hydrogen furnaces in the back; management confirmed they are the primary annealing furnaces.
4. Cold drawing. This is the defining cold-work step. The tube is pulled through progressively smaller dies over an internal mandrel across several passes. The mandrel is programmed to vary wall thickness along the length, which is how a designer puts the stiffness where they want it (heavy tip, heavy butt, and so on). One automated draw line was already running on my visit, replacing a line that needed five or six people; management’s stated goal is to automate all six draw lines.
5. Cut to blank. The long, drawn tube is cut into individual shaft blanks, each weighed and checked.
6. Forming, stepped versus stepless. This is where designs split. Stepped shafts (KBS Tour, True Temper’s Dynamic Gold) are pressed through a sequence of carbide dies in a taper press, one die per visible step. Stepless shafts (KBS C-Taper and Tour-V, True Temper’s Project X) are run through a long swaging die into a smooth, continuous taper, with flex controlled entirely by wall thickness. KBS leans stepless as its premium signature. When I asked on-site what the machine putting indentations in the shaft was called, the answer was the stepping machine, which is exactly the stepped, taper-press line. (Ever wonder what those indents in your golf shaft are actually called? Steps)
7. Heat treatment. Here is the one real metallurgical difference between KBS and True Temper. True Temper austempers, holding the steel isothermally in the bainite range to get a tougher, more fatigue-resistant “leaf spring” microstructure. The company’s name comes from the process. KBS uses conventional quench-and-temper in an oil bath, which is metallurgically sound, cheaper, and faster, but not as fatigue-optimized for a part that flexes thousands of times. For a tour player loading the shaft at high speed, this is a genuine, if narrow, True Temper advantage.
8. Straighten, trim, polish. Shafts are straightened to tolerance (KBS adds a second anneal here to relieve residual stress), trimmed to length, and polished.
Video shows how they test to ensure the shaft is straight, and if it needs to be bent, the machine fixes the slight curve.
9. Plating. The chrome finish is the most visible quality signal on a shaft. True Temper plates in-house with a duplex nickel-and-chrome line and inkjets each shaft. KBS outsources all of its electroplating to Taiwanese contractors.
10. Cosmetics, inspection, pack. Graphics go on, every shaft is inspected against the company’s quality criteria, and passing shafts are warehoused pending sale.
Quality inspection station
How workers know what specs are allowed and what iron is currently being worked on
Most important to all of this is that the steel blend used in the manufacturing process is proprietary to KBS and would not work in True Temper, Nippon, or any other golf shaft manufacturer's facility. The steel blend is made specifically for KBS’s process and tools.
Putter Shafts
KBS has three quality tiers, and the economics differ sharply across them. In 2025, Premium shafts comprised about 26% of units but 53% of revenue at 70%-plus gross margins (my estimate); Standard (much of it OEM custom programs) at about 68% of units and 46% of revenue at 15% margins (my estimate); and economy at about 2.9% of units but only 6% of revenue at a slight loss to breakeven (my estimate). The economy shaft exists for two reasons. More total shafts lowers unit cost across the whole plant, and downgraded defects from premium runs get sold as economy grade instead of being scrapped (and when I say defects, you wouldn’t even notice them). I believe KBS was more price competitive in 2025 with a focus on gaining share at the expense of margin. Based on my estimates, standard margins declined ~2300 bps y/y; however, over time, these should recover through efficiency improvements and increased fixed cost absorption. In 2025, while KBS sold 7.5m shafts, they only produced 5.5m. This increased cost/shaft as fixed costs were spread across fewer shafts.
What I learned from management on-site
I sat with management at the Chiayi facility.
Increasing capacity utilization is critical. FST has increased nameplate capacity to roughly 1.2m shafts per month from 900,000 in 2023 and sees a path toward 1.5m through debottlenecking and line optimization. Management was clear that the near-term objective is to fill the existing footprint, not build additional capacity. True Temper is a private business with NDAs everywhere; however, my best estimate and scuttlebutt have them around 1.5m shafts/month of capacity and currently operating at 55%. Nippon Shaft has a capacity of 500k shafts per month. Something has to give. The market will not grow fast enough to absorb all excess capacity in the near term; how the big 3 coexist remains to be seen. Lincolnshire Management (Private equity) acquired True Temper in 2012, and continues to own it today (much longer than a traditional PE stake). True Temper has ceded market share to KBS. A video from 2019 stated they’re in 70%-75% of bags every week (PGA Tour Players). Now their website says 60%. Utilization at KBS and True Temper cannot remain at suboptimal levels forever, and with KBS going after OEM products like those they previously did not compete in, True Temper is in a challenging situation.
At approximately low 50% utilization, KBS has significant unused capacity already in place. As a result, incremental volume should flow through at attractive margins given the largely fixed manufacturing cost base. In my view, the combination of underutilized capacity, modest capital requirements, and potential market share gains creates a meaningful earnings leverage opportunity if demand continues to recover. I estimate incremental margins are around 55%, though this largely depends on mix shift over time.
Management estimates the steel shaft market is approximately 40% KBS, 40% True Temper, 17% Nippon, and 3% other manufacturers. Importantly, these figures refer only to steel shafts and exclude graphite, where KBS currently has limited exposure. I believe management’s 40% share estimate relates to unit volumes, not revenue. On a revenue basis, I estimate KBS is roughly 14% of the steel shaft market in 2025, based on approximately $40m of steel shaft sales against an estimated $281m steel shaft market. I believe the difference between unit share and revenue share largely explains the discrepancy. Management’s figures likely reflect volume, where KBS has significant exposure to high-volume OEM programs and economy-tier products, while my estimates are based on revenue. Additionally, based on my channel checks with competitors, True Temper has 1.5m shafts/month of production capacity and operates at roughly 50%+ of capacity utilization, putting them around 800k shafts per month or 2.4m per quarter, roughly 33% higher than KBS.
KBS appears to command a substantially larger share of industry units than industry revenue, implying a lower average selling price relative to peers. The PGA Tour usage data below corroborates this. While unit growth should help absorb existing capacity and improve utilization, the larger earnings opportunity comes from shifting the mix toward higher-priced premium steel and graphite products, where revenue and profit growth can outpace unit growth.
Growth Opportunities
Management identified Japan as the company’s largest share gain opportunity in the steel market. Despite being the world’s second-largest golf market, KBS estimates its steel shaft share in Japan is ~10%, compared to ~50% in the US. Management attributes the gap primarily to strong domestic brand preferences (Nippon). Importantly, management framed the next two to three years as a market share story rather than an industry growth story. I suspect True Temper has also tried, but has had little luck in penetrating. While I believe KBS has plans to open a KBS Experience golf store in Japan to improve visibility, the Nippon dominance in Japan is unlikely to be performance-driven (given the low penetration on the PGA Tour) and more about supporting the local economy. To that end, I expect KBS to increase its share from increased marketing spend marginally; however, the net result will likely be immaterial to results.
OEM Relationships
KBS maintains relationships with all major OEMs, including TaylorMade, Callaway, and Titleist. Management noted that TaylorMade was an early supporter of the brand and remained a priority customer during the COVID-era supply constraints. Over the last year, management has focused on strengthening relationships with Callaway and Titleist, aided by the company’s proximity to the major OEMs in Carlsbad, California.
Revenue is split roughly evenly between OEM-specific custom programs and branded KBS products, although management acknowledged the distinction is not always clean, given OEMs also purchase standard KBS shafts. The OEM custom programs typically involve two-to-three-year development cycles and provide greater revenue visibility, while branded product sales are more dependent on retail demand and annual equipment cycles.
Capital Allocation
With ~$29m of debt, including roughly $19.5m of near-term maturities that management expects to refinance. Free cash flow is expected to be directed toward debt reduction, with no current plans for dividends or share repurchases. Given the company’s leverage profile and growth opportunities, I view this as the appropriate capital allocation framework.
Within the last month, KBSX announced a $100m shelf offering. In management’s prior discussions, they often discussed the potential for making an acquisition, likely in the graphite shaft market, to strengthen their presence and to potentially bring graphite shaft production in-house rather than outsourcing as they currently do. It is unclear why they would want to bring in the graphite shaft manufacturing process in-house, as it increases the business’s already high fixed costs. Furthermore, the core competency of FST is in their steel shaft know-how, not graphite. While this improves the margin of the business (during good times), I remain skeptical that a decision like this is prudent. I will reserve judgment until they formally announce what their plans are with the ATM proceeds. Results will come down to price paid and margin uplift from bringing production in-house vs. outsourced. A further concern is that it’s unlikely a graphite shaft manufacturer has one line of business. It’s more likely they make products for different industries. If this is the case, does management continue this? Or do they buy it with the expectation of continued graphite shaft growth, and close down other business lines? I worry that if they acquire a graphite manufacturer, KBS will enter into non-adjacent business lines where they have little expertise. I will reserve judgment until management provides more details.
Corporate Branding
Management indicated that the possibility of rebranding from FST Corp. to KBS is periodically discussed. Still, the more likely outcome is maintaining FST as the corporate parent while continuing to build KBS as the flagship consumer-facing brand. This structure preserves flexibility for future diversification beyond golf shafts while maintaining continuity with the founding organization.
Management Assessment
Management and high-level employees demonstrated strong operational execution and industry knowledge. Unsurprisingly, given my knowledge and golf curiosity, I asked many questions on the production line, technical know-how, floor layout, and much more. Discussions around manufacturing capacity, automation, supplier relationships, and production economics were detailed, internally consistent, and aligned with my independent work. I place less weight on longer-term diversification and lifestyle brand ambitions, which remain nascent today. KBS recently hired an apparel/lifestyle designer to help roll out the next generation of clothing/apparel. Today, KBS logos can be found embroidered on high-quality shirts, jackets, and accessories in their retail stores. Over time, I expect them to launch their own fashion line. Today, this represents a call option. However, one thing is certain: whatever they end up designing and producing will be high quality and well thought out.
Industry Structure and Competitive Positioning
Steel shafts are basically a three-player market. Based on my research, True Temper, KBS, and Nippon collectively account for more than 95% of industry volume, with True Temper remaining the market leader. There are smaller players like Shimada and Formosa, but management does not view them as real threats at the OEM scale. More importantly, it is hard to see a new steel shaft entrant showing up and mattering. The result is a concentrated industry with long customer relationships and limited disruption. The problem today is not new competition. It is excess capacity.
KBS’s edge comes down to manufacturing cost. Manufacturing in Taiwan gives KBS a cost advantage versus True Temper in the US and Nippon in Japan. KBS is the low-cost producer, which explains why they can compete on price and gain share. If you’re in the golf universe, you know how expensive clubs have become over the years. A new iron set can run upwards of $2,000, a putter is easily $400, and wedges are $170 each. Instead of raising prices, we could see OEMs favor KBS, allowing Callaway, TaylorMade, etc., the ability to manage costs and not have to push incremental pricing through.
Notably, management does not believe True Temper faces significant pressure to pursue lower-cost manufacturing. The company’s Mississippi facility reportedly has a capacity of approximately 1.5m shafts per month. At one point, True Temper had 3m shafts/month of capacity, enough to supply the entire industry. Information is hard to come by with True Temper; however, they likely closed or repurposed facilities over time, stemming from lost market share. While industry contacts have suggested True Temper may have explored manufacturing alternatives in Southeast Asia, I have not identified evidence of any material shift in production strategy. For now, I do not see an obvious reason KBS loses its cost advantage.
I do not view “Made in USA” branding as a significant competitive moat. While it may carry some marketing value, the vast majority of golf equipment manufacturing/assembly already occurs outside the United States. Performance, consistency, availability, and cost are the primary purchasing considerations.
True Temper still has real advantages at the top end of the market. The company continues to benefit from proprietary austempering technology and in-house chrome plating capabilities, both of which support its position in premium iron shafts and on professional tours. That probably does not stop KBS from gaining volume share, but it helps explain why True Temper is still the premium benchmark.
What tour players actually use
To test the KBS tour story, I built my own dataset tracking iron shaft usage among professional golfers. The dataset covers Masters participants from 2016 through 2026. The sample is not a full PGA Tour census, but it is tilted towards the elite players, as that is typically who fans, commentators, and journalists care most about. In addition, I took the top 57 players in the 2026 US Open and found what shafts they play. The story is the same with True Temper dominating share, while KBS is 2nd. Golf may be one of the few sports where there is a dominant player in respective products; Titleist is far and away #1 in golf ball market share and PGA Tour usage.
The data gives a decent view of how share has changed at the highest level of golf. The main takeaways:
Takeaways: First, KBS is clearly a legitimate premium iron shaft brand. Across the sample period, KBS generally accounted for a mid-teens to mid-twenties percentage of Masters participants, demonstrating meaningful adoption among elite players. Current KBS users in my September 2025 snapshot include Collin Morikawa and Justin Rose, both playing KBS Tour 130 X iron shafts. You do not get into tour bags by accident. The product has to work, the tour support has to be there, and fitters have to trust it. One notable disappointment for KBS is that Scottie Scheffler played KBS throughout his amateur days and switched to True Temper when he turned pro. Few golfers move the needle (certainly none like Tiger); however, Scottie is one that juniors/amateurs may wish to emulate.
Second, the data does not suggest KBS has meaningfully increased its share among elite iron players over the last decade. More notably, every Masters winner in my sample used either a True Temper or Project X iron shaft. While KBS has maintained a respectable presence, the primary share gainer at the highest level appears to be Project X, True Temper’s stepless product line, which has gained share largely at the expense of Nippon. True Temper is still very strong in premium iron shafts. Its manufacturing process and long tour history matter.
Third, while KBS and TaylorMade have a great relationship on the OEM front, I found little evidence that this helps them with the TaylorMade tour staff. Among the eight TaylorMade iron players identified in the 2026 Masters field, none used KBS iron shafts, and of the 11 players in the 2026 US Open, none had TaylorMade irons. Retail stock shafts, OEM custom programs, and tour usage are different channels. Margins are higher in the premium segment; thus, any inroads KBS can make in the Player/Tour market is significantly margin accretive. In the premium section, price is almost irrelevant; it’s all about performance. This may explain part of the reason why KBS’s cost/price advantage is less impactful in the high-end market.
The data suggests KBS is a strong number two in premium steel shafts and has real share in OEM and standard steel volume; however, KBS has taken little market share from True Temper at the highest end of the iron shaft market. Thus, incremental gains in elite steel iron shafts are likely to be difficult given True Temper’s entrenched position. Graphite woods may be the better opportunity. KBS is early there, and the competitive set is different. On the high-performance graphite driver shaft side, Fujikura has a stranglehold on the market. Watch a tour event and see how many players have a Ventus Blue or Black shaft in the bag (it’s a lot). It’s challenging to displace a gold standard.
Market outlook
The golf shaft market is not a high-growth industry. Data suggests the golf shaft industry was $460m in 2024 and $483m in 2025, with expectations to grow to roughly $684m by 2032, representing a CAGR of about 5%. Within that, steel shafts are expected to grow somewhat slower, from approximately $269m to $376m over the same period, while graphite gradually gains share. Graphite is gaining share due to an increase in woods/hybrids in bags, resulting in one less steel shaft and one more graphite shaft. In addition, I suspect driver fittings are resulting in more premium shaft sales. Historically, I suspect more golfers opted to get fit for irons as they typically last 5-7+ years. However, someone may switch their driver every 3 years. Thus, spending $100 on a driver fitting every 2-3 years may be a deterrent. Today, the fitting marketing and importance are so ingrained that I suspect more are willing to pay for a fitting when purchasing a driver. Most fittings these days allow the golfer to apply the cost of the fitting (or a portion) towards the purchase of the club. This increases the likelihood that someone gets fit for a club, as it’s not an incremental cost on top of the club.
The thesis does not need the golf shaft market to boom. The market should grow modestly from participation and pricing, not because the addressable market suddenly explodes. Management sees the next few years the same way: this is about taking share, not hoping the industry grows a lot. In their view, Japan represents the largest single opportunity, given KBS’s relatively low penetration compared to its position in the U.S. Long term, Asia’s growing middle class could be the next wave of demand acceleration. As disposable income increases, it allows for more leisure activities.
The graphite shaft opportunity
Graphite is a new and growing piece of the KBS thesis. Steel is still the core business, driving 1/3 of the incremental revenue growth in my model.
Graphite is a very different business from steel. KBS designs, brands, and markets graphite shafts across multiple product categories, including the TD Driver series, Tour Graphite Iron (TGI) shafts, the Players Graphite Wood family, and the recently launched TGBlack driver shaft. However, the company does not manufacture graphite shafts internally.
In my opinion, the outsourcing model is a positive. Premium graphite shafts command substantially higher price points than steel shafts, often selling for several hundred dollars compared to tens of dollars for a steel shaft. Because production is outsourced, KBS can participate in this attractive segment without investing in its own carbon-fiber manufacturing infrastructure. Interestingly, KBS, in a recent conference presentation, stated that graphite shaft gross margins are ~30%; however, if they bring that process in-house, they could bring margins to 55% to 60%. I am marginally confused about how a higher-priced, outsourced manufacturing process has such low margins. The margin profile may include D&A or R&D, but I am unsure what costs are included in the COGS figure that creates such a low margin profile. Adding to this in their Q3 2025 earnings press release, “Gross profit margin for the third quarter of 2025 improved to 39.2%, compared with 38.8% in the prior-year period. This increase was attributable to increased KBS-branded programs and wider wholesale acceptance of KBS graphite shafts.” Implies margins on graphite shafts aided margin expansion. Given the outsourced and presumably steady margin profile of this segment, I have trouble squaring these comments.
During the Q4 call, management disclosed graphite shafts drove over half the $11.5m revenue increase, and they represented 5% of 2024 revenue. I estimate graphite shaft revenue grows from approximately $7.8m in 2025 to $12.2m in 2026, $15.5m in 2027, and $16.4m in 2028. Under these assumptions, graphite increases from roughly 5% of shaft revenue in 2024 to approximately 20% by 2028. $16.4m of revenue translates to ~7% market share (note I combine the graphite, multi-material, and other markets). In Q1 2026, graphite shaft revenue increased 64% year over year following the launch of the TGBlack driver shaft.
The biggest graphite risk is the supplier. All graphite shafts are sourced from a single external manufacturer. While management maintains several months of inventory as a buffer, the business remains dependent on a single production partner for its fastest-growing product category.
KBS is entering a segment dominated by established brands such as Fujikura, Mitsubishi Chemical, and Graphite Design. These companies occupy positions in premium wood shafts similar to the role True Temper plays in premium steel irons. The opportunity is real, and the early results are encouraging, but KBS still has to prove it can take lasting share.
KBS does not need to become the graphite market leader for the stock to work. If KBS can win even a modest position in premium wood shafts, graphite could become the biggest driver of revenue and profit growth over the next few years.
Key Risks
1. Demand and the Path to Sustainable Profitability
This is the primary risk to the entire investment case. KBS has historically generated limited profitability, and even after adjusting for non-recurring SPAC-related expenses, earnings remained modest through much of 2025. Q1 2026 was encouraging, but it is still only one quarter.
If demand stagnates near current levels, margin expansion and debt reduction become significantly more difficult. If golf equipment demand rolls over, leverage becomes a concern.
2. Customer Concentration
OEM relationships represent approximately half of revenue, with TaylorMade serving as the most significant customer relationship. OEM programs offer some protection because switching shafts is not immediate. Product cycles and qualification processes take time. Revenue would fall, utilization would drop, and margins would decline, barring offset wins at other OEMs.
I am unsure who Customer C is (likely Callaway or Ping); however, customer concentration has increased over the last two years. Should TaylorMade decide to pivot to True Temper, KBS would need to take share at another OEM.
On a similar note, KBS sources its steel from China Steel. We do not have a look into their financials; however, should they run into any trouble, KBS has a single supplier and thus would need to find a new steel producer capable of manufacturing the exact blend of steel they need. I suspect this would result in temporary production issues and could cause higher defects than present, lowering margins and putting revenue and customer relationships at risk.
3. Single-Source Graphite Supplier
The fastest-growing portion of my model relies entirely on graphite shafts produced by a single external manufacturer. Inventory buffers reduce near-term disruption risk, but the company remains dependent on one supplier for what I view as its most important growth category. Any production issue, capacity constraint, quality problem, or supplier dispute would directly hit the fastest-growing part of the model.
4. Golf Industry Cyclicality
Golf equipment demand remains tied to rounds played, equipment replacement cycles, and consumer discretionary spending. The industry benefited significantly from the COVID-era participation surge before returning toward more normalized growth levels. Golf has held up better than many recreational categories, but it is still discretionary.
5. Key-Person Dependence and Succession
Kim Braly remains one of the central figures behind KBS’s product development efforts and oversees an R&D organization of approximately sixteen employees. There is an engineering team behind him, but losing or replacing a key designer would still matter. While all indications are that Kim loves what he does, he is 71 years old, and I am sure one day he would love to hit the clubs he made so famous more often.
6. Equity Offering – Capital Allocation Decisions
Their recent $100m ATM offering will result in significant shareholder dilution and capital destruction if cash is improperly allocated. We have no prior history of capital allocation decisions for the management team outside of the capacity expansions during Covid. An acquisition creates increased operational risk, for which the market does not have a playbook for how management has performed in the past.
Estimates & Model
Phase one is steel. Between 2024 and 2026, shaft volume increases from approximately 6.3m units to 8.5m units as KBS fills existing capacity, gains OEM business, and captures market share. From 2024 to 2026, steel revenue grows from roughly $33.6m to $45.9m, and in 2028 generates $58.8m. All in, I estimate production increases from 7.5m shafts in 2025 to 9.83m shafts in 2028, resulting in 67% capacity utilization.
Phase two is graphite. I estimate graphite revenue increases from approximately $7.8m in 2025 to $16.4m in 2028. Both figures have upside optionality if KBS wins incremental OEM lines with steel/graphite combo sets. A major win by a tour pro using KBS Graphite shafts would go a long way in validating the technology.
Between 2024 and 2028, I estimate total revenue increases by approximately $28.4m. Graphite contributes roughly $9m of that growth, or approximately one-third, with steel accounting for the remainder. I assume the company’s retail, food and beverage, and lifestyle-related initiatives remain approximately flat at current levels. The retail, food and beverage, and lifestyle projects may eventually matter, but they do not drive material results today or in the next several years.
Margin Expansion and Earnings Inflection
Gross margin declined to 43.1% in 2024 as OEM customers worked through excess inventory created during the post-COVID normalization period. I model gross margin improving to approximately 48.5% by 2028 as manufacturing utilization increases and OEM contracts are priced less aggressively.
Q1 supports that view. Management has discussed a long-term gross margin profile in the high-40% to 50% range, and the first quarter of 2026 produced a gross margin of 51.6%, aided by higher graphite sales and improved operating leverage. One quarter does not make a trend, but the 2028 margin estimate does not look heroic if graphite keeps growing.
The earnings move is meaningful. I estimate EBIT improves from a loss of approximately $3.4m in 2025 to a profit of $3.5m in 2026, increasing to roughly $11m by 2028. Margins expand 2100+ bps over that time period.
EPS follows the same path, moving from a loss of about $0.13 in 2025 to earnings of about $0.12 by 2028.
Key Modeling Assumptions
Capacity Utilization. I assume shaft production increases to approximately 9.8m units by 2028, and asp/shaft increases 5% per year. Note, oil and refined products may result in prices needing to increase at a higher rate to offset input cost increases. Notably, the Iran war has put a strain on the production and supply of plastics coming from a refinery. Should the war not end in the near term (as I write this, it’s said to be “over” but who actually knows what’s happening), input and transportation costs are set to rise.
I project that graphite revenue reaches approximately $16.4m by 2028, representing roughly 21% of shaft revenue. Graphite drives approximately one-third of forecast revenue growth. Recent results support the continued market share gains; however, how much share is up for grabs vs. low-hanging fruit is unknown.
I assume gross margin reaches approximately 48.5% by 2028. How the next several years’ OEM wins shake out is a key driver of this. Should KBS need to remain price competitive and undercut competition, margins will likely come in lower than anticipated. Conversely, if KBS gains share in the premium market, acquires a graphite shaft manufacturer, and/or increases pricing on OEM wins, margins should come in higher than I anticipate.
Valuation
At the current share price of approximately $1.26, the stock trades at roughly 10.5x my 2028 EPS estimate of $0.12 per share.
Using a 14x multiple on my 2028 EPS estimate produces an implied value of approximately $1.72 per share, representing roughly 41% upside from current levels.
Downside - Book value is ~$17m. The facility is on the older side; however, one of the main thoughts I had walking through that is how the machinery, coupled with the Kim Braley IP, patents, and technological know-how, has to be worth more than what BV suggests. On the other hand, KBS’s debt profile is comprised primarily sub 3% interest debt. Should interest rates rise, they will likely have to tap the ATM to pay it off. Today, the leverage profile does not concern me, so long as the TaylorMade relationship is rock solid.
Beyond Shafts: Brand Building and Optionality
This part of the visit does not move my model, but it does show how management thinks about the brand.
KBS Golf Experience
I would not think about the KBS Golf Experience locations as normal retail stores. The associated food, beverage, and accessory revenue remains modest, approximately $1m annually, and I model it as essentially flat throughout the forecast period.
Management was clear that these locations are about brand building, fitting, education, and supporting the channel. The locations host fittings, customer events, and product demonstrations while supporting a broader network of roughly 800 independent fitters and golf retailers in the United States. These locations give the company incremental swing data, allowing them to potentially fine-tune their shafts depending on trends they are seeing. They are more marketing and distribution assets than standalone profit centers. No new locations have been announced, and it's unlikely there will be any material expansion beyond what exists. KBS does not want to compete with its retail channel partners.
KBS Experience in Taipei, Taiwain
HIT CAT and the Lifestyle Brand Ambition
The original Hit Cat Café is located in Hinoki Village in Chiayi City, a restored Japanese-era cultural district and tourist destination. The brewery and restaurant concepts extend the same branding into food and beverage. These businesses do not matter to current earnings, but they show that management wants KBS to be more than just a shaft manufacturer.
What stood out during the visit was the consistency of execution. Whether it is shafts, fitting centers, restaurants, or hospitality, management is trying to position everything as premium. The facilities are well done and clearly meant to make KBS feel like a premium brand.
The affordability question is the one I kept coming back to. Taiwan’s average household disposable income was about NT$1.165 million in 2024 (roughly $37,000). Chiayi City is near the national average at about NT$1.21 million per household, helped by tourist traffic through Hinoki Village. The surrounding Chiayi County, though, is one of the five lowest-income areas in all of Taiwan. A premium café and a high-end restaurant priced for a Taipei or Hsinchu wallet are selling into a local base that mostly is not, which means the economics lean heavily on tourist footfall through the historic village rather than local repeat spend.
I believe all food, restaurant, and event spaces lose money, and I do not expect this to change. So why do they exist, and does it matter for the equity? My main takeaway is that David Chuang, CEO, does not let a single stone go unturned. The same mentality that finishes a shaft to tour tolerance finishes a café in a historic timber village to the same standard. As a profit center, the food ventures are non-core and probably a small drag. This company obsesses over quality, even in businesses that barely matter to the P&L. That matters if management ever pushes harder into apparel or a broader lifestyle brand, where perception is a huge part of the battle. The problem is that the connection between Hit Cat and KBS shafts is still not obvious, so I have no way to quantify the marketing benefit. Whether Hit Cat Cafe, brewery, retail store, and future apparel brand ever become relevant is not critical to the long-term success of KBS. They are potentially additive. FST recently hired a designer to construct the future KBS retail brand.
Hit Cat Cafe in Hinoki Village
A delicious Peanut Latte from Hit Cat Cafe
The KBS Open. The First Annual KBS Open Competition (also called the KBS Open Golf Tournament) held its inaugural edition on December 4 and 5, 2025, at the Chiayi Palm Lakes Resort in Chiayi County, Taiwan. Roughly 60 professional and amateur golfers competed, all using KBS shafts. The purse was over $70,000, with more than $47,000 to the winner, and the winner also earned a spot in a Taiwan PGA tournament the following season. You can watch the recap here.
Management stated growing the event is a 2026 priority. Every player is using KBS equipment, the company controls the event, and it creates content and credibility in a market KBS is trying to build.
Conclusion
KBS is at an interesting point. It operates in a concentrated steel shaft market, has a cost advantage, and has spent the last several years building capacity, distribution, and the KBS brand. Those investments hurt near-term profitability, but earnings power is starting to inflect.
As utilization moves toward 1.2m shafts per month, fixed costs get spread across more volume, and margins should improve. Q1 2026 was the first evidence of that, with a gross margin of 51.6% and net income of $1.9m. More importantly, graphite is becoming the second growth engine. Because graphite is outsourced, growth there should require less capital and should help margins.
The thesis rests on a few measurable things: higher utilization, more OEM wins, debt reduction, and graphite execution. KBS has a strong position in premium steel shafts, but it has not displaced True Temper at the highest end of the iron market. The lifestyle businesses are still immaterial to earnings and should be seen as a call option.
The risks are also clear. If graphite ramps slower than expected, the sole supplier has an issue, golf equipment demand weakens, or utilization does not improve, the earnings story gets impaired. This is also a small-cap foreign private issuer with limited liquidity, concentrated ownership, and less disclosure than a U.S. domestic issuer. A further risk and issue is that I don’t see any historical presentations that the company has made accessible; thus, ramping up on the name is more challenging.
Disclosure: The author visited FST Corp.’s facilities in Chiayi, Taiwan. FST Corp. paid for travel and lodging expenses associated with the visit. The company had no editorial control over this report and did not review or approve its contents prior to publication. All opinions, estimates, and conclusions expressed herein are solely those of the author and are subject to change without notice.
Masters iron-shaft share, 2016 to 2026
All photographs are mine, taken at the FST facility and around Chiayi, Taiwan, during the visit.
Representing the Bills in Taiwan
A special thank-you to the entire KBS Team. What an amazing and unforgettable experience it was. They don’t call it KBSX (KBS Experience) for nothing!
Fantastic report.