First Read: SUMCO Corporation "Q1 FY12/26 results: improving demand outlook..."

Research evidence excerpt

First Read: SUMCO Corporation "Q1 FY12/26 results: improving demand outlook..."

(52.4)

stemming from the Middle East situation. As for 12-inch wafer price trends, most prices

12/27E 0.9 56.5

are determined by long-term contracts, and near-term price increases seem unlikely. We 12/28E (15.7) 109.9

forecast an operating loss of ¥4.0bn (forex assumption: ¥155/$, forex sensitivity: ¥1

depreciation versus the dollar results in OP +¥1.2bn/year, assuming all other conditions Shunta Omura

remain unchanged), which is roughly in line with the company's plan. Analyst

shunta.omura@ubs.com

+81-3-5208 6244

President Ryuta's comments: World's best in technology (SUMCO Vision)

According to President Ryuta (formerly head of production technology), who attended

the results briefing for the first time, SUMCO possesses world-leading technology in

advanced logic and is in a position to secure market share for next-generation products.

Achieving this will require strong communication with customers, as the ability of

SUMCO's engineers to propose solutions to customer demands is key. Additionally,

communication between the company and its suppliers (equipment/materials) is also

critical, as this ecosystem appears to be one of SUMCO's strengths. However, from the

perspective of production technology, there are areas where SUMCO lags its

competitors. The company intends to address these shortcomings over the medium

term to drive improvements in profitability. If leadership can be demonstrated in these

areas, significant profitability improvements could come into view.

Valuation: Applying a PBR of about 0.7X

Our price target of ¥1,050 is based on a fair-value PBR of about 0.7X and end-12/26E

BPS of ¥1,589. We plan to examine demand trends and review our forecasts.