First Read: Furukawa Electric "FY3/26 results: Ambitious profit growth plan..."

Research evidence excerpt

First Read: Furukawa Electric "FY3/26 results: Ambitious profit growth plan..."

5.2 720.2

as well as expanded sales of optical components (DFB lasers, MT ferrules) and rollable

03/27E 863.6 958.3

ribbon cable (optical fibre). Functional products (OP +¥1.3bn yoy; ¥400mn above 03/28E 1,034.7 1,280.1

guidance) benefited mainly from improved earnings on high-performance copper foil.

Harunobu Goroh

Q: What were the most noteworth areas in FY3/27 guidance? Analyst

harunobu.goroh@ubs.com

A: The FY3/27 OP guidance is ¥95bn (+¥31.1bn yoy; +48.8%), driven by an expected

+81-3-5208 6215

¥23.1bn yoy profit increase for digital infrastructure components (optical devices,

functional products). Cooling components are expected to add ¥16bn yoy, with the Lihui Huang

Analyststartup of additional water-cooled module capacity, and optical components, copper

lihui.huang@ubs.com

foil, and AT tape around +¥2bn each. Management expects +¥16.3bn yoy profit growth +81-3-5208 6217

in the optical solutions segment (optical fibre cables and broadband equipment) and full

contributions from additional capacity for rollable ribbon cables (+¥14bn yoy) and MT

ferrules (+¥2bn yoy). Management has not factored in risks related to the Middle East

situation but assumes for the automotive systems segment flat demand and fixed-cost

increases and hence expects an OP decline of ¥3.4bn yoy.

Q: How would we expect investors to react?

A: Following the results announcement, the stock hit its daily limit. At the next medium-

term plan presentation (scheduled for 19 May), management is likely to announce

ambitious numerical targets for capturing demand for AIDC-related products. We think

it will be crucial to show the product competitiveness and profitability improvement

efforts underpinning these targets.