First Read: Furukawa Electric "Group Vision 2030 announced: cooling modules..."

Research evidence excerpt

First Read: Furukawa Electric "Group Vision 2030 announced: cooling modules..."

ed

03/27E 863.6 940.2

at ¥99.0bn (the FY3/27 company plan is ¥39.0bn) as a profit growth driver from FY3/27 03/28E 1,034.7 1,331.9

to FY3/31. Profit in thermal electronic components, primarily water-cooling modules, is

expected to expand 15X to approximately ¥130.0bn, while profit in FITEL products, Harunobu Goroh

including active components such as DFB laser chips, is expected to expand 10X to Analyst

about ¥10.0bn. OP in the optical solutions segment (optical fiber cables and optical harunobu.goroh@ubs.com

+81-3-5208 6215

connectors: Lightera) is projected to reach ¥37.0bn in FY3/29 (the FY3/27 company plan

is ¥27.0bn). Production of optical fiber cables is expected to roughly triple, while MT Lihui Huang

ferrules production is expected to roughly double. Of the expected ¥350.0bn increase in Analyst

sales versus the FY3/27 plan, the company projects approximately ¥300.0bn as coming lihui.huang@ubs.com

+81-3-5208 6217

from growth in water-cooling modules (including some air-cooling modules).

Management noted that the planned production increase was based on the assumption

that the company can secure orders in line with customer demand forecasts. It also

stated that its HVDC investment policy remains unchanged, and despite project delays it

plans to update production facilities to accommodate medium- to long-term demand

growth.

Valuation

We have a Neutral rating for the company and a price target of ¥31,300 (FY3/27E PBR of

5.0X). Our fair-value price target calculation factors in our average (FY3/28-29) ROE

forecast of 16.0% and our average COE forecast of 5.2%. We forecast end-FY3/27 BPS

of ¥6,282.

Highlights (¥b) 03/23 03/24 03/25 03/26E 03/27E 03/28E 03/29E 03/30E