Still upbeat on strong profitability in major businesses, robust financials

Research evidence excerpt

Still upbeat on strong profitability in major businesses, robust financials

cting competitiveness across major businesses to drive

earnings recovery

We maintain our view that the 10-year US Treasury yield needs to decline

below 3.0% for US housing starts to pick up, and that wafer customers’

inventory adjustments will continue through 3Q FY3/27. Increased use of

domestically produced wafers by semiconductor fabs in China and the growth

of Chinese-made general-purpose silicon products are concerns. However,

we expect an earnings recovery at Shin-Etsu Chemical to be driven by

improved export profitability at Shintech on the rise in crude oil prices, higher

sales of advanced semiconductor materials and of functional silicon products,

Senior Analyst Mikiya Yamada and gradual increase in the margins of rare earth magnets.+81 3 6202 8390 mikiya.yamada@mizuho-sc.com

WATCH: Growth prospects for rare earth magnets, advanced

Click here for ESG on semiconductor processing materials

our entire coverage We forecast rare earth magnets, photoresists, substrate coatings, and

photomask blanks will support sales growth in the Electronics Materials

segment. In the Functional Materials segment, we forecast continued stable

growth for silicon and cellulose driven by high value-added applications.

(More on page 2)

MEASURE: Premium justified by company’s competitive edge

Our price objective of ¥7,700, which we derive using a discounted future

economic value added (EVA) model, equates to a PER of 25.0x, a PBR of

3.06x, and an EV/EBITDA of 11.8x on our FY3/27 forecasts. (More on page 2)

Consolidated results and forecasts Share Price: ¥7,641 (4 Jun) 52wks: H ¥7,930 L ¥4,280

Term Sales YoY OP YoY RP YoY NP YoY EPS PER EV/EBITDA

(¥m ) (%) (¥m ) (%) (¥m ) (%) (¥m ) (%) (¥) (x) (x)