Sumitomo Bakelite: Expect Guidance Beat

Research evidence excerpt

Sumitomo Bakelite: Expect Guidance Beat

IdeaMTaiwan sales strong at present: We estimate China and Taiwan respectively make up 40-

45% and 30-35% of Sumitomo Bakelite’s semis encapsulant sales. We understand F3/26

sales to China were +20% YoY and Taiwan +10-15%. Monthly data from the firm’s Taiwan

distributor Chang Wah Electromaterials confirm Apr-May sales +27% YoY. Distributor

trends indicate stronger momentum for Sumitomo Bakelite’s encapsulation materials from

Mar, with this apparently continuing at present.

Launch of liquid encapsulants: We estimate advanced products make up 10–15% of semis

encapsulation material sales. Unit prices are generally highest for liquid products,

followed by granular and then mold underfill (MUF). Sumitomo Bakelite recently began

shipping sample liquid products targeting major foundries/OSATs, with shipment proper of

these products expected to begin in F3/28. We understand customers for granular

encapsulation materials include US IDMs, and recovery momentum may now strengthen

given end-customer conditions. However, we expect granular encapsulation materials will

grow sharply from 2030 when the market takes off for 515x510mm PLP.

To acquire part of Kyocera’s business: Sumitomo Bakelite plans to acquire part of

Kyocera’s business in October for ¥30.0bn. The target business generated sales of

¥23.2bn in F3/25; we estimate semiconductor-related materials, mainly semiconductor

encapsulants, accounted for 70% and high-performance plastics for 30%. We estimate OP

was around ¥3bn. As the company reports under IFRS, there will be no goodwill

amortization, and after excluding one-off expenses, we expect the acquisition to

contribute ¥1.0-1.5bn to business profit in F3/27. The acquisition effect is not incorporated

in the current plan.