Nissan Chemical (4021): Raise PO: strengthening positioning as a semiconductor materials play

Research evidence excerpt

Nissan Chemical (4021): Raise PO: strengthening positioning as a semiconductor materials play

Short-term view

• We expect 1Q FY3/27 OP of ¥20.5bn, exceeding the company‘s guidance of ¥16.8bn

and consensus of ¥17.5bn, driven by strong semiconductor materials. This should

act as a positive catalyst for the share price.

• Due to strong semiconductor materials demand and an improved outlook for LCD

materials, we raise our operating income forecast for the performance materials

business to ¥42.2bn from ¥39.2bn for FY3/27 and to ¥48.0bn from ¥44.1bn for

FY3/28. On the other hand, due to the emergence of competing products for Gracia,

we lower our operating income forecast for the agrochemicals business to ¥26.5bn

from ¥27.2bn for FY3/27 and to ¥25.3bn from ¥26.0bn for FY3/28.

• Semiconductor materials are set to be the primary earnings driver. In-line with

semiconductor market growth in Korea, China, and Taiwan, we expect strong

expansion in BARC (bottom anti-reflective coatings), multilayer materials, and EUV

underlayers.

o Semiconductor materials carry high marginal profitability, and volume

growth should contribute significantly to earnings. Regional exposure

is weighted toward China (high-30% range), Korea (30% range), and

Taiwan (~20%). By application, slightly over 50% is memory (mainly

DRAM) and slightly under 50% is logic.

o Accelerating growth in advanced materials, including temporary

bonding materials, should support the share price. We expect adoption

of temporary bonding materials to accelerate from HBM4E.

• Display materials (LCD alignment film “SunEver”) face substitution by OLED, but

capacity expansions at customers should support growth, particularly for monitor

and automotive applications.