Raise PO, reiterate U/P; semis tailwinds, but petrochem weakness still drags

Research evidence excerpt

Raise PO, reiterate U/P; semis tailwinds, but petrochem weakness still drags

Short-term view

• 1Q OP is expected at ¥23.0bn, in line with consensus of ¥23.7bn. Our estimate

incorporates improvements in inventory valuation gains. Full-year OP guidance (yet

to be announced) is projected at around ¥100bn, below consensus of ¥110bn, and is

expected to trigger a negative share-price reaction.

• We expect the company to repurchase ¥25.0bn worth of shares during FY3/27, in

line with its medium-term management plan.

• From FY3/27, the company will change its reported business segments.

• Supported by a strong semiconductor market, growth is expected in semiconductor-

related businesses, including subsidiary Organo (6368 JP), quartz products

(components for semiconductor manufacturing equipment), and sputtering targets

(semiconductor materials). Organo is expected to show steady growth. While quartz

products and sputtering targets are unlikely to quickly recover to the peak earnings

seen in FY3/23 due to higher fixed costs, earnings growth is still expected.

• For PVC, which has a large impact on earnings volatility, OilChem indicates that

China’s capacity expansion in 2026 is expected to be limited to +0.3mn tons, a

sharp slowdown compared with +2.2mn tons in 2025, with no new capacity

additions in 1H 2026. According to OPIS, global PVC capacity stood at 63.5mn tons

as of 2025. Meanwhile, capacity expansions of +1.5mn tons by Reliance Industries

in India during 2026-27 and +1.0mn tons by Mundra Petrochemicals (Adani Group)

by 2028 are planned, which could become sources of supply pressure if they

proceed as scheduled.

Medium-/long-term view

• In petrochemicals, the chlor-alkali and petrochemical segments posted strong OP of

¥89.1bn in FY3/18 and ¥85.2bn in FY3/22.