Toray Industries: Prospects for longer-term benefits from structural reforms and investment

Research evidence excerpt

Toray Industries: Prospects for longer-term benefits from structural reforms and investment

69.5 61.7 -11 65.1

sluggish full-year sales volumes, primarily for apparel, due to an impact from rising raw

03/28E 77.4 69.7 -10 79.6

material costs. We forecast core OP of ¥58bn for performance chemicals (+3.0% yoy,

03/29E 89.6 80.8 -10 91.0

guidance ¥66bn). A key difference between our outlook and guidance is that we do not

factor in any significant contribution from increased sales of battery separator film/film Shunta Omura

in Europe and the US. We revise down our EPS forecasts for FY3/27 to FY3/29 by 10- Analyst

11%, factoring in non-recurring expenses such as restructuring costs. shunta.omura@ubs.com

+81-3-5208 6244

H1 FY3/27: Higher sales for fibers & textiles in Q1, carbon fiber volume growth

in Q2

We estimate H1 core OP of ¥73.8bn (+8.7% yoy), broadly in line with guidance for

¥73bn. For Q1 (April-June), we forecast core OP of ¥32.6bn (+15.6%). We look for

positive volume effects from customers increasing transactions to secure inventories,

especially in the fibers & textiles business. In the performance chemicals business, we

also expect a profit boost from improved ABS resin spreads. With price pass-through

generally appearing to have made some headway, we do not expect significant margin

deterioration. We assume sluggish earnings in the fibers & textiles business from Q2, as

declining crude oil and naphtha prices fuel expectations for further price declines across

a broad range of petrochemical-related products, thereby leading customers to defer

purchases and make inventory adjustments. However, we forecast company-wide core

OP of ¥41.2bn (+6.2% yoy) supported by higher aircraft-related shipments at the

carbon fiber composite materials segment.