Japan Technology: Hardware - Industrial Electronics: GLW 2Q: DC demand strong; valuation gap with Japanese peers to narrow

Research evidence excerpt

Japan Technology: Hardware - Industrial Electronics: GLW 2Q: DC demand strong; valuation gap with Japanese peers to narrow

and EBITDA margin for global competitors).

Key downside risks: Energy & infrastructure segment: The balancing out of supply and

demand for wires/cables and power equipment in Japan, resulting in lower selling prices;

a lack of progress with the further leveling of construction work and improvement of

personnel allocation efficiency, resulting in slower-than-expected profit margin

improvement; an influx of foreign workers significantly alleviating the shortage of

construction workers in Japan. Communication & components segment: Sharp

declines in optical fiber cable selling prices due to a large supply of inexpensive products

from China, India, and other countries, and profitability deteriorating as a result; home

appliance sales in China and Japan falling short of expectations; acceleration in the

trend toward a paperless society, resulting in a steeper-than-expected decline in sales

of printer rollers. A slower-than-expected shift to EVs by the company’s customers,

leading to lower demand; significant declines in automobile production volume,

including EVs; increases in prices of materials such as copper, with the company unable

to pass these increases on to customers. Company-wide: The implementation of

large-scale growth investments aimed at furthering overseas expansion in the electronic

equipment & components and communication & industrial devices segments, with

returns on these investments falling short of expectations and significantly impacting

company-wide margins; yen appreciation.

Price Target Risks and Methodology - Anritsu

Our 12-month target price is ¥5,300, based on a target EV/EBITDA multiple of 17X on

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