TOKYO ELECTRON (=) : Takeaways from TEL business update call

研报英文原文证据摘录

TOKYO ELECTRON (=) : Takeaways from TEL business update call

Refinitiv

Investment case, valuation and risks

Tokyo Electron (Neutral, Target Price JPY38,500)

Investment case

TEL's product offerings focus on front-end patterning equipment covering the key

sequential processes, including cleaning, lithography, etching and deposition. TEL's

China sales contribution has normalised from 42% in FY3/25 to 34% in FY3/26, where

we believe, it will further decline to our estimated 20-30% in the medium- to long-term,

in our view. We expect TEL's China sales normalisation to be driven by the lower pre-

purchase intent of China customers and Chinese peers rapidly narrowing their tech

gaps with TEL on mature-process SPE.

In addition, as TSMC will have c30% advanced-process capacity to build in the US in

future, we expect TEL's Taiwan sales contribution will come down while TEL will have

more competition from US peers in the US market, where TEL should be at a

disadvantage due to the potential imposition of tariffs.

Valuation methodology

Our TP of JPY38,500 for TEL is based on 23x FY3/28E EPS, which is its past 2-year

average NTM P/E. We are cautious on its valuation, given 1) China sales normalisation

from its peak and TEL losing market share in China; and 2) shift of advanced fab

investments to the US, which would be unfavourable to TEL's cost competitiveness.

Risks

To the upside:

1) Stronger-than-expected global WFE spending; 2) favourable changes from emerging

semiconductor manufacturing technology; 3) favourable geopolitical risks; 4) sharp JPY

depreciation against USD.

To the downside:

1) Weaker-than-expected global WFE spending; 2) unfavourable changes from

emerging semiconductor manufacturing technology; 3) unfavourable geopolitical risks;