Mitsui Chemicals "Accelerated re-expansion in earnings likely to take time"

研报英文原文证据摘录

Mitsui Chemicals "Accelerated re-expansion in earnings likely to take time"

n our estimates for ICT solutions and mobility solutions due to higher-than-

03/28E 186.0 149.2 -20 196.1

expected raw material costs versus previous assumptions (Figure 1Quarterlyandful-yearcoreOP/estimates/consensus). For example, we

03/29E 222.5 176.3 -21 230.0

expect the non-woven fabric business, in which earnings remain low, to face pressure

from rising costs driven by high naphtha prices. Shunta Omura

Analyst

The company's ROIC target of 7% or higher (FY3/29) looks distant shunta.omura@ubs.com

+81-3-5208 6244

Mitsui Chemicals' ROIC remains sluggish at 4.5% (FY3/26). Efforts to improve ROIC are

being made through structural reforms in the petrochemical business and growth in the

high-margin semiconductor materials business. However, in FY3/27, delays in improving

operational efficiency are expected due to the start-up of a new Tafmer plant in

Singapore (6TF) and new PP compound plant (4PP) capacity, both of which are part of

mobility solutions. We forecast FY3/27 ROIC of 4.4%, remaining below the company's

capital cost of about 4.9%. If the business environment improves by FY3/29, achieving

the company's ROIC target (7% or higher) may be possible, but at present, we see many

uncertainties. We forecast FY3/29 ROIC of 5.0%. Sustained sales growth of

semiconductor materials such as EUV pellicles, CNT pellicles, and ICROS tape, along with

the performance of the mobility solutions business, are likely to be key.

Valuation: Fair-value PER of 12X

Our price target of ¥1,790 (previously ¥1,660) is based on fair-value PER of around 12X

(unchanged) and 12-month forward moving average adjusted EPS of ¥150 (¥139). Our

PER is discounted to the TOPIX-33 (chemicals) PER of 16X (16X).