Equity Analyst, LightStream Research

Farha Sabri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

SUMCO reported its 1QFY12/18 results yesterday. Despite performing a touch weaker than its own estimate, the company continued to achieve top-line growth similar to the last few quarters. The company’s top-line grew by 28.5% YoY to reach JPY77.2bn in 1QFY12/18. This was a touch lower than the 31.4% YoY top-line growth the company called for in its estimates. Our own estimates were slightly more conservative with our estimates calling for 26% YoY growth in 1QFY12/18.Meanwhile, the company’s OP…

SUMCO reported its 1QFY12/18 results yesterday. Despite performing a touch weaker than its own estimate, the company continued to achieve top-line growth similar to the last few quarters. The company’s top-line grew by 28.5% YoY to reach JPY77.2bn in 1QFY12/18. This was a touch lower than the 31.4% YoY top-line growth the company called for in its estimates. Our own estimates were slightly more conservative with our estimates calling for 26% YoY growth in 1QFY12/18.Meanwhile, the company’s OP…

SUMCO Continues Growth Trajectory Recording Strong Financial Performance in 1QFY12/18

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

SK Holdings Co Ltd/Old / Equity Capital Markets

SK Siltron is expected to complete its IPO in 2H18. This is expected to be one of the highly anticipated IPOs in the Asian semiconductor sector this year. SK Siltron makes silicon wafers which are thin discs used as a basic material for semiconductors. These wafers are used to make semiconductor devices such as DRAM, flash memory, LCD drivers, image sensors, and power devices. Currently, <a href="https://www.smartkarma.com/entities/393" target="_blank" data-smartkarma-citation="entities:393:1">SK Holdings Co Ltd (034730 KS)</a> has a 70.6% stake in SK Siltron. <h2>Company Background</h2>Established in 1983, SK…

SK Siltron is expected to complete its IPO in 2H18. This is expected to be one of the highly anticipated IPOs in the Asian semiconductor sector this year. SK Siltron makes silicon wafers which are thin discs used as a basic material for semiconductors. These wafers are used to make semiconductor devices such as DRAM, flash memory, LCD drivers, image sensors, and power devices. Currently, SK Holdings Co Ltd (034730 KS) has a 70.6% stake in SK Siltron. Company BackgroundEstablished in 1983, SK…

Thematic (Sector/Industry)

<ul class=""><li>Shortage of silicon wafers to grow on the back of increasing selling prices with very low levels of capacity expansion, and continuously increasing demand from semiconductor manufacturers. Fabrication capacity expansion to grow faster in 300mm segment while demand for 200mm to continue at a more subdued rate.</li><li>Semiconductor manufacturers rush to secure long-term contracts with wafer producers regardless of the continuously increasing average selling prices.</li><li>Silicon wafer industry revenue to grow at a two-year CAGR of 23% until 2019E on the back of steadily increasing selling prices.</li></ul>

Shortage of silicon wafers to grow on the back of increasing selling prices with very low levels of capacity expansion, and continuously increasing demand from semiconductor manufacturers. Fabrication capacity expansion to grow faster in 300mm segment while demand for 200mm to continue at a more subdued rate.Semiconductor manufacturers rush to secure long-term contracts with wafer producers regardless of the continuously increasing average selling prices.Silicon wafer industry revenue to grow at a two-year CAGR of 23% until 2019E on the back of steadily increasing selling prices.

The Fiasco That Is the Silicon Wafer Shortage to Continue Well into 2018 and Beyond

<ul><li>Revenue and operating profits to soar on the back of increased wafer prices. Sumco has planned a 20% price hike in FY12/18 and we expect revenue to grow by 20.8% YoY and OPM to improve from last year’s levels. We expect the OPM to improve to approximately 16.5% in the current fiscal year.</li><li>Sumco plans to increase production capacity for 300mm wafers gradually. The company is still skeptical about capacity expansion for 200mm wafers. As such, this segment does not presently have any expansion plans.</li><li>Sumco seems to be undervalued with our estimates showing a FY1 PE of 24.3x, below the company’s historical median as well as peer multiples.</li></ul>

Revenue and operating profits to soar on the back of increased wafer prices. Sumco has planned a 20% price hike in FY12/18 and we expect revenue to grow by 20.8% YoY and OPM to improve from last year’s levels. We expect the OPM to improve to approximately 16.5% in the current fiscal year.Sumco plans to increase production capacity for 300mm wafers gradually. The company is still skeptical about capacity expansion for 200mm wafers. As such, this segment does not presently have any expansion plans.Sumco seems to be undervalued with our estimates showing a FY1 PE of 24.3x, below the company’s historical median as well as peer multiples.

Sumco Benefits from Rebound in Wafer Prices Following Demand-Supply Mismatch

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

We believe that conditions within the semiconductor chain make the relative prospects for wafer manufacturers extremely attractive in terms of both potential upside as well as the likelihood and volatility of profit growth over the next 3-4 years. In contrast, surging capex levels in 2017 make us concerned that we are nearing the top in terms of wafer fabrication equipment spending. While we are not outright negative on semi capex, we feel the potential for a plateau is increasingly high. More…

We believe that conditions within the semiconductor chain make the relative prospects for wafer manufacturers extremely attractive in terms of both potential upside as well as the likelihood and volatility of profit growth over the next 3-4 years. In contrast, surging capex levels in 2017 make us concerned that we are nearing the top in terms of wafer fabrication equipment spending. While we are not outright negative on semi capex, we feel the potential for a plateau is increasingly high. More…

Japan

SUMCO Corporation manufactures silicon wafers for the semiconductor industry. The Company produces silicon wafers used to produce solar batteries as well as ultra-high purity quartz used to produce vessels for silicon manufacturing process. SUMCO markets its products worldwide.

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SUMCO Corp (3436 JP)

SUMCO Continues Growth Trajectory Recording Strong Financial Performance in 1QFY12/18

SUMCO reported its 1QFY12/18 results yesterday. Despite performing a touch weaker than its own estimate, the company continued to achieve top-line...

Farha Sabri

SK Siltron IPO Preview (Part 1)

SK Siltron is expected to complete its IPO in 2H18. This is expected to be one of the highly anticipated IPOs in the Asian semiconductor sector...

Douglas Kim

The Fiasco That Is the Silicon Wafer Shortage to Continue Well into 2018 and Beyond

Shortage of silicon wafers to grow on the back of increasing selling prices with very low levels of capacity expansion, and continuously...

Farha Sabri

Sumco Benefits from Rebound in Wafer Prices Following Demand-Supply Mismatch

Revenue and operating profits to soar on the back of increased wafer prices. Sumco has planned a 20% price hike in FY12/18 and we expect revenue...

Farha Sabri

Sumco Vs. TEL: Wafers over Etchers

We believe that conditions within the semiconductor chain make the relative prospects for wafer manufacturers extremely attractive in terms of both...

Mio Kato

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