Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

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

<ul>
<li>Sumco 1Q revenues were on the strong side, 1.5% above consensus but OP beat by 9.9%. </li>
<li>As we have been flagging, consensus is underestimating operating leverage and that was before the weakening of the yen. </li>
<li>Revenue guidance for 2Q was 4.9% above consensus and OP 12.8% higher but we expect results to be an even larger beat.</li>
</ul>


Sumco 1Q revenues were on the strong side, 1.5% above consensus but OP beat by 9.9%. 
As we have been flagging, consensus is underestimating operating leverage and that was before the weakening of the yen. 
Revenue guidance for 2Q was 4.9% above consensus and OP 12.8% higher but we expect results to be an even larger beat.


<ul>
<li>Sumco’s 4Q results were on the strong side with revenue beating by 2.3% and OP beating by 2.0%. </li>
<li>1Q guidance was also bullish with revenue guidance of ¥99bn 5.3% higher than consensus while OP guidance of ¥21bn was 12.8% higher. </li>
<li>Guidance is still a touch conservative in our view, particularly on the margin side.</li>
</ul>


Sumco’s 4Q results were on the strong side with revenue beating by 2.3% and OP beating by 2.0%. 
1Q guidance was also bullish with revenue guidance of ¥99bn 5.3% higher than consensus while OP guidance of ¥21bn was 12.8% higher. 
Guidance is still a touch conservative in our view, particularly on the margin side.


Sumco – Consensus Probably Too Timid on Price Hikes

Taiwan Tech Focused Senior Analyst

Patrick Liao

<ul>
<li>To merge with Siltronic has reached to 95% in probability for GlobalWafers now. Our target price for GlobalWafers doesn’t change at NT$880~960 and $1,200 if it finally past.  </li>
<li>Chinese government requested that GlobalWafers has to spin off its Denmark’s subsidiary 8” float zone (FZ) wafer within no more than 9 months at most.</li>
<li>Currently, Siltronic is delivering a GM of 25.6~32% during 1Q~3Q in 2021, which is competitive to Sumco, Shin Etsu. However, it shall be able to improve the GM further.</li>
</ul>


To merge with Siltronic has reached to 95% in probability for GlobalWafers now. Our target price for GlobalWafers doesn’t change at NT$880~960 and $1,200 if it finally past.  
Chinese government requested that GlobalWafers has to spin off its Denmark’s subsidiary 8” float zone (FZ) wafer within no more than 9 months at most.
Currently, Siltronic is delivering a GM of 25.6~32% during 1Q~3Q in 2021, which is competitive to Sumco, Shin Etsu. However, it shall be able to improve the GM further.


GlobalWafers (6488.TT): The Last Step to Go for Siltronic (WAF GR) Mergence

<ul>
<li>We think the chance for GlobalWafers mergence case to have the final approval could be high. Even if it finally failed, the raw wafer supply should be full until 2024.</li>
<li>This deal was granted by seven governments and organizations already. And it is still under review of Chinese and Japanese governments.</li>
<li>The deal will not change the worldwide raw wafer supply status, especially such supply tightness. To our understanding, the secrets to achieve success are cost reduction and resource management mostly.</li>
</ul>


We think the chance for GlobalWafers mergence case to have the final approval could be high. Even if it finally failed, the raw wafer supply should be full until 2024.
This deal was granted by seven governments and organizations already. And it is still under review of Chinese and Japanese governments.
The deal will not change the worldwide raw wafer supply status, especially such supply tightness. To our understanding, the secrets to achieve success are cost reduction and resource management mostly.


Globalwafers (6488.TT): Stock Price Can Go Higher Even If Siltronic Mergence Case Failed

Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

<ul>
<li>CEO Hashimoto told the <em>Nikkei</em> newspaper that customers are ordering silicon wafers at higher prices before they are made, even as production capacity is being increased.</li>
<li>SEMI and TSMC announcements point to rising wafer demand for at least another two years. SUMCO's expansion plans suggest at least three years.</li>
<li>We continue to recommend buying into the current weakness for the medium to long term.</li>
</ul>


CEO Hashimoto told the Nikkei newspaper that customers are ordering silicon wafers at higher prices before they are made, even as production capacity is being increased.
SEMI and TSMC announcements point to rising wafer demand for at least another two years. SUMCO's expansion plans suggest at least three years.
We continue to recommend buying into the current weakness for the medium to long term.


SUMCO (3436 JP): CEO Describes Tight Supply, Rising Prices

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 – Still Underestimated

Sumco delivered a strong beat at 1Q together with strong guidance but we believe those numbers are still highly conservative given a weakening yen.

Mio Kato

Sumco – Consensus Probably Too Timid on Price Hikes

Sumco’s 4Q results were on the strong side and 1Q guidance was also bullish with revenue guidance of ¥99bn 5.3% higher than consensus while OP...

Mio Kato

GlobalWafers (6488.TT): The Last Step to Go for Siltronic (WAF GR) Mergence

GlobalWafers to merge with Siltronic has reached to 95% in probability now. Our target price for GlobalWafers doesn’t change at NT$880~960, and it...

Patrick Liao

Globalwafers (6488.TT): Stock Price Can Go Higher Even If Siltronic Mergence Case Failed

The chance for GlobalWafers to have the final approval could be high. Even if it finally failed, the raw wafer supply should be full until 2024.

Patrick Liao

SUMCO (3436 JP): CEO Describes Tight Supply, Rising Prices

Tight supply and rising prices for silicon wafers points to sales growth and margin expansion for at least 2-3 years. Capacity expansion lagging...

Scott Foster

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