Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Securities analyst covering electronics, precision equipment & robotics, engineering, construction, transport and other sectors for more than 25 years in Japan and 3 years in Korea. Permanent resident of Japan.

Senior Technology Analyst, Japanese Equities

Fujimi (5384 JP): Guidance Raised, but Still Looks Conservative

Fujimi (5384 JP): Geared to Silicon Wafer Demand

Silicon Wafers for Semiconductors - Ugly Duckling Turns Golden Goose

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Equity Bottom-Up

<p>Management has raised FY Mar-18 guidance for the third time this fiscal year following good 3Q results. The indicated dividend for this fiscal year has also been raised, from ¥53.00 to ¥63.00 per share (increasing the current dividend yield from 2.2% to 2.6%). </p><p>Rising demand for CMP slurry and silicon wafer lapping and polishing materials supported a 10.7% year-on-year increase in sales in the three months to December and a 17.3% increase in operating profit - both substantial improvements over 2Q. The main growth drivers were silicon wafers and memory ICs in Japan and logic ICs in North America. Forex losses (vs. gains the previous year) held the increase in net profit to 1.1%. Sales, operating profit and net profit were all above the expectations of management, which raised guidance to the level of our own estimates. </p><p>At ¥2,432 (March 6 closing price), the shares are selling at 17.6 our EPS estimate for this fiscal year, 15.0 our estimate for next year and 13.0 our estimate for FY Mar-20. These and other projected valuation multiples look attractive when compared with their historical ranges. Targeting 20x estimated FY Mar-20 earnings implies 44% potential upside to ¥3,500, a price last reached in FY Mar-08.</p><div class="content-highlight"><p>Fujimi is a leading supplier of synthetic precision abrasive powders and slurries used in the lapping (removal of surface defects and thinning) and polishing of silicon wafers and other semiconductor substrates, the chemical mechanical planarization (CMP) of processed semiconductor wafers, and the polishing of computer hard disks. It has close to 90% of the global market for silicon wafer lapping and polishing abrasives and 8% of the fragmented market for CMP slurries. Customers include SUMCO, Shin-Etsu, Samsung Electronics, Intel, Micron, Global Foundries, TSMC, UMC, Western Digital, and mobile display makers in China. </p></div>

Management has raised FY Mar-18 guidance for the third time this fiscal year following good 3Q results. The indicated dividend for this fiscal year has also been raised, from ¥53.00 to ¥63.00 per share (increasing the current dividend yield from 2.2% to 2.6%). Rising demand for CMP slurry and silicon wafer lapping and polishing materials supported a 10.7% year-on-year increase in sales in the three months to December and a 17.3% increase in operating profit - both substantial improvements over 2Q. The main growth drivers were silicon wafers and memory ICs in Japan and logic ICs in North America. Forex losses (vs. gains the previous year) held the increase in net profit to 1.1%. Sales, operating profit and net profit were all above the expectations of management, which raised guidance to the level of our own estimates. At ¥2,432 (March 6 closing price), the shares are selling at 17.6 our EPS estimate for this fiscal year, 15.0 our estimate for next year and 13.0 our estimate for FY Mar-20. These and other projected valuation multiples look attractive when compared with their historical ranges. Targeting 20x estimated FY Mar-20 earnings implies 44% potential upside to ¥3,500, a price last reached in FY Mar-08.Fujimi is a leading supplier of synthetic precision abrasive powders and slurries used in the lapping (removal of surface defects and thinning) and polishing of silicon wafers and other semiconductor substrates, the chemical mechanical planarization (CMP) of processed semiconductor wafers, and the polishing of computer hard disks. It has close to 90% of the global market for silicon wafer lapping and polishing abrasives and 8% of the fragmented market for CMP slurries. Customers include SUMCO, Shin-Etsu, Samsung Electronics, Intel, Micron, Global Foundries, TSMC, UMC, Western Digital, and mobile display makers in China. 

Fujimi Inc

Fujimi (5384 JP): Guidance Raised Again