Ferrotec (6890 JP) Still Semicon Driven new Ebitda
Valuations at Ferrotec continue to be low relative to semiconductor or niche machinery plays. Our May 2017 update, One of the Cheapest SPE-Related Plays, stressed the EV then of ¥58bil produced EV/OP and PER on our FY17 numbers (which proved 5% too low) of 6.9x and 13.4x. At that time, we forecast OP for FY17 and FY18 would reach “at least†¥8.0bil and ¥9.5bil, hurdles easily cleared despite being 8~9% above consensus. EV since has only edged up to ¥65bil despite better visibility on medium-term earnings; delays in wafer processing and CVD-SiC will likely show up in Q1 and Q2 FY18 earnings, as overseas subsidiaries are accounted on a calendar year. Nevertheless, we think the share price may move ahead of actual earnings releases as business updates confirm the three big semiconductor-related products are firmly on a growth track, and new progress in wafer processing and the equipment cleaning business.• H1 OP likely only in line with company guidance as wafer processing issues may not be resolved until Q3.
• High-margin Semiconductor Equipment-Related products likely to show quarterly sequential sales growth as capacity is expanded (Quartz, Ceramics and Vacuum Feedthroughs).
• Rising OPM trend in the Electronics Division temporarily stalls in FY18. DCB substrate (for power semiconductors) sales increase and a resumption of product mix improvement expected for FY19.
• Despite 20% share dilution from last year’s equity-related finance, Ferrotec remains undervalued. EV/OP on guidance FY18 OP is around 7x, whereas we have 6.4x and 4.4x for FY18 and FY19. Similar valuations for PER come to 12.1x (guidance) and our figures of 10.3x and 7.4x.
• RoE should improve to double-digit increases from FY18 with cash flow at record levels as depreciation doubles between FY17 and FY20.
Founded in 2009, Pelham Smithers Associates (PSA) provides market intelligence on Asian technology, focusing in particular on Japan. The industries covered by our team of specialists are: consumer electronics, telecomms, pharmaceuticals, internet, electronic parts and materials, automotive technology, retail and capital goods.
PSA produces both company and sector reports. The focus of PSA’s research is to identify winners and losers as new technologies impact the top and bottom lines of corporations. Critical to our research is the clear explanation of how these new technologies work and how they impact companies and industries.
The founding partners have worked closely together for twenty years and the team has more than doubled in size since 2012.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.