JSR (4185) Results Comment – After a Strong Q4, Guidance Likely Will Be Viewed as Conservative
JSR finished FY16 with a strong Q4, and considering that many OP estimates were still around ¥30.5bn, the ¥32.4bn result looks positive.
It is less clear how much the market will be encouraged by FY17 OP guidance of ¥35.0bn, as the median estimate is around ¥36.5bn. The market will likely conclude JSR is being conservative. Valuations are not particularly demanding, with EV/OP of around 12.5x vs. guidance.
The figure on page 2 of this report illustrates the quarterly trend and JSR’s guidance. We will review our estimates after visiting JSR on April 26th.
Key Points
- Elastomer exports were brisk in in H2. SSBR for eco-tires grew with higher capacity in Thailand, and more capacity is under construction in Hungary. Management commented, though, that market visibility is not high, and raw material on hand is currently somewhat expensive.
- A change to IFRS accounting in FY17 apparently makes little difference to JSR’s earnings, which implies that JSR is guiding for 8% OP growth.
- The plan does not include the proposed combination with Japan’s ABS resin joint venture UMG ABS (unlisted). If added in October, as planned, we estimate a ¥2bn OP addition in FY17 and the same in FY18.
- While IC markets are characterized as firm, and the LCD TV area is supposed to grow 5%, tech material guidance is still subdued. ArF photoresist sales growth appears sluggish, and pricing pressure is strong in LCD materials. JSR continues to work to cut costs.
- There is a potential positive read-across to Zeon Corp (4205) in JSR’s strong Q4 elastomer results.
JSR is a manufacturing company. Co.'s principal business segments are Elastomer, Synthetic Resin, and Diversified. Co. is engaged in the manufacture and sale of synthetic rubber products, such as styrene butadiene rubber (SBR), and butadiene rubber (BR), thermoplastic elastomers; emulsion products such as SBR latex and others; the manufacture, processing and sale of acrylonitrile butadiene styrene (ABS) resin, acrylonitrile ethylene styrene resin and other synthetic resin products. Co. is also engaged in the manufacture and sale of materials for semiconductor manufacture, flat panel displays, optical instruments and functional chemicals, as well as the sale of manufacturing technology.
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.
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