Thursday, May 9, 2013

Ushio (6925): Long and Strong

Ushio’s full-year results and forecasts were released today after market. The firm held a results meeting as well which had a positive tone. Results were relatively inline while forecasts for FY3/14 were far above expectations. Ushio’s OP forecast for FY3/14 is Y12.5bn versus our Y10.9bn and consensus’ Y9.7bn. OP forecast is 28% over the consensus forecast on Bloomberg. Q4 OP was Y2.1bn, slightly better than our Y1.9bn estimate, but under the firm’s original guidance of Y2.6bn.

 FY3/14e, ¥mn Ushio BLBG Us vs. BLBG     vs. Us
Revenues 160,000 147,156 154,474 8.7% 3.6%
Operating profit 12,500 9,741 10,850 28.3% 15.2%
Net profit 10,000 7,035 8,054 42.1% 24.2%

We believe the market should react positively to the bullish forecast, since the stock has underperformed the market over the past year despite the recent outperformance. Further, Ushio is assuming Y90 to the $USD for FY3/14, which gives them about Y8 cushion, or Y1.6bn in OP at current exchange rates.


The tone of the meeting was positive overall as most areas are slated to grow in FY3/14. By product, lamp sales were stronger than equipment sales, owing to buoyancy in digital cinema projector (DCP) lamps. UV lamps for LCD/semiconductor litho were under par. Most of the main equipment such as DCP, LCD-related gear, chip/LED-related gear, etc. were sluggish.

However, in FY3/14, Ushio expects a sharp recovery in equipment sales, +14% YoY, aided by a recovery in LCD and semiconductor equipment. Lamp sales are slated to rise 6% YoY boosted by UV lamps, cinema lamps, and halogen lamps.

Ushio also announced it will sell its EUV service business to customer ASML and discontinue R&D into EUV light sources. Its subsidiary Xtreme Technologies competes with Cymer, which was recently acquired by leading semiconductor lithography equipment maker ASML, thus symbolizing an endorsement of Cymer’s EUV technology. Ushio will gain cost savings in both fixed costs and variable costs as 30 staff in their German facility will be shifted under ASML’s umbrella. Although the termination of this business is disappointing, it does reduce future risk of high R&D costs as well as lowering current costs.