Okasan Rating Information

6th May 2016

Hitachi Chemical Co., Ltd. (4217)

Attention on the growth potential of anode materials for LiBs in mid-long term
<Analysts Perspective>
The major downside factors include the slower growth of
smartphone market and the extensive inventory adjustment of
LCD panels, while the anode material sales expansion will probably
be seen along the expected growth of automotive LiB (li-ion battery)
market. Attention should particularly be on the mid-long term growth
potential of silicon anode active materials that can help boosting the
driving range of EVs.

Rating
Buy (Previous: Neutral)
Target Price
JPY 2,400 (Previous: JPY --)
Share price

1,839 (16/05/02)

52-week high

JPY2,560 (15/06/04)

52-week low

JPY1,595 (15/09/29)

TOPIX

Shipment of silicon anode active materials has started

FY16/3 consolidated operating income has increased 81% to JPY53
billion, prompted by the domestic cost structural reform implemented
in FY15/3. Moreover, the reasonable profit margin was secured by
reviewing the unprofitable businesses and improving the productivity
of powdered metal products.

1,299

PER

9.9x (17/3 forecast)

9.1x (18/3 forecast)
8.2x (19/3 forecast)

PBR

1.1x (16/3)

ROE

10.4% (17/3 forecast)

Market
Capitalization
Outstanding
Shares

JPY382.9 billion
208,232 thousand shares

Takashi Nishihira
Sector
coverage:

We forecast FY17/3 consolidated operating income to have 2%

growth and record JPY54 billion. We believe the operating income
growth will continue as supported by sales expansion of anode
materials for LiBs, despite possible sluggish shipment of conductive
films for displays due to the inventory adjustment of LCD panels.
Regarding the anode materials for LiBs, focus is on the start of
shipment of silicon-typed anode active materials. Besides allowing
the consumer LiBs to have higher capacity and smaller size, silicontyped anode active materials can also help to extend the automotive
driving range. Hence, we believe the company is developing the
materials into one of the consolidated earnings drivers in mid-long
term. Moreover, the sales of the existing graphite anode active
materials for EVs is also expected to increase.
< Basis of Target Price >
The target price of JPY2,400 reflecting the FY17/3 expected PER of
13x level can be justified by the mid-long term growth potential of
anode materials for LiBs. We upgraded the rating from Neutral to
Buy.

Chemicals, Textiles

<Consolidated Earnings> IFRS

Fiscal Year Ending

(Units: mil yen, yen)

Revenue

Operating Income before

income
tax
29,226
34,692

Net income

EPS

Dividends

15/3

526,687

22,587

108.5

36.0

16/3

546,468

53,036

53,682

38,512

185.0

50.0

Company

550,000

54,000

55,000

38,500

184.9

50.0

Okasan Previous

583,000

55,000

57,000

40,000

192.1

50.0

Okasan Current

550,000

54,000

55,000

38,500

184.9

50.0

Okasan Previous

610,000

61,000

63,500

44,500

213.7

50.0

Okasan Current

571,000

58,500

60,000

42,000

201.7

50.0

598,000

64,500

66,500

46,500

223.3

50.0

17/3 (forecast)

18/3 (forecast)
19/3 (forecast)

Okasan Previous
Okasan Current

Please be informed with the notes at the end of the report.

Okasan Rating Information

Hitachi Chemical Co., Ltd. (4217)

Quarterly Consolidated Results (IFRS)

units: million yen

FY16/3 1Q
FY16/3 2Q
FY16/3 3Q
FY16/3 4Q FY17/3 1Q (F) FY17/3 2Q (F) FY17/3 3Q (F) FY17/3 4Q (F)
70,966
68,679
69,363
60,761
69,800
70,600
69,800
63,800
21,500
21,200
21,000
20,200
22,200
22,400
22,200
21,200
6,300
5,400
5,300
5,600
6,400
6,200
6,200
6,200
16,200
16,000
16,900
13,900
16,900
16,800
17,300
15,000
18,800
19,600
19,000
17,300
19,300
20,200
19,600
16,900
8,166
6,479
7,163
3,761
5,000
5,000
4,500
4,500
66,614
69,345
70,375
70,365
65,800
69,800
70,200
70,200
32,200
31,600
32,000
31,100
31,500
32,000
32,000
32,000
23,100
25,800
28,200
28,700
23,800
26,800
28,700
29,700
10,300
10,000
8,700
8,000
10,000
10,500
9,000
8,000
1,014
1,945
1,475
2,565
500
500
500
500
137,580
138,024
139,738
131,126
135,600
140,400
140,000
134,000
9,279
10,680
11,243
7,372
9,000
9,500
12,500
8,500
1,638
1,726
2,621
8,403
1,500
2,000
2,500
8,500
48
(31)
77
(20)
0
0
0
0
10,965
12,375
13,941
15,755
10,500
11,500
15,000
17,000

Functional Materials
Electronics Materials
Inorganic Materials
Polymer Science Materials
Printed Wiring Board Materials
Others
Advanced Components & Systems
Automotive Products
Energy Storage Devices & Systems
Electronic Components
Others
Consolidated revenue
Functional Materials
Advanced Components & Systems
Adjustments
Consolidated operating income
* Figures may not add due to rounding.
Source: Financial summary, Company data. Forecast & Compiled by Okasan Securities

Consolidated Results by Segment (IFRS)

Functional Materials
Electronics Materials
Inorganic Materials
Polymer Science Materials
Printed Wiring Board Materials
Others
Advanced Components & Systems
Automotive Products
Energy Storage Devices & Systems
Electronic Components
Others
Consolidated revenue
Functional Materials
Advanced Components & Systems
Adjustments
Consolidated operating income
* Figures may not add due to rounding.

Units: million yen

FY15/3
277,127
85,000
27,000
64,700
70,400
30,027
249,560
121,100
82,700
38,400
7,360
526,687
23,494
5,846
(114)
29,226

FY16/3
269,769
83,900
22,600
63,000
74,700
25,569
276,699
126,900
105,800
37,000
6,999
546,468
38,574
14,388
74
53,036

FY17/3 (F)
274,000
88,000
25,000
66,000
76,000
19,000
276,000
127,500
109,000
37,500
2,000
550,000
39,500
14,500
54,000

FY18/3 (F)
288,000
91,500
31,200
68,000
78,000
19,300
283,000
131,000
112,000
38,000
2,000
571,000
42,500
16,000
58,500

FY19/3 (F)
306,000
95,500
40,600
70,000
80,000
19,900
292,000
135,000
116,000
38,500
2,500
598,000
46,500
18,000
64,500

Source: Financial summary, Company data. (F)= Okasan Forecast, (CE)= Company Estimates. Compiled by Okasan Securities

Please be informed with the notes at the end of the report.

FY17/3 (CE)
274,000
87,900
24,100
67,700
76,100
18,200
276,000
126,100
109,000
37,500
3,400
550,000
40,300
13,700
54,000

Okasan Rating Information

Hitachi Chemical Co., Ltd. (4217)

Consolidated Statement (IFRS)

units: million yen

FY16/3
Changes FY17/3 (F) Changes FY18/3 (F) Changes FY19/3 (F) Changes
546,468
3.8%
550,000
0.6%
571,000
3.8%
598,000
4.7%
399,374
399,000
412,500
429,500
147,094
151,000
158,500
168,500
26.9%
27.5%
27.8%
28.2%
97,243
98,000
101,000
105,000
10,539
10,000
10,000
10,000
7,354
9,000
9,000
9,000
53,036
81.5%
54,000
1.8%
58,500
8.3%
64,500
10.3%
9.7%
9.8%
10.2%
10.8%
1,038
1,000
1,000
1,000
3,615
3,500
3,200
3,000

Revenue
Cost of sales
Gross profit
(Gross profit margin)
SG & A expenses
Other income
Other expenses
Operating Income
(Operating profit margin)
Financial income
Financial expenses
Share of profits of investments
3,223
3,500
accounted for using the equity method
Income before income taxes
53,682
54.7%
55,000
2.5%
Income tax
14,530
15,800
Net Income
39,152
71.2%
39,200
0.1%
Net income attributable to:
Owners of the parent
38,512
70.5%
38,500
0.0%
Non-controlling interests
640
700
R&D expenditure
27,800
28,000
Capital expenditure
32,022
45,200
Depreciation & Amortization
28,844
30,500
Source: Financial summary, Company data. Forecast & compiled by Okasan Securities

3,700

4,000

60,000
17,200
42,800

9.1%

42,000
800
28,500
46,000
31,000

9.1%

Please be informed with the notes at the end of the report.

9.2%

66,500
19,100
47,400

10.8%

46,500
900
29,000
47,000
31,500

10.7%

10.7%

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