Semiconductor Equipment - Berenberg Bank

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Applied Materials Inc Technology Hardware Cash flow statement USD m 2011 2012 2013E 2014E 2015E Net profit/loss 1,928.0 109.0 450.8 1,381.8 1,470.8 Depreciation and Amortisation 246.0 422.0 416.0 408.0 408.0 Other 250.0 993.0 397.1 132.0 132.0 Cash flow from operations before changes in w/c 2,426.0 1,851.0 1,152.8 2,024.9 2,109.8 Change in working capital 4.0 327.0 -111.1 103.1 99.0 Cash flow from operating activities 2,426.0 1,851.0 1,152.8 2,024.9 2,109.8 Capex -209.0 -162.0 -175.0 -180.0 -180.0 Payments for acquisitions 0.0 -4,900.0 0.0 0.0 0.0 Other investing cash flow 919.0 392.0 292.0 0.0 0.0 Cash flow from investing activities 710.0 -4,670.0 117.0 -180.0 -180.0 Long Term Debt 1,730.0 0.0 0.0 0.0 0.0 Short Term Debt 0.0 -1.0 0.0 0.0 0.0 Repayment of borrowings 0.0 0.0 0.0 0.0 0.0 Purchase of own shares -350.0 -1,416.0 -348.0 -400.0 -400.0 Inflow resulting from the issue of shares 49.0 97.0 85.0 0.0 0.0 Dividends paid -314.0 -424.0 -455.6 -479.2 -479.2 Cash flow from financing activities 960.0 -1,744.0 -718.6 -879.2 -879.2 Effects of exchange rate changes on cash 6.3 -5.0 0.0 0.0 0.0 Increase/decrease in liquid assets 4,102.3 -4,568.0 551.2 965.7 1,050.6 Liquid assets at end of period 5,959.0 1,392.0 1,943.2 2,908.9 3,959.5 Source: Company data, <strong>Berenberg</strong> estimates 116
Tokyo Electron Ltd Technology Hardware Mainly exposed to legacy markets • We initiate coverage of TEL with a Sell recommendation and a price target of ¥4,331. TEL supplies equipment used for semiconductor chip fabrication, FPD and photovoltaic (PV) manufacturing. We are sellers because: 1) 77% of the revenues from its semiconductor precise equipment (SPE) segment (which accounts for 79% of revenue, and 100% profit) comes from lowgrowth/declining markets; 2) the loss-making FPD and PV segment is likely to remain weak, as the TV and solar markets remain sluggish. • Key debates: 1) Can TEL benefit from new chip designs including FinFET, 20nm and 3D NAND? 2) Has the recent depreciation of the yen improved TEL’s competitive position versus other equipment vendors? 3) Can it gain market share in the silicon etching market? 1. We estimate TEL’s SPE revenue will grow by 7% in 2013 and 6% in 2014 and will decline by 5% in 2015: The level of growth is unlikely to be as strong as peers as its SPE revenue is exposed to low-growth markets, such as photoresist processing, dielectric etching and LP CVD, 2. We believe the depreciated yen versus the dollar will have a very limited impact on TEL: We do not think chip-makers will switch vendors purely for cost reasons, as they would incur extra expenses related to process reconfiguration/testing. TEL’s ASP may look attractive compared to peers AMAT and LAM, but other Japan-based competitors (ie Hitachi, Dainippon) have the same advantage. 3. Management aims to grow its silicon etching market share, with growth driven by 20nm, FinFET and 3D NAND: We remain sceptical about whether TEL can increase its silicon etching share. It currently holds a 9% market share, but has fallen behind LAM, AMAT and Hitachi (an 89% combined share). These latter three already have strong positions with the main foundry, logic and memory players, so we see little room for TEL to expand. • Compared to consensus, our FY 2014 and FY 2015 EPS are 8% and 10% lower: We estimate revenue will remain flat from FY 2014 to FY 2015, given TEL’s 60% exposure to low growth markets, while consensus is expecting 4% growth. • Our ¥4,331 PT implies an EV/sales of 0.9x, which is the middle of the historical EV/sales range (0.7-1.2x) during the semiconductor recovery cycle. Sell (initiation) Rating system Current price JPY 4,790 Absolute Price target JPY 4,331 19/07/2013 Tokyo Close Market cap JPY 910,222 bn Reuters 8035.T Bloomberg 8035 JT Share data Shares outstanding (m) 179 Enterprise value (JPY bn) 660 Daily trading volume 2,025,887 Performance data High 52 weeks (JPY) 5,980 Low 52 weeks (JPY) 3,225 Relative performance to SXXP TOPIX 1 month -6.0 % -9.7 % 3 months -2.8 % -3.4 % 12 months 12.6 % -31.2 % Key data Price/book value 1516.5 Net gearing 0.0% CAGR sales 2012-2015 6.0% CAGR EPS 2012-2015 84.8% Business activities: Tokyo Electron supplies equipment used for semiconductor chip fabrication, flat panel display and photovoltaic manufacturing. Y/E 31.03., JPY bn 2011 2012 2013E 2014E 2015E Sales 633 497 549 596 593 EBIT 60 13 17 53 52 Net profit 37 6 15 39 39 Y/E net debt (net cash) -247 -240 -250 -275 -321 EPS (GAAP) 205.04 34.07 82.02 218.51 214.99 EPS (Proforma) 205.04 34.07 82.02 218.51 214.99 CPS 1380.00 1340.17 1396.31 1532.27 1793.15 DPS 128.98 51.99 50.00 76.00 75.00 Gross margin 33.4% 31.9% 31.7% 33.3% 31.6% EBIT margin 9.5% 2.5% 3.2% 8.9% 8.8% Dividend yield 2.5% 1.0% 1.0% 1.5% 1.5% ROCE 6.2% 1.0% 2.4% 6.3% 5.9% EV/sales 1.0 1.3 1.2 1.1 1.1 EV/EBIT 11.0 53.4 38.0 12.0 11.3 P/E 24.8 149.1 61.9 23.2 23.6 Source: Company data, <strong>Berenberg</strong> 22 July 2013 Tammy Qiu Analyst +44 20 3207 2673 tammy.qiu@berenberg.com Jean Beaubois Specialist Sales +44 20 3207 7835 jean.beaubois@berenberg.com 117
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Semiconductor Equipment - Berenberg Bank

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