Kokusai Electric Corporation · TSE:6525
Kokusai Electric — Q2 2024 Earnings Presentation
28 slides from Kokusai Electric's earnings presentation, Nov 9, 2023
Slide 1: Kokusai Electric Group corporate overview
Since there are many who are attending the meeting with us for the first time, I would like to begin with a brief explanation about the Kokusai Electric Group. Page four carries our corporate overview. In our more than 70-year long history, we have been achieving strong growth together with our cust
Slide 2: Group supply chain and new Toyama plant
Page five is describing our group supply chain. The center of research, development and manufacturing is located in our Toyama plant, which, together with our plant in Korea supplies products to customers around the world, which is supported by a network of our operations in Asia, China, North Ameri
Slide 3: Group management policy
Page six is on our group's management policy. As a company engaging in the evolution of semiconductors, the Kokusai Electric Group pursues value creation from both business and ESG perspectives based on the Kokusai Electric Way, which was formulated as a new corporate philosophy in December 2022 and
Slide 4: Business model: film deposition specialist
Page seven summarizes our unique business model. We are a company specializing in film deposition. Our main products are batch ALD compatible equipment and treatment equipment, where we pride top-class market share in the world. Under our services business, in addition to recurring businesses such a
Slide 5: Batch deposition equipment and batch ALD
On page eight, I will discuss one of our core products, the batch deposition equipment. In recent years, as semiconductor devices have become more complex and shifting to 3D structures, the surface area requiring deposition has expanded and the gas travel distance is becoming longer, which is result
Slide 6: Treatment devices
Next, on page nine, I will discuss treatment devices, the second pillar of our business following batch ALD. As deposition temperatures continue to drop, there is growing need for plasma-based film quality improvement. Our treatment equipment is a highly productive solution for improving film qualit
Slide 7: SiC power devices and service business
Page 10 is on SiC power devices and the service business. Sales for SiC power device applications have been accelerating since the previous fiscal year and are expected to grow significantly in the current fiscal year as well. In addition, development of high-temperature activation annealing equipme
Slide 8: Highlights
Page 12, our highlights. I will share details in the following pages. 7
Slide 9: P&L for Q2 and H1
Please see page 13. This section shows P&L for Q2 and H1 of the current fiscal year. Since we consider adjusted profit to be an important management indicator, I will be discussing things in adjusted profit terms. Since most of our export sales of our products are in yen terms, the foreign exchange
Slide 10: Revenue and operating income change factors
On page 14 are the factors that contributed to the YoY changes in revenue and adjusted operating income for Q2 of the current fiscal year. Equipment sales fell sharply, especially in memory, as some device manufacturers curbed investment, leading to a decline in gross profit and lower adjusted opera
Slide 11: Revenue by business segment
Page 15 shows revenue by business segment. In the fiscal year ended March 2023, equipment accounted for about 70% and services about 30%. While equipment sales declined in fiscal year ended March 2024, services revenues and earnings remained on par with the same period of the previous year, resultin
Slide 12: Sales revenue by application
Page 16 shows sales revenue by application. In the fiscal year ended March 2023, NAND accounted for 43%, DRAM for 20%, and logic and others were 37%. In the fiscal year ended March 2024, the sales composition of ratio of logic and others increased due to a decrease in NAND. Logic continues to be sup
Slide 13: Order backlog
Page 17 shows changes in order backlog. Orders received are not disclosed in the materials because there is a mixture of projects with long lead times that span across periods and projects with short lead times that are booked as sales within the same quarter and the composition of these projects va
Slide 14: Balance sheet
Page 18 is the balance sheet. Total assets decreased by JPY10.2 billion from the end of the previous period, mainly due to decreases in cash and cash equivalents, trade and other receivables. Total liabilities decreased by JPY21.5 billion from the end of the previous period, mainly due to a decrease
Slide 15: Balance sheet management indicators
Page 19 shows the main management indicators on the balance sheet. The equity ratio increased 4.3 percentage points from the end of the previous period to 47.8%. Net cash is temporarily negative due to temporary deterioration in operating cash flow in the fiscal year ending March 31, 2024, but as sa
Slide 16: Quarterly cash flow trends
Page 20 shows quarterly cash flow trends. Although operating cash flow has temporarily declined due to lower sales, the cash and cash equivalents balances remain adequate for working capital. 15
Slide 17: R&D, capital expenditures, depreciation
Page 21 shows quarterly R&D expenses, capital expenditures and depreciation and amortization. R&D expenses, which have been ranging between 4% and 5%, will be elevated to around 6% as sales recover over the medium to long term to accelerate growth. Capital investment, which previously ranged from JP
Slide 18: Full-year forecast highlights
Next, I will explain our full-year forecast. Here are the highlights. Specific details will be explained on the following pages. 17
Slide 19: Full-year forecast and dividend
Please see page 24. For the fiscal year ending March 24, we forecast revenue of JPY180 billion, gross profit of JPY73.7 billion, adjusted operating income of JPY36.3 billion and adjusted net income of JPY25.2 billion. Although profits for H1 exceeded the initial forecast, the full-year forecast rema
Slide 20: Earnings forecast bridge analysis
On page 25, we show the bridge analysis for the full-year earnings forecast compared to the previous year. The trend in H2 is expected to remain unchanged from H1 with the legacy mature node logic and the stable DRAM expected to be the driver for the full year. Although profits for H1 of the fiscal
Slide 21: Full-year sales composition by business
Page 26 shows the sales composition by business for the full year. We expect the ratio of the service business to grow temporarily in fiscal year March 2024 due to the decline in equipment sales. But it is expected to return to the previous balance as [there] could be a sales recovery and then grow
Slide 22: Equipment sales composition by application
Page 27 shows the sales composition of equipment sales by application for the year. In fiscal year March 2024, we expect the logic foundry ratio to raise temporarily due to restrained investment in memory and increased investment in legacy [modes] but we anticipate the balance growth as equipment sa
Slide 23: Mid- to long-term strategy and goals
I will explain our mid- to long-term business strategies and goals. Here are the highlights. Specific details will be explained on the following pages. 22
Slide 24: Business environment outlook
Please see page 30. Here is the outlook for the business environment. The semiconductor device market is expected to grow significantly over the medium to long term due to the expansion of data centers and the investment in reducing environmental impact. The WFE market is expected to grow to about J
Slide 25: Growth drivers and catalysts
On page 31, we summarize the drivers and the catalyst for our future growth. We believe that a number of catalysts exist in the short, medium and long term to sustain strong future growth momentum. Our long-term goal is to realize these catalysts and achieve a more balanced portfolio that includes S
Slide 26: Unique positioning of batch ALD
On page 32, we explain the unique positioning of batch ALDs. Batch and single wafer are used in separate applications, and there is essentially no overlap between the two areas. As semiconductor devices become more complex, productivity challenges become more pronounced and the need for batch ALD is
Slide 27: Medium- and long-term goals
Page 33 summarizes our medium- and long-term goals. In the next few years, we expect the WFE market to grow to USD110 million to USD120 billion, of which we aim to generate sales of JPY300 billion to JPY330 billion. Batch ALD and treatment are targeted to grow at an average annual rate of more than
Slide 28: Shareholder return policy
Finally, page 34, discuss our shareholder return policy. While placing the highest priority on investment in growth, we also aim to achieve a higher level of shareholder return. In addition, the Company plans to flexibly consider share buybacks in order to return approximately 70% of free cash flow