J P M O R G A N Asia Pacific Equity Research

31 January 2024

Shinko Electric Industries (6967)

3Q results: Full-year guidance unchanged, but hurdle Overweight
looks high; improvement in the supply-demand balance 6967.T, 6967 JP
still slow Price (31 Jan 24):¥5,530
Price Target (Dec-24):¥7,400

Negative: Shinko Electric Industries reported 3Q operating profit of ¥6.5 billion Japan Equity Research
(-16% QoQ), below our estimate of ¥10.5 billion and the Bloomberg consensus
Electronic Components, Steel
estimate of ¥12.3 billion. Sales of IC packages sales declined by 13% QoQ, which
we believe is attributable to a worsening of sales of FC packages. It seems that the Hao Xin AC
(81-3) 6736 8603
pace of recovery in demand from PC and server manufacturers was slower than we [email protected]
had expected in 3Q. The company left its full-year operating profit guidance of Bloomberg JPMA HXIN <GO>
¥35.0 billion unchanged. However, based on January-March forecasts from Intel JPMorgan Securities Japan Co., Ltd.
and AMD, we do not expect to see a strong recovery in the market, and we therefore
think the hurdle for reaching the company’s guidance looks high.

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 JPMorgan Securities Japan Co., Ltd. Asia Pacific Equity Research
Hao Xin AC 31 January 2024 JPMORGAN
(81-3) 6736 8603
[email protected]

Investment Thesis, Valuation and Risks

Shinko Electric Industries (6967) (Overweight; Price Target: ¥7,400)
Investment Thesis
FC packages are currently in an inventory adjustment phase for both PC and data center
(DC) applications, but they are also poised to take on higher added value as key customer
Intel shifts to chiplets. With the semiconductor industry transitioning from SoC to SiP, our
focus is on the degree to which added value migrates from the chip to the package.
Valuation
Our ¥7,400 price target is calculated by applying a P/E of 20x to our FY2024 EPS estimate.
We apply a premium to the 15x sector average in view of smooth process migration at key
customer Intel and prospects for structural growth in FC packages. The horizon for our price
target is through December 2024.
Risks to Rating and Price Target
Upside Scenario to Target Price/Rating

• Greater-than-expected demand for AI servers

• Higher-than-expected FC package sales to non-Intel customers
• Greater-than-expected growth in Lam Research’s share of etcher market
• Greater-than-expected yen depreciation

Downside Scenario to Target Price/Rating

• Stalled process migration at Intel

• Stalling of technical innovation for data center servers
• Asian rivals catching up in high-value-added FC packages
• Stronger-than-expected yen appreciation

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 JPMorgan Securities Japan Co., Ltd. Asia Pacific Equity Research
Hao Xin AC 31 January 2024 JPMORGAN
(81-3) 6736 8603
[email protected]

Analyst Certification: The Research Analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple Research Analysts
are primarily responsible for this report, the Research Analyst denoted by an “AC” on the cover or within the document individually certifies,
with respect to each security or issuer that the Research Analyst covers in this research) that: (1) all of the views expressed in this report
accurately reflect the Research Analyst’s personal views about any and all of the subject securities or issuers; and (2) no part of any of the
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requirements, that the Research Analyst’s analysis was made in good faith and that the views reflect the Research Analyst’s own opinion,
without undue influence or intervention.
All authors named within this report are Research Analysts who produce independent research unless otherwise specified. In Europe, Sector
Specialists (Sales and Trading) may be shown on this report as contacts but are not authors of the report or part of the Research Department.
Important Disclosures

Market Maker/ Liquidity Provider: J.P. Morgan is a market maker and/or liquidity provider in the financial instruments of/related to Shinko
Electric Industries (6967).
Beneficial Ownership (1% or more): J.P. Morgan beneficially owns 1% or more of a class of common equity securities of Shinko Electric
Industries (6967).
Client: J.P. Morgan currently has, or had within the past 12 months, the following entity(ies) as clients: Shinko Electric Industries (6967).
Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following entity(ies)
as clients, and the services provided were non-investment-banking, securities-related: Shinko Electric Industries (6967).
Client/Non-Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following entity(ies) as clients, and the
services provided were non-securities-related: Fujitsu Ltd, a parent company of Shinko Electric Industries (6967).
Non-Investment Banking Compensation Received: J.P. Morgan has received compensation in the past 12 months for products or services
other than investment banking from Shinko Electric Industries (6967).
Debt Position: J.P. Morgan may hold a position in the debt securities of Shinko Electric Industries (6967), if any.

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Date Rating Price (Y) Price Target
(Y)
10-Feb-21 OW 2817 3,600
18-May-21 OW 3085 4,300
11-Aug-21 OW 3625 4,800
25-Nov-21 OW 5250 6,700
18-Feb-22 OW 4990 6,600
01-Jun-22 OW 4745 5,900
11-Jul-22 OW 3495 5,200
17-Aug-22 OW 3775 5,400
08-Nov-22 OW 3685 5,500
14-Feb-23 OW 3820 5,300
17-May-23 OW 4345 6,200
09-Aug-23 OW 5742 7,400

The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period.
J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated
Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe:
J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average
total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve months, we expect this
stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Underweight

For the exclusive use of Joyce Belen ([email protected]) at S&P Global Market Intelligence Inc.
 JPMorgan Securities Japan Co., Ltd. Asia Pacific Equity Research
Hao Xin AC 31 January 2024 JPMORGAN
(81-3) 6736 8603
[email protected]

[Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst’s (or the
analyst’s team’s) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if applicable, the price target, for this stock
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and U.K. small- and mid-cap equity research, each stock’s expected total return is compared to the expected total return of a benchmark country
market index, not to those analysts’ coverage universe. If it does not appear in the Important Disclosures section of this report, the certifying
analyst’s coverage universe can be found on J.P. Morgan’s research website, https://www.jpmorganmarkets.com .
Coverage Universe: Xin, Hao: Alps Alpine (6770) (6770.T), Hirose Electric (6806) (6806.T), Ibiden (4062) (4062.T), JFE Holdings (5411)
(5411.T), Kurita Water Industries (6370) (6370.T), Kyocera (6971) (6971.T), Mabuchi Motor (6592) (6592.T), MinebeaMitsumi (6479)
(6479.T), Murata Manufacturing (6981) (6981.T), NOK (7240) (7240.T), Nidec (6594) (6594.T), Nissha (7915) (7915.T), Niterra (5334)
(5334.T), Nitto Denko (6988) (6988.T), Renesas Electronics (6723) (6723.T), Rohm (6963) (6963.T), Shinko Electric Industries (6967)
(6967.T), TDK (6762) (6762.T), Taiyo Yuden (6976) (6976.T)

J.P. Morgan Equity Research Ratings Distribution, as of January 01, 2024

Overweight Neutral Underweight
(buy) (hold) (sell)
J.P. Morgan Global Equity Research Coverage* 47% 39% 13%
IB clients** 48% 43% 32%
JPMS Equity Research Coverage* 46% 42% 12%
IB clients** 68% 63% 46%

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[email protected]

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