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1、September 27, 2012ACTIONBuyNitto Denko (6988.T)Return Potential: 25%Equity ResearchTechnology shift, new growth phase: Raising TP, reiterating CL-BuySource of opportunityInvestment ProfileWe expect the stock market to start pricing in a new growth phase for NittoDenko driven by a technology shift fo
2、r tablet touch panels. We haverevised our main scenario to include supply of Nitto Denko film for theiPad. We raise our estimates from FY3/14, thereby raising our 12-monthLowGrowthReturns *MultipleVolatilityHighGrowthReturns *MultipleVolatilitytarget price to 4,600, from 4,100, reiterating our Buy r
3、ating, and keepingPercentile20th40th60th80th100ththe stock on our Conviction List and Japan Sustain List. The company iscurrently in transition, in our view, tasting the first fruits of smartphoneand tablet growth after optimizing profits on its LCD TV products.Nitto Denko (6988.T)Japan Electronic C
4、omponents Peer Group Average* Returns = Return on Capital For a complete description of theinvestment profile measures please refer tothe disclosure section of this document.CatalystKey dataPrice ()Current3,685In the tablet technology space, film solutions are starting to gain ground dueto difficult
5、ies with SOC and in-cell technologies (performance enhancement,costs, specs). We see Nitto Denko, which holds a 70-80% global share in ITOfilm, strengthening its position through its ability to provide customersolutions with innovative technologies such as Double ITO andpolarizing/adhesive film comb
6、inations. Our new assumption is that iPad andother major tablets will use film from FY3/15, more than doubling the ITOfilm sales outlook and substantially boosting Nitto Denkos earnings givenits dominance in this field. We cut our op. profit forecast 6% for FY3/13 tofactor in upfront costs and raise
7、 it 2% for FY3/14 and 11% for FY3/15. We12 month price target ()Market cap (bn)Consolidated (bn)Revenue NewOp. profit NewOp. profit OldOp. profit CoE NewOp. profit CoE OldEPS() Newyoy % chg.EPS () OldP/E (X)P/B (X)EV/EBITDA (X)CROCI (%)EV/GCI (X)3/12607.656.556.571.071.0186.5(44.3)186.519.81.45.08.2
8、0.63/13E656.868.573.071.071.0292.356.8309.112.61.33.912.80.63/14E714.085.583.50.00.0360.123.2345.110.21.23.114.30.54,600613.93/15E764.596.587.00.00.0408.213.3360.19.01.12.614.70.5introduce FY3/16 estimates. We watch for details of the medium term plan(starts in FY3/14) and changes to production capa
9、city plans.Price performance chart4,000890ValuationWe maintain EV/GCI vs. CROCI/WACC, but change our base year to FY3/16,when we assume a full earnings contribution from the technology shift.We discount FY3/16 DACF using 7% WACC. Target equals 13X FY3/14 P/E.Key risks3,8003,6003,4003,2003,0002,8002,
10、600860830800770740710680Yen appreciation, non-adoption of ITO film, swings in LCD production.Sep-11Jan-12Apr-12Jul-12INVESTMENT LIST MEMBERSHIPNitto Denko (L)TOPIX (R)Japan Buy ListShare price performance (%)3 month6 month 12 monthJapan Conviction Buy ListAbsoluteRel. to TOPIX11.311.39.528.115.916.3
11、Coverage View: AttractiveDaiki Takayama+81(3)6437-9870 Goldman Sachs Japan Co., Ltd.Takashi Watanabe+81(3)6437-9894 Goldman Sachs Japan Co., Ltd.Hinako Yoshida+81(3)6437-4061 Goldman Sachs Japan Co., Ltd.The Goldman Sachs Group, Inc.Source: Company data, Goldman Sachs Research estimates, FactSet.
12、 Price as of 9/27/2012 close.Goldman Sachs does and seeks to do business with companiescovered in its research reports. As a result, investors should beaware that the firm may have a conflict of interest that couldaffect the objectivity of this report. Investors should considerthis report as only a
13、single factor in making their investmentdecision. For Reg AC certification and other importantdisclosures, see the Disclosure Appendix, or go Analysts employed by non-US affiliates are not registered/qualified as research analystswith FINRA in the U.S.Global Investment Research2September 27, 2012Ni
14、tto Denko: Summary FinancialsNitto Denko (6988.T)Profit model (bn)RevenueCost of goods soldGross profitSG&A and otherOperating profitNet interest income/(expense)Equity in earnings of affiliatesNet other nonoperating inc/(exp)Recurring profitExtraordinary income3/12607.6(439.9)167.7(111.2)56.5(0.6)0
15、.02.658.41.13/13E656.8(468.3)188.5(120.0)68.5(0.6)0.00.668.50.53/14E714.0(498.5)215.5(130.0)85.5(0.6)0.00.685.50.53/15E764.5(530.0)234.5(138.0)96.5(0.6)0.00.696.50.5Balance sheet (bn)Cash & equivalentsAccounts receivableInventoryOther current assetsTotal current assetsNet PP&ENet intangiblesTotal in
16、vestmentsOther long-term assetsTotal assets3/12209.9126.367.519.3423.0190.19.08.921.0651.93/13E229.2139.669.219.3457.3194.19.08.921.0690.23/14E253.3151.873.619.3498.0199.19.08.921.0735.93/15E287.3162.578.319.3547.3202.19.08.921.0788.3Extraordinary expense(9.7)(1.0)(1.0)(1.0)Pretax profitIncome taxMi
17、nority interestNet income49.8(18.5)(0.3)31.168.0(19.5)0.248.785.0(25.0)0.060.096.0(28.0)0.068.0Accounts payableShort-term debtOther current liabilitiesTotal current liabilities78.73.056.8138.584.93.056.8144.790.43.056.8150.296.13.056.8155.9Long-term debt56.056.056.056.0Capital expenditures (excl. le
18、ases)Capital expenditures (incl. leases)Depreciation & amortizationEPS (basic) ()EPS (fully diluted) ()(33.8)(33.8)(36.8)186.5186.5(48.0)(48.0)(44.0)292.3292.3(55.0)(55.0)(50.0)360.1360.1(55.0)(55.0)(52.0)408.2408.2Other long-term liabilitiesTotal long-term liabilitiesTotal liabilitiesMinority inter
19、estTotal common equity21.177.5216.01.4434.521.177.5222.21.2466.821.177.5227.71.2507.021.177.5233.41.2553.6Total liabilities & equity651.9690.2735.9788.3BVPS ()2,608.02,801.63,043.33,323.1DPS ()100.0100.0120.0130.0Net debt(150.9)(170.2)(194.3)(228.3)Dividend payout ratio (%)53.634.233.331.9Ratios3/12
20、3/13E3/14E3/15EYear-on-year change (%)3/123/13E3/14E3/15ERevenueOperating profitRecurring profitNet incomeEPS (basic)(4.8)(33.7)(31.4)(44.3)(44.3)8.121.317.256.856.88.724.824.823.223.27.112.912.913.313.3CROCI (%)ROE (%)ROA (%)Net debt/equity (%)Interest coverage ratio (X)8.27.34.8(34.6)62.312.810.87
21、.3(36.4)79.814.312.38.4(38.2)99.614.712.88.9(41.1)112.4EPS (fully diluted)(44.3)56.823.213.3Valuation3/123/13E3/14E3/15EMargins (%)3/123/13E3/14E3/15EOperating profitEBITDARecurring profitNet income9.315.49.65.110.417.110.47.412.019.012.08.412.619.412.68.9P/E (X)EV/EBITDA (X)EV/GCI (X)P/B (X)19.85.0
22、0.61.412.63.90.61.310.23.10.51.29.02.60.51.1Dividend yield (%)2.72.73.33.5Cash flow statement (bn)3/123/13E3/14E3/15EFCF yield (%)4.05.87.29.0Net incomeD&A add-backMinority interest add-backNet (inc)/dec in working capitalOther operating cash flowCash flow from operationsCapital expenditures (incl.
23、leases)Purchases of long-term securitiesSales of long-term securitiesOther investing cash flowCash flow from investmentsDividends paid (common & preferred)Incr./(decr.) in debtCommon stock issuanceOther financing cash flow31.136.80.3(1.6)(8.1)58.5(33.8)0.00.0(4.2)(37.9)(16.4)(7.7)0.00.148.744.0(0.2)
24、(8.7)0.083.8(48.0)0.00.00.0(48.0)(16.4)0.00.00.060.050.00.0(11.1)0.098.9(55.0)0.00.00.0(55.0)(19.7)0.00.00.068.052.00.0(9.7)0.0110.3(55.0)0.00.00.0(55.0)(21.4)0.00.00.0Cash flow from financingTotal cash flow(24.0)(3.4)(16.4)19.3(19.7)24.1(21.4)33.9Note: Last actual year may include reported and esti
25、mated data.Source: Company data, Goldman Sachs Research estimates.Analyst ContributorsDaiki TTakashi WHinako YGoldman Sachs Global Investment Research3September 27, 2012Nitto Denko (6988.T)Executive summary: Entering growth phase; raise TP to 4,600,reiterate CL-BuyShift in tablet touch panel technol
26、ogy could favor filmThe position of film-based touch panels has previously been viewed as weak becauseSOC (Sensor On Cover glass, or One-glass Solution) was considered to betechnologically superior. However, film solutions may be gaining an advantage as tabletPC demand grows. SOC solutions are facin
27、g hurdles in terms of performanceenhancement, cost, and specs, while the outlook for film solutions is improving. We seebenefits for Nitto Denko (which has 70%-80% global share in ITO film) as customersincreasingly demand customization.Scenario analysis: Size of business will depend on iPad adoption
28、We have formulated four scenarios to calculate the business potential of ITO film. In ourmain scenario, we now assume that film solutions will be adopted for iPad, first beingadopted into the iPad mini and then being carried over to the main iPad product. iPaddominates the sector in terms of volume/
29、area and the business scale of ITO film will differmarkedly depending on iPad adoption. If adopted, our FY3/16 sales assumption is 129.4bn; on non-adoption we previously (“GS old” scenario in Exhibit 3) projected 68 bn.Even if adoption proceeds, we would expect earnings impact in 2H of FY3/14 at the
30、earliest, given development/mass production lead times. This is our base caseassumption, in which we assume a gradual contribution from FY3/15 with fullcontribution from FY3/16.Our Bull case scenario assumes the same adoption rate for ITO film technology (100% inFY3/16 given Nitto Denkos dominance i
31、n the ITO film field), but less price deteriorationand higher profitability. Our bear case scenario assumes only minimal adoption of ITOtechnology into the iPad mini and no carry-over into the main iPad product.We will monitor the medium-term plan, slated to start from FY3/14, and progress oncapacit
32、y expansion.From transitional phase to growth: Record FY3/15 op. profitsWe forecast record operating profits in FY3/15, topping the 89.2 bn high reached inFY3/06 during the period of strong LCD TV penetration. Nitto Denko has been in atransitional phase from FY3/11, optimizing its LCD TV product lin
33、e-up (securing decentprofits) and seeing new business opportunities emerge in smartphones/tablets. We nowsee a new growth phase from FY3/14-FY3/16.Cash returns (CROCI) are lower than levels in FY3/05-FY3/06, during global LCD TVexpansion (15%-20%) but we think they can improve to around 15% in the n
34、ext growthphase. Nitto Denko is in the top sector quartile and is on our GS SUSTAIN Japan List. See“Disclosing Japans potential: Beyond the headwinds The 2020 winners” by RichardManley, September 27, 2011.We think annual share buybacks of around 3%-8% are feasibleWe forecast cash holdings rising to
35、328.6 bn at end-FY3/16 from 209.9 bn at end-FY3/12.Based on three scenarios (cash staying flat, falling to 180 bn, falling to 160 bn) wecalculate Nitto Denko could conduct annual share buybacks of around 3%-8%.Goldman Sachs Global Investment Research1.2.3.1.4September 27, 2012Nitto Denko (6988.T)Rai
36、se target price to 4,600 from 4,100, reiterate Buy, maintain CLWe raise our 12-month target price to 4,600 (equals an FY3/14E P/E of 13X) from 4,100.Our target price is still based on EV/GCI-CROCI/WACC correlation with a 10% discountversus the electronic component sector trend line (we calculate a t
37、heoretical value of5,000 assuming a return to the trend line).We change the base year for our target price calculation to FY3/16, when we expect theuse of Nitto Denko products in major tablet PCs to begin making a full-scale earningscontribution. Our previous base was the FY3/13-FY3/14 average. Howe
38、ver, we use aWACC discount of 7% on FY3/16 DACF to calculate our target price.Brighter prospects for film-type touch panels in tablet PCsOf the three technologies, film could provide a distinctive edge intablet PCsBroadly speaking, there are three types of touch panel technology (see Appendix fordet
39、ails on product structure):Add-on film type: Evolving into double ITO/F2Add-on glass type: Evolving into sensor on cover (SOC) glass (one glass solution)New technologies including in-cell and on-cellThe general perception has been that film-type touch panels have a weak position in theindustry and t
40、hat most touch panels will use SOC glass-type technology for the nextseveral years, later replaced by in-cell and on-cell technology. This perception that SOCglass-type technology is superior was based on the belief that film-type technologyresults in relatively inferior product quality because of r
41、elatively inferior transparency andresistance, and that the technologys main advantages of being thin, light-weight, andlow-cost will hold less sway if companies can develop product and mass productiontechnology for SOC and in-cell touch panels.In small display applications such as smartphones, the
42、iPhone 5 uses in-cell technologyand we do not think film-type touch panels are necessarily the current first choice of thetwo global leaders Apple and Samsung.However, we think prospects have rapidly improved for film-type touch panels in tabletPCs for the reasons stated below.Six reasons why film t
43、echnology has become a stronger contenderWe see several reasons why film has become a much more attractive option for touchpanels and we believe the advantages of film technology are rapidly gaining attention inthe industry.Product technology: Film-type touch panels now have greater transparency and
44、lower resistance, which were previously weak points. Moreover, use ofphotolithography processes at the ITO layer phase by customers (at the sensorformation stage) enables production of thin bezel displays with thinner framesand allowing for a larger display area. This should in turn lead to greater
45、demandfor ITO film.Goldman Sachs Global Investment Research2.3.4.5.6.1.2.3.5September 27, 2012Nitto Denko (6988.T)Light/thin: These have always been strengths of film technology, but there hasbeen further evolution with the adoption of double ITO (DITO) technology andthinner PET film.Low cost: Costs
46、 have been significantly reduced because (1) DITO requires onlyone process as opposed to the two processes required in ITO formation with twofilm layers and (2) film can be worked into the manufacturing lines on a roll-to-roll basis (the benefits of this are more readily gained as volume increases).
47、Advantages vs. one-glass solution (SOC): SOC was seen as the leadingtechnology, but it has been slow to gain traction due to problems related to glassstrength (manufacturing yields and finished product strength) and the costgrowth associated with establishing mass production technology (lack offinan
48、cial strength among Taiwan touch panel makers).Advantages vs. in-cell technology: There are still problems achieving larger sizeswith in-cell technology (will likely not be used at all in tablet PCs over the nextseveral years).Background: Calls for thinner, lighter, and cheaper touch panels have bee
49、nincreasing with the advent of low-end touch panels. Also, as competition hasintensified, there is an increased need for timely product supply in accordancewith product delivery schedules (mass production capabilities, ability to respondto production fluctuations).Nitto Denko: 70%-80% ITO film share
50、, bolstering industry positionFilm-based touch panel manufacturing involves the following steps: (1) supply of PET filmand other materials; (2) ITO film production (Nitto Denko); (3) touch panel production (ITOetching = sensor formation; in some cases, sensor formation and cover glass installationar
51、e handled by separate companies); and (4) assembly by the LCD maker.Nitto Denko attaches ITO film to the entire film surface and supplies rolls of film to touchpanel makers. It has a 70%-80% global market share.We expect the company to enhance its superior position in tablet PCs based on thefollowin
52、g.Adhesive technology (high quality, low cost): Adhesive technology is one of NittoDenkos strengths and is one source of differentiation in ITO film. For example, inthe ITO sputtering process on PET film, the degree of PET surface processingdetermines the ease/difficulty with which the ITO film can
53、be removed. Peelingduring the process of rolling and removing from a roll is a problem, but at thesame time the portion that is to be removed by the customer during the ITOetching (sensor formation) process must come off properly (this has animportant impact on customer yields/costs).Optimal optical
54、 design/customization: Customers must maintain uniform qualityand identify various factors that cause problems in order to establish theirproducts. There are other suppliers of ITO film, such as LG Chemical and Oike &Co. (which supply laminated and single-layer film, respectively). However, onlyNitt
55、o Denko has the capabilities for combining ITO film with polarizing film usedin optical clear adhesives (OCA) and LCDs and providing optimal designs. Wethink customers will grow increasingly dependent on Nitto Denko as theyincreasingly customize technology in order to differentiate their products.Fi
56、nancial, production, and overall strengths: We believe it will become ever moreimportant to possess the financial strength (development and capex capabilities)to respond to customer needs in the rapidly growing touch panel industry. Thisis one reason why Taiwan touch panel makers (e.g., TPK), are be
57、ginning to lag asGoldman Sachs Global Investment Research6September 27, 2012Nitto Denko (6988.T)they move ahead with one-glass solutions. Nitto Denko is bolstering its overallcustomer responsiveness by reorganizing so as to able to providesmartphone/tablet customers with comprehensive solutions (con
58、solidatingrelated divisions in Onomichi, Hiroshima).Exhibit 1: Film makers are beginning to gain the relative advantage in tablet PCsRelative strengths/weaknesses of different touch panel technologiesAdd on FilmAdd on GlassSOCIn-Cell(Previous)(Now)(Two glasses)(One glass)ThicknessWeightClearnessProd
59、uctivity(mass prod. cost)Technology(maturity)Note: =superior, =good, =some issues, X = many problems.Source: Prepared by Goldman Sachs Research.Exhibit 2: Recent changes in technology competitionTailwinds for Nitto DenkoPrevious industry consensusFilm solution will disapper because of low qualitySOC
60、 (Sensor on touch: one glass solution) was believed to be a major trend in next 3-5 yearsIn-Cell might be a final solution for everythingRecent change in industryFilm technology improvesOriginally strong vs glassClearness, low resistance, narrow frames (narrow frame is progress of customers touch pa
61、nel assembly)Thinner, lighter (further progress is expected)Low cost (introduce Roll to Roll production process, DITO takes less process time than two films)SOC or In-cell is immatureLow cost Tablet fuels demandStrong tailwind for Nitto Denko Nittos strengths are focusedTheoretically good, but techn
62、ology immature (mass productioin, larger size In-cell, issue of strength by SOC)Emergence of low cost tablet and competition of spec (thin/light) spotlights film solutionAdhessive technology: better product quality, better mass production efficiencyOptical optimization: combination of ITO film, Pola
63、rizing film and OCA (Optical clear adhesive)Strong financial position, mass production capacity, capability to gather all customers requests, etcSource: Prepared by Goldman Sachs Research.Scenario analysis: iPad could double or triple ITO film earningsNitto Denko has not indicated whether it will su
64、pply components for major product lines(i.e., Apples iPad), so we have formulated four scenario analyses and calculated potentialimpact on the ITO film business.We previously assumed Nitto Denkos ITO film would be used in a smaller version of theiPad, commonly called the “Mini,” but not in the new m
65、ainline model. Nitto Denko has ahigh share in polarizing film, but we assumed the new iPad would use ITO glass in thetouch panel, not film.However, if Nitto Denkos ITO film were to be used in the new iPad it would mean a sharpincrease in earnings as the impact on volume and surface area would be con
66、siderable.This is the basis of our new assumptions and our more-bullish base scenario.Goldman Sachs Global Investment Research7September 27, 2012Nitto Denko (6988.T)We estimate FY3/16 ITO film earnings will double (in our base scenario) or triple (in or bullscenario) compared to levels expected unde
67、r our previous assumption and our bearishscenario if the film were used in the new iPad.Exhibit 3: Assumptions underlying our four scenariosBullGS newGS oldBearPotential of iPad miniEntry to major TabletsGrows up to 1/3-1/4of iPad market1/4 in FY13Grows up to 1/3-1/4of iPad market1/4 in FY13Grows up
68、 to 1/5-1/6of iPad marketNonesmall volumeNone1/2 in FY14full in FY151/2 in FY14full in FY15Price erosionProfitabilityaround -5%increasesaround -15-20%Stablearound -5%Stablearound -5%StableSource: Prepared by Goldman Sachs Research.Exhibit 4: ITO film sales/operating profit estimates based on our fou
69、r scenariosSize of business in FY3/16 will differ significantly depending on whether ITO film is used in iPad(Ybn)SalesBull caseGS base (New)GS base (Old)Bear case(New-Old)OPBull caseGS base (New)GS base (Old)Bear case(New-Old)FY201032.332.332.332.3-FY20108.08.08.08.00.0FY201137.537.537.537.5-FY2011
70、10.510.510.510.50.0FY2012E48.048.048.048.0-FY2012E11.311.311.311.30.0FY2013E79.575.060.057.515.0FY2013E21.019.015.013.54.0FY2014E111.496.465.060.531.4FY2014E31.025.016.014.09.0FY2015E165.8129.468.063.561.4FY2015E48.035.017.015.018.0Source: Company data, Goldman Sachs Research estimates.Assuming Nitt
71、o Denko film will be used in the new iPadWe now see strong tailwinds for film technology and expect the iPad mainline model toeventually use the film.Our new assumptions are detailed in Exhibit 5. Our independent calculations on the scopeof the iPad market (the new full-sized iPad that follows the M
72、ini) include two assumptions:(1) film price per touch panel module (after sensor formation) and (2) differences in scalevs. the Mini market (we estimate the new iPad would use 1.55X the film by surface area,or around x7 of the overall projected FY3/13 sales volume for ITO film). We estimate thiswoul
73、d boost the ITO film market by 60 bn annually, assuming full usage in the iPad.Generally, new model specs need to be decided 15 to 18 months in advance, so even ifNitto Denkos film were to be adopted at a relatively early stage, we estimate the impacton earnings would come in late 2013 or the first
74、half of 2014 at the earliest. We thereforefactor in long-term assumptionsITO film used in 25% of iPads in FY3/14, 50% in FY3/15,and 100% in FY3/16.Goldman Sachs Global Investment Research8September 27, 2012Exhibit 5: Details of our new assumptionsWe estimate full usage in iPad would increase annual
75、sales by 60 bnNitto Denko (6988.T)(Ybn)140OthersNitto Denkos ITO f ilm Sales120100806040200SmartphoneTablet PC (iPad)Tablet PC (iPad mini)Tablet PC (Samsung/Others)FY2011FY2012EFY2013EFY2014EFY2015E(mm inch2)10,000Worldwide Tablet market （byArea）9,0008,0007,0006,0005,0004,0003,0002,0001,0000Non Appl
76、e TabletApple iPadFY2010FY2011FY2012EFY2013EFY2014EFY2015ESource: Company data, Goldman Sachs Research estimates.Upcoming catalysts2H2012-1H2013: We expect a variety of upfront costs associated with new productdevelopment, assuming the film divisions workload increases sharply. We look forgreater co
77、sts to have an impact on earnings in 2H3/13.2H2012-1H2013: We are focusing on how the iPad Mini is received in the market atlaunch and thereafter.Spring 2013: Nitto Denko is to launch a new medium-term plan in FY3/14. We will befocusing on its capexboth the scale and distribution of capexand capacit
78、y expansionGoldman Sachs Global Investment Research9September 27, 2012Nitto Denko (6988.T)plans. Based on historical investment required for ITO film capacity expansion, weestimate Nitto Denko will not need to make a large investmentwe believe 10-15 bnshould be enough to meet our sales forecast.2H20
79、13: We look for concrete discussion of what components will be included in majortablet lines to emerge from the supply chain.Earnings estimates: We forecast record profits in FY3/15From transitional phase (from FY3/11) to growth (from FY3/14)Nitto Denko has a large market share in polarizing film an
80、d this business grew strongly inFY3/03-FY3/06 on the back of sharp growth in the LCD TV market. Earnings subsequentlyslumped, however, due to increased emphasis on low cost and missteps in thecompanys business model (Nitto Denko specializes in niche high value-added productsand was unfamiliar with t
81、he high-volume/commodity business).Finally, around FY3/11, the company successfully optimized its LCD TV products (securedreasonable profits) and entered a transitional phase with new business opportunities insmartphone and tablet products. We are now focusing on the possibility of the companyenteri
82、ng a new growth phase in FY3/14-FY3/16 and we are growing increasingly confidentit will.Modest profit decline in FY3/13 record op. profits in FY3/15We estimate potential sales and operating profits based on the four scenarios outlinedabove. Our new estimates call for record operating profits in FY3/
83、15, topping the high of89.2 bn hit in FY3/06 on the back of rapid LCD TV growth. We expect the company tooffset the impact of the strong yen (every 1/US$ change has roughly a 2.5 bn operatingprofit impact) and post record profits for the first time in nine years.We revise our estimates as follows.FY
84、3/13: We lower our operating profit estimate. While we believe sales of substratematerials (ITO film, OCA, polarizing film) are trending above expectations, profit growth isweak due to rising upfront costs related to new product development/trial production. Welower our estimate for the tape busines
85、s and HDD circuit materials on a moreconservative outlook.FY3/14-FY3/15: We raise our estimates, with an increase in our substrate materialestimates and a decrease in our tape-related product estimates.FY3/16: We introduce new estimates. We see full-scale adoption of Nitto Denko productsin major tab
86、let PCs driving earnings.Goldman Sachs Global Investment Research-10September 27, 2012Exhibit 6: Profit impact of four ITO film scenariosWe forecast record operating profits in FY3/15 ( bn)Nitto Denko (6988.T)Total SalesBull caseGS base (New)GS base (Old)Bear case(New-Old)Total OPBull caseGS base (N
87、ew)GS base (Old)Bear case(New-Old)EPSBull caseGS base (New)GS base (Old)Bear case(New-Old)FY2010638.6638.6638.6638.60.0FY201085.285.285.285.20.0FY2010334.6334.6334.6334.60.0FY2011607.6607.6607.6607.60.0FY201156.556.556.556.50.0FY2011186.5186.5186.5186.50.0FY2012E656.8656.8653.0656.83.8FY2012E68.568.
88、573.068.5-4.5FY2012E292.3292.3309.1292.3-16.8FY2013E718.5714.0685.0696.529.0FY2013E87.585.583.580.02.0FY2013E368.5360.1345.1336.715.0FY2014E779.5764.5714.5728.650.0FY2014E102.596.587.085.59.5FY2014E433.4408.2360.1361.348.0FY2015E858.3821.9756.0FY2015E123.5110.590.5-FY2015E523.4468.2382.9Source: Comp
89、any data, Goldman Sachs Research estimates.Goldman Sachs Global Investment Research11September 27, 2012Exhibit 7: Nitto Denko sales and operating profits by segmentNitto Denko (6988.T)FY3/13FY3/12FY3/13FY3/14FY3/15FY3/16 mn1Q2QE3QE4QEEEEESegment SalesIndustrial TapeFunctional base products62,61363,0
90、0063,50062,500242,986251,613263,000275,000285,000%seq6%1%1%-2%yoy5%0%4%5%0%4%5%5%4%OptronicsInformation fine materials%seq76,857 86,000 85,500 85,00013%12%-1%-1%291,699333,357375,000409,900454,400%yoy-1%13%21%25%14%12%9%11%(Polarizer)(ITO Film, etc.)65,500 71,000 70,000 68,0008,500 12,000 13,000 14,
91、500244,44937,500274,50048,000288,00075,000300,00096,400310,000129,400Semiconductor related materials2,9663,0002,8002,70011,72011,46612,00012,50013,000%seq11%1%-7%-4%yoy-14%-2%10%1%-2%5%4%4%Flexible printed circuits%seq11,371 10,000 10,500 10,0006%-12%5%-5%43,85541,87144,00045,00046,000%yoy-5%-11%5%-
92、6%-5%5%2%2%Processing materials3,0713,0253,0002,80011,83011,89612,50013,10013,500%seq18%-1%-1%-7%yoy-10%3%5%7%1%5%5%3%Subtotal%seq94,265 102,025 101,800 100,50012%8%0%-1%359,104398,590443,500480,500526,900%yoy-2%9%19%20%11%11%8%10%Medical&MembraneMedical3,4233,8004,0004,00016,86915,22316,00017,00018
93、,000%seq-9%11%5%0%yoy-24%-13%-6%7%-10%5%6%6%Membrane4,8134,5004,5004,50016,51518,31319,50020,00021,000%seq15%-7%0%0%yoy10%6%21%8%11%6%3%5%Subtotal8,2368,3008,5008,50033,38433,53635,50037,00039,000%seq4%1%2%0%yoy-7%-4%7%7%0%6%4%5%Sales Total%seq158,319 166,625 167,100 164,7569%5%0%-1%607,639656,80071
94、4,000764,500821,900%yoy1%5%13%14%8%9%7%8%Operating ProfitIndustrial TapeFunctional base products%OPM3,7716.0%3,8006.0%4,0006.3%3,9006.2%13,8745.7%15,4716.1%19,0007.2%21,0007.6%22,0007.7%OptronicsInformation fine materials%OPM(Polarizer)%OPM(ITO Film, etc.)%OPMSemiconductor related materials%OPMFlexi
95、ble printed circuits%OPMProcessing materials%OPMSubtotal%OPM10,58813.8%8,40012.8%2,10024.7%00.0%1,70015.0%2508.1%12,53813.3%12,04114.0%9,20013.0%2,74122.8%00.0%1,20012.0%2508.3%13,49113.2%12,20014.3%9,00012.9%3,10023.8%00.0%1,20011.4%30010.0%13,70013.5%12,00014.1%8,50012.5%3,40023.4%00.0%1,00010.0%2
96、007.1%13,20013.1%35,81212.3%25,20010.3%10,50028.0%4003.4%4,90011.2%1,0508.9%42,16211.7%46,82914.0%35,10012.8%11,34123.6%00.0%5,10012.2%1,0008.4%52,92913.3%58,70015.7%39,00013.5%19,00025.3%5004.2%5,50012.5%1,30010.4%66,00014.9%67,00016.3%41,00013.7%25,00025.9%5004.0%6,00013.3%1,50011.5%75,00015.6%79,
97、30017.5%43,00013.9%35,00027.0%6004.6%6,20013.5%1,70012.6%87,80016.7%Medical&MembraneSubtotal%OPMOP Total%OPM-59-0.7%16,35910.3%-41-0.5%17,14110.3%1001.2%17,80010.7%1001.2%17,20010.4%-2,476-7.4%56,4909.3%1000.3%68,50010.4%5001.4%85,50012.0%5001.4%96,50012.6%7001.8%110,50013.4%Source: Company data, Go
98、ldman Sachs Research estimates.Goldman Sachs Global Investment Research12September 27, 2012Exhibit 8: Nitto Denko income statement mnNitto Denko (6988) Consolidated P/L statementNitto Denko (6988.T)Consolidated P/L statementmn, , %SalesCost of goods soldGross profitsSG&A expenseOperating profitsRecu
99、rring profitsExtraordinary incomeExtraordinary lossesPretax profitsTaxesMinority interestsNet profitsDPS2011/3638,556444,037194,518109,27385,24585,1435742,76882,95026,89331355,74390.002012/3607,639439,938167,701111,21056,49158,4361,1389,72649,84818,50227931,066100.002013/3(E)656,800468,300188,500120
100、,00068,50068,5005001,00068,00019,500(200)48,700100.002014/3(E)714,000498,500215,500130,00085,50085,5005001,00085,00025,000060,000120.002015/3(E)764,500530,000234,500138,00096,50096,5005001,00096,00028,000068,000130.002016/3(E)821,900566,400255,500145,000110,500110,5005001,000110,00032,000078,000150.
101、00Source: Company data, Goldman Sachs Research estimates.CROCI: Should maintain top quartile position within sectorFrom an historical standpoint, CROCI (cash return on cash invested) is not exceptionallyhigh. It rose to 15%-20% in FY3/05-FY3/06 on the rapid spread of LCD TVs globally, and weforecast
102、 growth of up to around 15% now. There are fewer business opportunities withtablet PCs, owing to their size and the size of the market, than there were with LCD TVs,and we expect this high-margin business to make a smaller earnings contribution thanLCD TVs did.From a sector standpoint, however, Nitt
103、o Denkos CROCI remains stable at a highabsolute level, and it consistently ranks in the top quartile, reflecting the companysposition as a premier firm within the sector.Exhibit 9: CROCI breakdown and historical trendWe expect CROCI to improve to around 15%, though this would fall short of FY3/05-FY
104、3/06 levels, when LCD TVs werespreading rapidly ( mn)6988.TNitto DenkoCash flow from operating activities(Increase)/decrease in working capital1 - Margin tax rateNet interest income/(expense)Lease paymentsOther DACF adjustmentsDebt adjusted cash flow (incl leases)2004.345,321(5,262)62%410050,5582005
105、.356,067(14,029)62%(139)0070,1822006.384,525(20,091)63%(470)00104,9122007.363,032(8,662)64%(1,040)0072,3592008.3101,5953,61268%(1,062)0098,7102009.351,29013,15475%(771)0038,7172010.3102,498(13,333)70%(1,083)00116,5922011.397,060(248)68%(711)0097,7882012.358,492(1,573)63%(606)0060,4462013.3E83,793(8,
106、707)71%(561)0092,9002014.3E98,860(11,140)71%(561)00110,3962015.3E110,328(9,672)71%(561)00120,398Total depreciating assetsGross fixed assets, PP&EGross intangibles357,9976,753398,3126,619464,1597,326538,0926,768562,6866,610576,9078,579583,0007,273593,5618,099610,1658,955642,0388,955679,7338,955716,22
107、38,955Operating current assetsInventoryAccounts receivableOther current assets40,670104,20017,28044,170115,76016,92259,528141,17119,35072,293148,84918,39972,403141,29821,94160,98692,85221,43157,927134,89616,81062,399132,01717,88067,544126,29919,29169,160139,60819,29173,620151,76619,29178,272162,5001
108、9,291Current liabilities (excld ST debt)Total current liabilitiesShort-term debt138,27412,115145,2188,508191,46318,021209,42224,228180,5368,416153,71828,832149,68810,667157,04610,654138,4872,978144,7052,978150,1832,978155,8972,978Other GCI elementsEquity method investmentsInvestments in securitiesCa
109、pitalized leasesOther GCI adjustmentsGross cash investedCROCI13,53811,60200425,88112.2%15,57011,46800472,11115.6%1,77517,53900537,40620.8%1,98815,33200616,52712.5%1,8768,93000643,62415.7%1,8768,93000646,6756.0%08,89000669,77517.7%08,89000676,45414.5%08,89000705,6358.7%08,89000746,21412.8%08,89000795
110、,05014.3%08,89000841,21214.7%Source: Goldman Sachs Research estimates.Goldman Sachs Global Investment Research13September 27, 2012Exhibit 10: CROCI: Nitto Denko ranks in the top quartile in a sector comparisonFirst QuartileSecond QuartileThird QuartileFourth QuartileNot Meaningful / MissingCROCINitt
111、o Denko (6988.T)NameAlps ElectricHirose ElectricIbidenJapan Aviation Electronics IndustryKyocera2002.1210%22%8%7%7%2003.1210%27%7%8%6%2004.1211%27%11%8%8%2005.1212%27%17%12%7%2006.129%22%21%11%8%2007.127%20%20%12%8%2008.1214%10%8%4%2009.123%14%12%8%6%2010.128%13%14%9%8%2011.127%12%10%10%8%2012.12E6%
112、10%9%11%6%2013.12E7%9%9%12%7%Mabuchi Motor10%6%8%6%7%7%4%6%5%Minebea7%8%7%7%8%8%6%6%7%6%6%7%Mitsumi Electric5%3%7%10%14%15%9%8%3%Murata Mfg.NGK InsulatorsNGK Spark PlugNichiconNidecNihon Dempa KogyoNippon Chemi-ConNitto DenkoShinko Electric IndustriesTaiyo YudenTDK13%5%7%7%10%4%4%12%10%9%7%13%5%7%4%
113、11%9%4%13%11%8%12%12%5%9%6%13%11%5%15%12%4%11%13%7%11%6%14%11%7%20%14%9%13%14%9%11%6%15%14%9%14%16%12%14%11%12%10%4%16%13%7%15%12%10%10%6%7%11%8%5%3%7%8%8%15%4%3%15%8%7%9%11%8%7%4%15%4%6%15%8%7%10%8%4%7%4%12%4%10%6%3%7%8%7%6%4%15%4%3%12%6%6%8%10%9%7%4%18%4%4%14%6%7%9%Source: Goldman Sachs Research e
114、stimates.Use of cash and cash equivalents merits serious considerationNitto Denko attaches a very high priority to rationalization and capex efficiency, so we donot believe investment is likely to rise sharply. Even if the company needed to make largeproduction expansion investments in ITO film, we
115、estimate it would need to invest only10-15 bn or so (this is factored into our estimates). The company had cash and cashequivalents of 209.9 bn as of end-FY3/12, more than twice the level five years earlier.Even assuming a dividend payout ratio of 30%, we expect its cash to continue increasing.We be
116、lieve the time has come to examine the potential for share buybacks, which wediscuss in more detail below.Goldman Sachs Global Investment Research14September 27, 2012Exhibit 11: Nitto Denko balance sheet and cash flow statement mnNitto Denko (6988) Consolidated balance sheetNitto Denko (6988.T)Conso
117、lidated balance sheetmn, , %2011/32012/32013/3(E)2014/3(E)2015/3(E)2016/3(E)AssetsCash equivalentsNotes & accounts receivableInventoriesCurrent deferred tax assetsOthersTotal current assetsTangible fixed assetsIntangible assetsInvestments and otherTotalOther assetsTotal assets211,044132,01762,3999,1
118、288,752423,340195,1528,09927,370230,6210653,961209,855126,29967,5446,48012,811422,989190,0748,95529,890228,9190651,908229,201139,60869,1606,48012,811457,260194,0748,95529,890232,9190690,179253,325151,76673,6206,48012,811498,002199,0748,95529,890237,9190735,921287,271162,50078,2726,48012,811547,33420
119、2,0748,95529,890240,9190788,253328,627174,70183,6486,48012,811606,267203,0748,95529,890241,9190848,186Liabilities and Shareholders EquityNotes & accounts payableShort-term debtsCurrent deferred tax liabilitiesOthersTotal current liabilitiesBonds and long-term debtsDeferred tax liabilitiesAccrued ret
120、irement benefit costOthersTotal fixed liabilitiesMinority interestsCapital stockCapital reserveRetained earningsTresury stockOtherTotal shareholders equityTotal Liabilities and Shareholders EquityNet debtBPS80,87610,654065,516157,04656,00036518,6882,18977,2421,21926,78356,171398,161(33,953)(28,708)4
121、18,454653,961(144,390)2,51278,7302,978056,779138,48756,00035318,9942,13977,4861,43026,78356,160412,784(33,655)(27,567)434,505651,908(150,877)2,60884,9482,978056,779144,70556,00035318,9942,13977,4861,23026,78356,160445,037(33,655)(27,567)466,758690,179(170,223)2,80290,4262,978056,779150,18356,0003531
122、8,9942,13977,4861,23026,78356,160485,301(33,655)(27,567)507,022735,921(194,347)3,04396,1402,978056,779155,89756,00035318,9942,13977,4861,23026,78356,160531,920(33,655)(27,567)553,641788,253(228,293)3,323102,7432,978056,779162,50056,00035318,9942,13977,4861,23026,78356,160585,249(33,655)(27,567)606,9
123、70848,186(269,649)3,643% of total assestsCurrent assetsTangible fixed assetsCurrent liabilitiesTotal shreholders equity64.7%29.8%24.0%64.0%64.9%29.2%21.2%66.7%66.3%28.1%21.0%67.6%67.7%27.1%20.4%68.9%69.4%25.6%19.8%70.2%71.5%23.9%19.2%71.6%Efficiency analysisAsset turnoverFixed asset turnoverAccounts
124、 receivable turnoverInventory turn (monthAccounts payable turn (month)Cash equivalent turnoverROEFinancial leverageDebt to assetsDebt to equityCurrent ratio (x)Acid test (x)Total asset growth rateTangible fixed asset growth rate1.001.872.511.632.173.6013.8%1.560.360.562.702.304.6%-6.4%0.931.912.551.
125、772.184.167.3%1.500.330.503.052.57-0.3%-2.6%0.982.032.551.772.184.0110.8%1.480.320.483.162.685.9%2.1%1.002.122.551.772.184.0512.3%1.450.310.453.322.836.6%2.6%1.002.212.551.772.184.2412.8%1.420.300.423.513.017.1%1.5%1.002.352.551.772.184.5013.4%1.400.280.403.733.227.6%0.5%Source: Company data, Goldma
126、n Sachs Research estimates.Goldman Sachs Global Investment Research15September 27, 2012Exhibit 12: Nitto Denko cash flow statement mnNitto Denko (6988) Consolidated cash flow statementNitto Denko (6988.T)Consolidated cash flow statementmn, , %Net profitsMinority interestDepreciationWorking capitalOt
127、her operating cash flowCapexIntangible assetsTotal investmentsOther investing cash flowFree cash flowInterest bearing debtDividends and directors bonusOther financial cash flowCash flowCash equivalents2011/355,74331340,017(248)1,235(38,000)(826)06,78565,019(8,329)(9,898)(5,132)37,661211,0442012/331,
128、06627936,806(1,573)(8,086)(33,758)(856)0(2,450)21,428(7,676)(16,447)145-2,576209,8552013/3(E)48,700(200)44,000(8,707)0(48,000)00035,7930(16,447)019,346229,2012014/3(E)60,000050,000(11,140)0(55,000)00043,8600(19,736)024,123253,3252015/3(E)68,000052,000(9,672)0(55,000)00055,3280(21,381)033,947287,2712
129、016/3(E)78,000054,000(10,974)0(55,000)00066,0260(24,671)041,356328,627Source: Company data, Goldman Sachs Research estimates.Nitto Denko remains on GS SUSTAIN Japan ListThe GS SUSTAIN Japan List consists of companies that excel in three facets of ouranalysis: return on capital (CROCI), industry posi
130、tioning, and management quality asdemonstrated by the public disclosure of engagement with ESG factors. Nitto Denkoremains on the list based on our view that it will strengthen its industry positioning onshifts in technology and maintain high CROCI.Exhibit 13: Nitto Denkos scores in GS SUSTAIN Japan
131、 List frameworkTickers6981.OS6594.OS6988.T4062.T7751.T7731.TCompanyMurata Mfg.NidecNitto DenkoIbidenCanonNikonSectorHardwareHardwareHardwareHardwareHardwareHardwareheadline CROCI(2011-13E)8.6%15.1%12.1%8.9%12.6%15.3%headline CROCI vsPeers69.2%92.3%84.6%73.0%88.4%96.1%adjusted CROCI(2011-13E)9.4%15.3
132、%12.6%10.1%12.3%15.9%adjusted CROCI vsPeers57.6%92.3%80.7%73.0%76.9%100.0%IP vs Peers92.3%84.6%80.7%92.3%88.4%76.9%Current ESG (as% of max)45%43%53%50%50%53%ESG vs Peers19%8%54%35%46%54%ESG onavailable data56%53%58%58%57%65%ESG upsidefrom fulldisclosure70%67%63%67%64%74%Source: Company data, Goldman
133、 Sachs Research estimates.Exhibit 14: Nitto Denkos profile under the GS SUSTAIN frameworkCROCI (% ile)IndustryPositioning (%ile)ESG (% of Max)CurrentSource: Goldman Sachs ResearchGoldman Sachs Global Investment ResearchESG from available dataTop Quartile16September 27, 2012Nitto Denko (6988.T)Valuat
134、ion: Target price up to 4,600 from 4,100, reiterate CL BuyRaise target price to 4,600 from 4,100, reiterate CL BuyWe raise our 12-month target price to 4,600 from 4,100. Our new target equals FY3/14EP/E of 13X.As before, our target price is based on EV/GCI-CROCI/WACC correlation (cash returnvaluatio
135、n). We continue to apply a 10% discount to the EV/GCI vs. CROCI/WACC trend linefor the electronic components sector based on our view that while the discount has beennarrowing recently, we do not expect CROCI to top the FY3/05-FY3/06 peak (which meriteda share price premium) even in FY3/16. We estim
136、ate a theoretical value of 5,000 pershare assuming a return to the trend line. We do not believe the stock warrants a discountfor a rising Apple weighting (takes into account increasing dependency on onetechnologically demanding client with high order volatility) because we believe NittoDenko is ent
137、ering a phase where it will have new business opportunities driven by shiftsin technology.We change the base year for our target price calculation to FY3/16, when we expect theuse of Nitto Denko products in major tablet PCs to begin making a full-scale earningscontribution, from the FY3/13-FY3/14 av
138、erage. However, we use a WACC discount of 7%(based on Nikkos balance sheet) on FY3/16 DACF to calculate our target price.Exhibit 17 shows a share price valuation simulation (stress test) using our original bullcase and bear case scenarios and adjusting them for four different price decline levels(ou
139、r main bull and bear case scenarios both assume price declines of 5%). Our theoreticalvalue estimates range between 4,100 and 4,900 regardless of whether ITO film pricedeclines accelerate to -25% or if they do not decline at all, so we see little downside risk.Goldman Sachs Global Investment Researc
140、hEV/GCIJAE17September 27, 2012Exhibit 15: EV/GCI vs. CROCI/WACC plot for the electronic components sectorNitto Denko looks clearly undervalued even when we apply a 10% discount1.20x1.00xHirose0.80xNidecNitto Denko (6988.T)0.60x0.40xNippon Chemi-conNDKNGK InsulatorsMurataMinebeaKyoceraMabuchiAlpsTDKT
141、aiyoYudenNGK Spark PlugNitto Denko0.20xIbiden0.00xNichiconShinko0.00x0.50x1.00x1.50x2.00x2.50x3.00x3.50xCROCI/WACCSource: Goldman Sachs Research estimates.Exhibit 16: Theoretical value per share in our four scenariosWe change base year for target price calculation to FY3/16 from FY3/13-FY3/14 averag
142、e but use WACC discount of 7% forFY3/15-FY3/16(*Discounted with WACC=7%)TPBull caseGS base (New)GS base (Old)Bear caseFY12-13E4,2004,1004,1004,100upside9%6%6%6%FY13E4,4004,4004,2004,300upside14%14%9%11%FY14E(*)4,6004,500-4,200upside19%16%-9%FY15E(*)4,8004,600-4,200upside24%19%-9%Source: Goldman Sach
143、s Research estimates.Goldman Sachs Global Investment Research18September 27, 2012Nitto Denko (6988.T)Exhibit 17: Theoretical value per share ranges between 4,100 and 4,900 in our bull/base cases (smaller/larger ITOfilm price declines)FY2013E FY2014E(*)FY2015E(*)0(GS Bull case) -5%-10%-15%-20%4,5004,
144、4004,4004,4004,4004,6004,6004,6004,5004,5004,9004,8004,8004,7004,700FY2013E FY2014E(*)FY2015E(*)(GS Bear case) -5%-10%-15%-20%-25%4,3004,3004,2004,2004,2004,2004,2004,2004,2004,2004,2004,2004,1004,1004,100(*Discounted with WACC=7%)Source: Goldman Sachs Research estimates.Share buybacks: Scope for 3%
145、-8% annually by our estimatesWe see Nitto Denko coming under increasing pressure to make returns to shareholders asits cash builds up. We estimate that cash holdings will rise from 209.9 bn at end-FY3/12to 328.6 bn at end-FY3/16 even given a 30% dividend payout ratio.We estimated the potential for s
146、hare buybacks using three scenarios: (1) cash stays flat (isnot accumulated) after FY3/12, (2) cash declines to 180 bn by FY3/16, and (3) cashdeclines to 160 bn by FY3/16. Taking into account upcoming funding requirements, weestimated that it would be physically possible for the company to buy back
147、3% to 8% of itsshares annually.With a roadmap finally in place for full stock market recognition of Nitto Denkos corebusiness, we believe the company needs to adopt global standards in returns toshareholders and in balance-sheet management to match its aspirations as a premierglobal technology compa
148、ny.Exhibit 18: Estimated share buyback potential2008/32009/32010/32011/32012/3 2013/3E 2014/3E 2015/3E 2016/3ECash equivalents (mln yen)80,182 113,965 171,921 211,044209,855 229,201 253,325 287,271 328,627GS dividend forecast (yen)80804090100100120130150Stock price (yen)Market cap (bn yen)3700616,43
149、5AccumulatedShare buyback poten Cash equivalents are flattish after 3/12Cash is reduced 180bn yen by 3/16Cash is reduced to 160bn yen by 3/163%6%6%4%5%6%6%6%7%7%8%8%19%24%27%Source: Goldman Sachs Research estimates.Goldman Sachs Global Investment ResearchITO19September 27, 2012Exhibit 19: Sales segm
150、ent breakdown, Operating income FX sensitivityRevenue breakdownNitto Denko (6988.T)by productby regionIndustrial materialsElectronic materialsFunctional materials36%54%9%North AmericaJapanEuropeAsia, OceaniaRoW5%34%6%55%1%Operating profit forex sensitivityOP impact of 10FX assumptionOperating profit
151、:appreciationFY3/13FY1 GSE ( bn)68.5CurrencyYen/Dollar bn-25.0% of OP-36GSE80CoE80NotesYen/Euro95Source: Company data, Goldman Sachs Research estimates.Appendix：Structure of Touch PanelsExhibit 20: Add-on type: Originally two sheets of glass and two layers of filmAdd-on Glass P-CapCover GlassITO Lay
152、er1.3mmGlass SubstrateLCD/OLEDCG：1.1mm0.55mmTP Substrate Glass：1.1mm0.33mmOCA：250/175Add-on Film P-CapCover GlassFilm SubstrateFilm SubstrateLCD/OLEDOCA/Air gapITO LayerOCA/Air gap2.63mm1.1mm1.65mmCG：1.1mm0.55mmTP Substrate Film：0.1mmOCA：250/50Source: Display SearchExhibit 21: ITO film substrate str
153、ucture: Nitto Denko developed Double ITO (DITO), whichproduces thinner and higher quality output.MultilayeredITOSpecial optical PET filmAdhesive layerPET filmHard CoatSource: Display SearchGoldman Sachs Global Investment ResearchSingle layeredITOUnder Coating layerClear Hard CoatPET filmHard CoatDIT
154、O(2 x multilayered)PET filmITOwoe,20September 27, 2012Nitto Denko (6988.T)Exhibit 22: ITO film is becoming thinner and thinner:Trends in Suurface resistance (), ITO film thickness (), Total touch ensor thickness ()Source: Display Search. Total touch sensor thickness assumes the use of CG (0.55mm),tw
155、 ITO film (300) and OCA (50).Exhibit 23: Two glasses migrate to one glass (SOC: Sensor on glass): theoretically competitive but technology is stillimmature for mass production. In some cases, ITO film is used to enhance quality.SOC （G2）ITO LayerCover GlassLCD/OLEDPrintingAdhesive1.05mm1.45mmCG：1.1mm
156、0.7mmOCA：250（飛散防止:100）SOC （G1+ Film ITO）CG：1.1mmITO LayerCover GlassITO FilmPrinting1.43mmITO Film：100OCA：250/75SOC （G1）LCD/OLEDAdhesiveCG：1.1mmITO LayerCover GlassPrinting1.43mmOCA：250LCD/OLEDSource: Display SearchGoldman Sachs Global Investment ResearchAdhesive21September 27, 2012Nitto Denko (6988
157、.T)Exhibit 24: On-Cell type touch panel:In-Cell is theoretically more advanced, but commercialization takes more than 3 years for largerscreen sizes - On-Cell sometimes uses Nittos film.On-Cell CapacitiveCover GlassCF Glass/Seal GlassITO Layer0.73mm1.28mmTFT GlassSource: Display SearchExhibit 25: In
158、-Cell type touch panel:In- Cell CapacitiveCover GlassAdhesiveCG：1.1mm0.55mmOCA：1750.73mm 1.28mmCF Glass/Seal GlassTFT GlassSource: Display SearchGoldman Sachs Global Investment ResearchAdhesiveCG：1.1mm0.55mmOCA：17522September 27, 2012Nitto Denko (6988.T)Disclosure AppendixReg ACI, Daiki Takayama, he
159、reby certify that all of the views expressed in this report accurately reflect my personal views about the subject company orcompanies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specificrecommendations or vie
160、ws expressed in this report.Investment ProfileThe Goldman Sachs Investment Profile provides investment context for a security by comparing key attributes of that security to its peer group andmarket. The four key attributes depicted are: growth, returns, multiple and volatility. Growth, returns and
161、multiple are indexed based on compositesof several methodologies to determine the stocks percentile ranking within the regions coverage universe.The precise calculation of each metric may vary depending on the fiscal year, industry and region but the standard approach is as follows:Growth is a compo
162、site of next years estimate over current years estimate, e.g. EPS, EBITDA, Revenue. Return is a year one prospectiveaggregate of various return on capital measures, e.g. CROCI, ROACE, and ROE. Multiple is a composite of one-year forward valuation ratios, e.g.P/E, dividend yield, EV/FCF, EV/EBITDA, E
163、V/DACF, Price/Book. Volatility is measured as trailing twelve-month volatility adjusted for dividends.QuantumQuantum is Goldman Sachs proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used forin-depth analysis of a single company, or to
164、make comparisons between companies in different sectors and markets.GS SUSTAINGS SUSTAIN is a global investment strategy aimed at long-term, long-only performance with a low turnover of ideas. The GS SUSTAIN focus listincludes leaders our analysis shows to be well positioned to deliver long term out
165、performance through sustained competitive advantage andsuperior returns on capital relative to their global industry peers. Leaders are identified based on quantifiable analysis of three aspects of corporateperformance: cash return on cash invested, industry positioning and management quality (the e
166、ffectiveness of companies management of theenvironmental, social and governance issues facing their industry).DisclosuresCoverage group(s) of stocks by primary analyst(s)Daiki Takayama: Japan-Electronic Components.Japan-Electronic Components: Alps Electric, Hirose Electric, Ibiden, Japan Aviation El
167、ectronics Industry, Kyocera, Mabuchi Motor, Minebea,Mitsumi Electric, Murata Mfg., NGK Insulators, NGK Spark Plug, Nichicon, Nidec, Nihon Dempa Kogyo, Nippon Chemi-Con, Nitto Denko, ShinkoElectric Industries, TDK, Taiyo Yuden.Company-specific regulatory disclosuresThe following disclosures relate to
168、 relationships between The Goldman Sachs Group, Inc. (with its affiliates, Goldman Sachs) and companiescovered by the Global Investment Research Division of Goldman Sachs and referred to in this research.Goldman Sachs expects to receive or intends to seek compensation for investment banking services
169、 in the next 3 months: Nitto Denko (3,685)Goldman Sachs has received compensation for non-investment banking services during the past 12 months: Nitto Denko (3,685)Goldman Sachs had a non-investment banking securities-related services client relationship during the past 12 months with: Nitto Denko (
170、3,685)Goldman Sachs had a non-securities services client relationship during the past 12 months with: Nitto Denko (3,685)Distribution of ratings/investment banking relationshipsGoldman Sachs Investment Research global coverage universeRating DistributionGoldman Sachs Global Investment ResearchInvest
171、ment Banking RelationshipsStockPriceIndexPrice280023September 27, 2012Nitto Denko (6988.T)BuyHoldSellBuyHoldSellGlobal31%55%14%48%41%35%As of July 1, 2012, Goldman Sachs Global Investment Research had investment ratings on 3,480 equity securities. Goldman Sachs assigns stocksas Buys and Sells on var
172、ious regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sellfor the purposes of the above disclosure required by NASD/NYSE rules. See Ratings, Coverage groups and views and related definitions below.Price target and rating history chart(s)N
173、itto De nk o (6988.T)Stoc k Pric e Currency : Japanese Y enGoldman Sachs rating and s tock price target history6,0005,5005,0004,50027002900280036004100370043005400500040004300380039001,00095040009008504,00026503,5003,00047005400520045008007507002,5002,0003900Oc t 194000380035005600Nov 17490036006506
174、00SNBA S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J2009201020112012Source: Goldman Sachs Investment Res earc h for ratings and pric e targets ; Fac tSet clos ing prices as of 6/30/2012.RatingPrice targetPrice target at remov alCov ered by Daiki TakayamaNot c ov ered by c urren
175、t analys tTOPIXThe price targets show n should be c onsidered in the c ontex t of all prior publis hed Goldman Sachs research, w hich may ormay not have included price targets, as w ell as developments relating to the company , its industry and f inancial markets .Regulatory disclosuresDisclosures r
176、equired by United States laws and regulationsSee company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report: manageror co-manager in a pending transaction; 1% or other ownership; compensation for certain services; types of c
177、lient relationships; managed/co-managed public offerings in prior periods; directorships; for equity securities, market making and/or specialist role. Goldman Sachs usually makes amarket in fixed income securities of issuers discussed in this report and usually deals as a principal in these securiti
178、es.The following are additional required disclosures: Ownership and material conflicts of interest: Goldman Sachs policy prohibits its analysts,professionals reporting to analysts and members of their households from owning securities of any company in the analysts area ofcoverage. Analyst compensat
179、ion: Analysts are paid in part based on the profitability of Goldman Sachs, which includes investment bankingrevenues. Analyst as officer or director: Goldman Sachs policy prohibits its analysts, persons reporting to analysts or members of theirhouseholds from serving as an officer, director, adviso
180、ry board member or employee of any company in the analysts area of coverage. Non-U.S.Analysts: Non-U.S. analysts may not be associated persons of Goldman, Sachs & Co. and therefore may not be subject to NASD Rule 2711/NYSERules 472 restrictions on communications with subject company, public appearan
181、ces and trading securities held by the analysts.Distribution of ratings: See the distribution of ratings disclosure above. Price chart: See the price chart, with changes of ratings and price targetsin prior periods, above, or, if electronic format or if with respect to multiple companies which are t
182、he subject of this report, on the Goldman Sachswebsite at http:/ disclosures required under the laws and regulations of jurisdictions other than the UnitedStatesThe following disclosures are those required by the jurisdiction indicated, except to the extent already made above pursuant to United Stat
183、es lawsand regulations. Australia: Goldman Sachs Australia Pty Ltd and its affiliates are not authorised deposit-taking institutions (as that term is definedin the Banking Act 1959 (Cth) in Australia and do not provide banking services, nor carry on a banking business, in Australia. This research, a
184、nd anyaccess to it, is intended only for wholesale clients within the meaning of the Australian Corporations Act, unless otherwise agreed by GoldmanSachs. Brazil: Disclosure information in relation to CVM Instruction 483 is available at http:/ applicable, the Brazil-registered analyst primarily resp
185、onsible for the content of this research report, as defined in Article 16 of CVMInstruction 483, is the first author named at the beginning of this report, unless indicated otherwise at the end of the text. Canada: Goldman, Sachs& Co. has approved of, and agreed to take responsibility for, this rese
186、arch in Canada if and to the extent it relates to equity securities of Canadianissuers. Analysts may conduct site visits but are prohibited from accepting payment or reimbursement by the company of travel expenses for suchvisits. Hong Kong: Further information on the securities of covered companies
187、referred to in this research may be obtained on request fromGoldman Sachs (Asia) L.L.C. India: Further information on the subject company or companies referred to in this research may be obtained fromGoldman Sachs (India) Securities Private Limited; Japan: See below. Korea: Further information on th
188、e subject company or companies referred toin this research may be obtained from Goldman Sachs (Asia) L.L.C., Seoul Branch. New Zealand: Goldman Sachs New Zealand Limited and itsaffiliates are neither registered banks nor deposit takers (as defined in the Reserve Bank of New Zealand Act 1989) in New
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191、 Pte. (Company Number: 198602165W). Taiwan: This material is for reference only and must not be reprinted without permission.Investors should carefully consider their own investment risk. Investment results are the responsibility of the individual investor. UnitedKingdom: Persons who would be catego
192、rized as retail clients in the United Kingdom, as such term is defined in the rules of the Financial ServicesAuthority, should read this research in conjunction with prior Goldman Sachs research on the covered companies referred to herein and shouldrefer to the risk warnings that have been sent to t
193、hem by Goldman Sachs International. A copy of these risks warnings, and a glossary of certainfinancial terms used in this report, are available from Goldman Sachs International on request.Goldman Sachs Global Investment Research24September 27, 2012Nitto Denko (6988.T)European Union: Disclosure infor
194、mation in relation to Article 4 (1) (d) and Article 6 (2) of the European Commission Directive 2003/126/EC isavailable at http:/ which states the European Policy for Managing Conflicts of Interest in Connectionwith Investment Research.Japan: Goldman Sachs Japan Co., Ltd. is a Financial Instrument De
195、aler under the Financial Instrument and Exchange Law, registered with theKanto Financial Bureau (Registration No. 69), and is a member of Japan Securities Dealers Association (JSDA) and Financial Futures Association ofJapan (FFAJ). Sales and purchase of equities are subject to commission pre-determi
196、ned with clients plus consumption tax. See company-specificdisclosures as to any applicable disclosures required by Japanese stock exchanges, the Japanese Securities Dealers Association or the JapaneseSecurities Finance Company.Ratings, coverage groups and views and related definitionsBuy (B), Neutr
197、al (N), Sell (S) -Analysts recommend stocks as Buys or Sells for inclusion on various regional Investment Lists. Being assigned a Buyor Sell on an Investment List is determined by a stocks return potential relative to its coverage group as described below. Any stock not assignedas a Buy or a Sell on
198、 an Investment List is deemed Neutral. Each regional Investment Review Committee manages various regional InvestmentLists to a global guideline of 25%-35% of stocks as Buy and 10%-15% of stocks as Sell; however, the distribution of Buys and Sells in any particularcoverage group may vary as determine
199、d by the regional Investment Review Committee. Regional Conviction Buy and Sell lists representinvestment recommendations focused on either the size of the potential return or the likelihood of the realization of the return.Return potential represents the price differential between the current share
200、 price and the price target expected during the time horizon associatedwith the price target. Price targets are required for all covered stocks. The return potential, price target and associated time horizon are stated ineach report adding or reiterating an Investment List membership.Coverage groups
201、 and views: A list of all stocks in each coverage group is available by primary analyst, stock and coverage group athttp:/ The analyst assigns one of the following coverage views which represents the analysts investmentoutlook on the coverage group relative to the groups historical fundamentals and/
202、or valuation. Attractive (A). The investment outlook over thefollowing 12 months is favorable relative to the coverage groups historical fundamentals and/or valuation. Neutral (N). The investment outlookover the following 12 months is neutral relative to the coverage groups historical fundamentals a
203、nd/or valuation. Cautious (C). The investmentoutlook over the following 12 months is unfavorable relative to the coverage groups historical fundamentals and/or valuation.Not Rated (NR). The investment rating and target price have been removed pursuant to Goldman Sachs policy when Goldman Sachs is ac
204、ting inan advisory capacity in a merger or strategic transaction involving this company and in certain other circumstances. RatingSuspended (RS). Goldman Sachs Research has suspended the investment rating and price target for this stock, because there is not a sufficientfundamental basis for determi
205、ning, or there are legal, regulatory or policy constraints around publishing, an investment rating or target. Theprevious investment rating and price target, if any, are no longer in effect for this stock and should not be relied upon. CoverageSuspended (CS). Goldman Sachs has suspended coverage of
206、this company. Not Covered (NC). Goldman Sachs does not cover thiscompany. Not Available or Not Applicable (NA). The information is not available for display or is not applicable. Not Meaningful (NM). Theinformation is not meaningful and is therefore excluded.Global product; distributing entitiesThe
207、Global Investment Research Division of Goldman Sachs produces and distributes research products for clients of Goldman Sachs on a globalbasis. Analysts based in Goldman Sachs offices around the world produce equity research on industries and companies, and research onmacroeconomics, currencies, comm
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209、Co. (all other research); in Hong Kong by Goldman Sachs (Asia) L.L.C.; in India by GoldmanSachs (India) Securities Private Ltd.; in Japan by Goldman Sachs Japan Co., Ltd.; in the Republic of Korea by Goldman Sachs (Asia) L.L.C., SeoulBranch; in New Zealand by Goldman Sachs New Zealand Limited; in Ru
210、ssia by OOO Goldman Sachs; in Singapore by Goldman Sachs (Singapore)Pte. (Company Number: 198602165W); and in the United States of America by Goldman, Sachs & Co. Goldman Sachs International has approvedthis research in connection with its distribution in the United Kingdom and European Union.Europe
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212、ribute research in Germany.General disclosuresThis research is for our clients only. Other than disclosures relating to Goldman Sachs, this research is based on current public information that weconsider reliable, but we do not represent it is accurate or complete, and it should not be relied on as
213、such. We seek to update our research asappropriate, but various regulations may prevent us from doing so. Other than certain industry reports published on a periodic basis, the largemajority of reports are published at irregular intervals as appropriate in the analysts judgment.Goldman Sachs conduct
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217、ldman Sachs salespersons and traders, ormay discuss in this report, trading strategies that reference catalysts or events that may have a near-term impact on the market price of the equitysecurities discussed in this report, which impact may be directionally counter to the analysts published price t
218、arget expectations for such stocks.Any such trading strategies are distinct from and do not affect the analysts fundamental equity rating for such stocks, which rating reflects a stocksreturn potential relative to its coverage group as described herein.We and our affiliates, officers, directors, and
219、 employees, excluding equity and credit analysts, will from time to time have long or short positions in,act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this research.Goldman Sachs Global Investment Research25September 27, 2012Nitto Denko (6988.T)This rese
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