Friday, 26 April 2013

(First Edition) Japan Daily Featured stocks Technology Price TP Upside Anritsu (6754) OUTPERFORM, TP ¥1,180 Maekawa/Fukumoto Rating 25 Apr TP Results, guidance negative, but Jan–Mar orders exceeding ¥20bn for first Results 6754 Anritsu O 1506 1180 -21.6% 6857 Advantest U 1533 1100 -28.2% time positive Hitachi Kokusai Advantest (6857) UNDERPERFORM, TP ¥1,100 Maekawa/Fukumoto 6756 Electric N 1054 890 -15.6% Orders miss guidance for third straight quarter; FY3/14 guidance looks Results 6146 Disco O 6230 6100 -2.1% ambitious 6971 Kyocera N 9800 9000 -8.2% Hitachi Kokusai Electric (6756) NEUTRAL, TP ¥890 Maekawa/Fukumoto 4062 Ibiden N 1695 1700 0.3% 4689 Yahoo Japan O 50300 46000 -8.5% Continuation of firm share price momentum hinges on Apr–Jun SPE order outlook Results 4751 CyberAgent, Inc N 206100 170000 -17.5% DISCO (6146) OUTPERFORM, TP ¥6,100 Maekawa/Fukumoto 6758 Sony N 1627 1600 -1.7% Preliminary parent earnings and consolidated sales: Earnings in line; maintain Comment 6301 Komatsu O 2587 2700 4.4% as top pick on sustained strength in orders 7205 Hino Motors, Ltd. O 1430 1350 -5.6% FOCUS LIST STOCK Daihatsu Motor 7262 Co., Ltd O 1979 2380 20.3% Kyocera (6971) NEUTRAL, TP ¥9,000 Kanemoto/Ohya 6995 Tokai Rika N 1902 1700 -10.6% Dividend propensity heading north of 30%, earnings trending well; slightly positive Results 3092 Start Today O 1498 1800 20.2% Ibiden (4062) NEUTRAL, TP ¥1,700 Kanemoto/Ohya 2914 JT O 3500 4000 14.3% Neutral impression despite lower-than-expected results; await details at briefing Results Shin-Etsu Yahoo Japan (4689) OUTPERFORM, TP ¥46,000 Nakayasu/Hayakawa 4063 Chemical O 6670 7820 17.2% 4217 Hitachi Chemical O 1641 2160 -0.7% Rich media ads blossoming; awaiting initiatives to leverage e-commerce Results CyberAgent, Inc (4751) NEUTRAL, TP ¥170,000 Nakayasu Still looking for profit rebound Results Sony (6758) NEUTRAL, TP ¥1,600 Tsuchiya Upward revision reveals larger-than-expected discrepancy between pretax profit and NP Comment

Capital Goods Komatsu (6301) OUTPERFORM, TP ¥2,700 Kuroda/Zhao FY3/13 results: likely to be well received by investors Results Hino Motors (7205) OUTPERFORM, TP ¥1,350 Takahashi FY3/13 results: Consensus estimate likely to rise Results FOCUS LIST STOCK Daihatsu Motor (7262) OUTPERFORM, TP ¥2,380 Takahashi FY3/13 results: Increase in up-front investment greater than we anticipated Results Tokai Rika (6995) NEUTRAL, TP ¥1,700 Akita FY3/13 results: Substantial rise in up-front investment for FY3/14 a negative Results surprise Japan Research Start Today (3092) OUTPERFORM, TP ¥1,800 Yamate Could beat FY3/14 guidance for solid growth Results Japan Tobacco (2914) OUTPERFORM, TP ¥4,000 Kawasaki/Yamate Favorable results; move to bring forward 50% payout ratio positive Results Shin-Etsu Chemical (4063) OUTPERFORM, TP ¥6,200-> ¥7,820 Sawato/Saito Foresee further growth in profit, on weak yen, wafer recovery, strong PVC Increase Target Price performance Hitachi Chemical (4217) OUTPERFORM, TP ¥1,630-> ¥2,160 Sawato/Saito Expect V-shaped recovery in earnings on higher demand for semiconductor Increase Target Price materials Earnings Preview Presentation Slides Earnings Preview Presentation Slides – April 16: Telecommunications, Internet, IT Services, Consumer Electron ics, Game Software, Precision Instruments, Industrial Electronics, Electronic Components, , Brokerage, Insurance, Other Financials, Real Estate, Housing, Construction

DISCLOSURE APPENDIX CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, INFORMATION ON TRADE ALERTS, ANALYST MODEL PORTFOLIOS AND THE STATUS OF NON-U.S ANALYSTS. FOR OTHER IMPORTANT DISCLOSURES, visit www.credit-suisse.com /researchdisclosures or call +1 (877) 291-2683. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION™ Client-Driven Solutions, Insights, and Access

Friday, 26 April 2013

Japan Daily

Earnings Preview Presentation Slides – April 17: Chemicals,Textiles,Steel,Nonferrous Metals, Cables, Glass & Ceramics, Paper, Batteries, Autos, Auto Parts, Pharmaceuticals, Food, Beverage, Tobacco, Quants FX Sensitivity Forex Sensitivity- Japan Coverage Forex Sensitivity (yen vs. USD, euro), January 2013 Japan Economics – click report title to download Japan Economics/Fixed Income Weekly: Business cycle update, Money and credit update, Policy update

From Overseas – click report title to download Asia Asia Hardware Sector: Apple’s assemblers join the June pain train Australian First Edition …and more in Asian Daily

Americas US Networks: US Card Issuers 1Q Spending - Largely Stable, Leap Year Lopped 1% Off Growth Rate US Focus List: Latest update …and more in First Edition U.S. Alert Europe European Week at a Glance: Latest update …and more in First Edition Summary Europe All Credit Suisse reports are available on Research and Analytics website

Page 2 of 23

Friday, 26 April 2013

Japan Daily

OUTPERFORM Anritsu (6754) Results, guidance negative, but Jan–Mar orders exceeding ¥20bn TP JPY 1,180 for first time positive ■ Impression of results and guidance: Negative, but order book positive Hideyuki Maekawa 81 3 4550 9723 ■ FY3/13 OP of ¥15.8bn (guidance ¥16.5bn, our estimate ¥16.5–17.0bn) and FY3/14 [email protected] guidance of ¥17bn (we anticipated guidance of ¥17.5–18.0bn) were both lower than we Chika Fukumoto expected, leaving a negative impression. FY3/13 results came in below guidance due 81 3 4550 7358 mainly to impairment losses (around ¥0.6bn) on fixed assets and slightly lower-than- [email protected]

expected sales of industrial machinery. FY3/14 guidance factors in higher R&D expenses (up ¥1.7bn YoY) and an increase in SG&A costs in tandem with the strengthening of the company's overseas support structure, and calls for OPM at the

test and measurement segment of 20.1% (21.1% in FY3/13), in line with the company's medium-term business plan. However, assuming improvement in the product mix due to growth in demand for equipment used in LTE manufacturing, we see guidance as

conservative. In contrast, Jan–Mar test and measurement segment orders of ¥20.1bn (up 24.6% QoQ and up 16.0% YoY) were far higher than guidance and our forecast (¥17.5bn), leaving a positive impression. We expect that LTE manufacturing by global

smartphone makers and R&D in the US contributed. We intend to confirm the details at the briefing scheduled for 26 April. ■ Short-term share price impact: Negative, but we recommend accumulating on dips ■ The consensus view is that Anritsu is a company that issues conservative guidance. However, given lower-than-expected FY3/13 results and low FY3/14 guidance due to rising R&D expenses, we think expectations for FY3/14 are unlikely to rise. That said, we are focusing on the fact that quarterly orders at the test and measurement segment have for the first time exceeded ¥20bn. Expectations for upward revision to FY3/14 guidance will likely rise if the market sees signs of sustainability for orders and of growth in demand for test and measurement equipment used in R&D and LTE manufacturing, which carry high margins. We maintain our medium-term growth scenario for Anritsu, and leaving aside the negative results we see a good opportunity to buy the stock on weakness as a medium-term holding.

Anritsu – FY3/13-15 earnings forecasts Anritsu (6754) 4/25 price (¥) Est. Sales Operating profit Pretax Profit Net profit EPS P/E ¥1,506 as of; ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) (x) Mar-12 Actual 93,622 0.0 14,000 0.0 13,094 0.0 7,972 0.0 62.2 0.0 Mar-13 Actual 94,685 1.1 15,800 12.9 16,225 23.9 13,942 74.9 98.8 58.9 Mar-13 CS E 7/5 98,000 4.7 17,400 24.3 16,400 25.2 11,300 41.7 78.3 26.0 19.2 CoE 10/31 94,500 0.9 16,500 17.9 15,500 18.4 12,000 50.5 86.1 38.5 17.5 IBES E 95,617 2.1 16,818 20.1 16,074 22.8 12,497 56.8 87.7 41.1 17.2 Mar-14 CS E 7/5 103,500 5.6 19,600 12.6 18,600 13.4 12,800 13.3 88.7 13.3 17.0 CoE (new) 4/25 102,000 7.7 17,000 7.6 16,500 1.7 11,500#ERR: Null-17.5 value 81.4 -17.6 18.5 IBES E 100,876 5.5 19,141 13.8 18,256 13.6 13,216 5.8 92.6 5.6 16.3 Mar-15 CS E 7/5 110,000 6.3 22,100 12.8 21,100 13.4 14,600 14.1 101.2 14.1 14.9 IBES E 106,430 5.5 21,050 10.0 20,245 10.9 14,365 8.7 101.0 9.0 14.9 Source: Company data, IBES, Credit Suisse estimates

Page 3 of 23

Friday, 26 April 2013

Japan Daily

UNDERPERFORM [V] Advantest (6857) Orders miss guidance for third straight quarter; FY3/14 guidance TP JPY 1,100 looks ambitious ■ Impression of results and guidance: Negative Hideyuki Maekawa 81 3 4550 9723 ■ As with 3Q, both orders and earnings fell short of plan in 4Q FY3/13. Particularly [email protected] problematic was the ¥700mn operating loss, versus guidance for a ¥1.7bn profit, Chika Fukumoto despite sales exceeding the company target amid yen depreciation. The reasons 81 3 4550 7358 appear to be: (1) an increased sales weighting for low-margin LCD driver testers; and [email protected]

(2) a ¥600mn or so rise in operating expenses (payments to R&D contractors, input costs, and valuation losses). For FY3/14, Advantest targets 20% YoY growth in sales and OP of ¥13bn, up from ¥100mn in FY3/14. While premised on the tester market

remaining flat YoY, FY3/14 guidance calls for growth in both sales and profit for memory testers, tester peripherals, and new businesses. Based on recent mismatches between guidance and results, it is difficult to take this positively.

■ Near-term share price impact: Negative ■ At the results briefing, Advantest said it expected orders to increase QoQ in 1Q

FY3/14, fueled by a rapid recovery in DRAM testers. As was the case in the previous quarter, though, we see the share price correcting as investors respond to 4Q earnings

missing guidance. ■ Orders outlook ■ Orders came to ¥29.8bn in 4Q FY3/13, rising 22.6% YoY but missing guidance for ¥32.1bn (falling short for the third consecutive quarter) and our ¥30bn forecast. If not for yen devaluation, we think the shortfall would have been more like ¥3–4bn. It seems the main reason was management's overly bullish targets for products including memory testers and handlers and logic testers. Advantest projects FY3/14 orders of ¥165bn (up 31.2% from ¥125.7bn in FY3/13), for a quarterly average of ¥41bn. We believe the company is again ambitious in projecting growth in both memory testers and tester peripherals. For 1Q, it forecasts a QoQ increase in orders to ¥30–40bn, apparently predicated on a rebound in Korean mobile RAM (LP DDR3) tester orders. We also anticipate recovery in DRAM tester demand, but not to the extent (up to around ¥10bn) management projects. We plan to approach Advantest for more details.

Advantest – FY3/13–15 earnings forecasts Advantest (6857) 4/25 price (¥) Est. Net operating Operating profit Pretax Profit Net profit EPS P/E ¥1,533 as of; ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) (x) Consolidated Mar-12 Actual 141,048 41.6 837 -86.3 -3,442 NM -2,195 NM -12.7 NM Mar-13 Actual 132,903 -5.8 80 -90.4 -1,293 NM -3,821 NM -22.0 NM Mar-13 CS E 2/4 126,900 -10.0 800 -4.4 -200 NM -2,200 NM -12.3 NM NM CoE 1/30 132,000 -6.4 2,500 198.7 IBES E 131,021 -7.1 2,254 169.3 1,632 NM 402 NM 1.9 NM 788.6 Mar-14 CS E 2/4 119,000 -6.2 1,700 112.5 700 NM 500 NM 2.8 NM 548.0 CoE (new) 4/25 160,000 20.4 13,000 NM 13,000 NM 9,800 NM 56.4 NM IBES E 147,906 12.9 11,708 419.4 11,418 599.6 7,731 NM 43.2 NM 35.5 Mar-15 CS E 2/4 131,900 10.8 7,600 347.1 6,600 842.9 5,000 900.0 28.0 900.0 54.8 IBES E 169,571 14.6 20,321 73.6 20,512 79.6 13,118 69.7 72.9 68.8 21.0 Source: Company data, I/B/E/S, Credit Suisse estimates

Page 4 of 23

Friday, 26 April 2013

Japan Daily

NEUTRAL Hitachi Kokusai Electric (6756) Continuation of firm share price momentum hinges on Apr–Jun TP JPY 890 SPE order outlook ■ Impression of results and guidance: Slightly positive Hideyuki Maekawa 81 3 4550 9723 ■ Hitachi Kokusai Electric (HKE) reported FY3/13 OP of ¥6.13bn, ahead of guidance for [email protected] ¥5.0 but in line with our forecast range of ¥6.0–6.5bn. The solid result was supported Chika Fukumoto by gains from higher utilization amid increased sales in the video and wireless network 81 3 4550 7358 business and higher sales and orders in the SPE business. Although HKE’s FY3/14 [email protected]

targets were below the consensus, they left us with a slightly positive impression as we had expected the company to issue further conservative guidance as usual. HKE’s margin assumptions for the video and wireless network business and the SPE

business (which registered solid order momentum in Jan–Mar) struck us as particularly conservative, leaving ample room for earnings upside. The company will hold an earnings briefing on the morning of 26 April.

■ Near-term share price impact: Slightly positive ■ We believe investors have already priced in above-target SPE orders and an improved

earnings structure in the video and wireless network business. Accordingly, if management suggests the possibility of a temporary correction in orders at the 26 April

briefing, we believe the stock could come under pressure from profit taking by investors aiming to capitalize on the shares’ recent rally. ■ SPE orders: Jan–Mar orders resulting from South Korean DRAM process migration stronger than expected ■ Jan–Mar orders for eco- and thin film systems (SPE business) amounted to ¥11.1bn (+32% QoQ, guidance ¥9.0–10.0bn) at the parent level, and ¥15.1bn (+26%, ¥11.0bn) on a consolidated basis, both far ahead of the company target. The main factors driving the order outperformance were Taiwanese foundry investment in expansion of 28/20nm production capacity and higher-than-expected domestic NAND and South Korean DRAM investment in process migration. However, since HKE only looks for consolidated orders of ¥25.0bn in 1H (Apr–Sep) FY3/14, management is likely to hint at a temporary correction in orders at the upcoming briefing.

Hitachi Kokusai Electric (6756) – FY3/13–15 earnings forecasts Hitachi Kokusai Electric (6756) 4/25 price (¥) Est. Operating revenue Operating profit Pretax Profit Net profit EPS P/E ¥1,054 as of; ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) (x) Consolidated Mar-12 Actual 147,184 3.1 8,314 110.2 8,636 134.1 5,120 NM 49.8 NM Mar-13 Actual 138,801 -5.7 6,130 -26.3 6,461 -25.2 6,165 20.4 60.0 20.4 Mar-13 CS E 2/4 138,800 -5.7 6,600 -20.6 6,600 -23.6 9,200 79.7 89.5 79.6 11.8 CoE 1/29 135,000 -8.3 5,000 -39.9 5,000 -42.1 5,500 7.4 53.5 7.5 19.7 IBES E 136,467 -7.3 5,799 -30.3 5,759 -33.3 6,362 24.3 63.8 28.2 16.5 Mar-14 CS E 2/4 154,700 11.5 10,700 62.1 10,700 62.1 6,100 -33.7 59.3 -33.7 17.8 CoE (new) 4/25 146,000 -0.8 8,000 -3.8 8,000 -7.4 6,500 27.0 63.2 27.0 16.7 IBES E 145,766 6.8 8,907 53.6 8,913 54.8 5,290 -16.9 53.2 -16.6 19.8 Mar-15 CS E 2/4 159,800 3.3 12,800 19.6 12,800 19.6 7,400 21.3 72.0 21.3 14.6 IBES E 154,138 5.7 11,411 28.1 11,429 28.2 6,575 24.3 67.5 26.8 15.6 Note: Recurring profit from I/B/E/S equals pretax profit, as there is no such term Source: Company data, I/B/E/S, Credit Suisse estimates

Page 5 of 23

Friday, 26 April 2013

Japan Daily

OUTPERFORM DISCO (6146) Preliminary parent earnings and consolidated sales: Earnings in TP JPY 6,100 line; maintain as top pick on sustained strength in orders ■ Event: Disco announced preliminary figures for 4Q parent earnings and consolidated Hideyuki Maekawa 81 3 4550 9723 sales after the close on 25 April. Both figures finished largely in line with the preliminary [email protected] parent sales data announced on 1 April. Today’s announcement is therefore unlikely to trigger a notable rally in the share price, in our view. Chika Fukumoto 81 3 4550 7358 ■ Investment case: Disco announced 4Q parent OP of ¥1.51bn (guidance ¥890mn) and [email protected]

consolidated sales of ¥22.09bn (+9.1% QoQ; guidance ¥19.88bn). Particularly, with R&D costs trending in line with projections, we look for full-year OP to finish in the ¥11.5–12.0bn range. Our impression is therefore neutral (a 17 April Nikkei preview

pegged OP at ¥12bn). As for orders, our main focus, we note a demand recovery in the second half of March, particularly from Taiwanese subcontractors. We see TSMC’s 2Q sales guidance calling for a 17% QoQ increase as providing key support. We

accordingly forecast a favorable order environment for Disco in Apr–Jun. According to Disco, the company has only one-month forward visibility on orders, but as there is no change from April with regard to inquiries for May orders, we anticipate the order

environment will track our estimates. We forecast orders of ¥21bn in Jan–Mar (initial guidance ¥19bn) and ¥24bn in Apr–Jun. ■ Investment implications: We maintain Disco as our top pick within the SPE sector in view of the recovery in semiconductor utilization rates and prospects of a sharp uptrend in orders for the next two quarters. While the shares appear to have more or less reached our upwardly revised target price from March, we intend to review our forecasts in light of the subsequent increase in TOPIX valuations taking Disco’s FY12 results and FY13 guidance (due on 9 May) into consideration.

Disco – FY3/13–15 earnings forecasts Disco (6146) 4/25 price (¥) Est. Sales Operating profit Recurring Profit Net profit EPS P/E ¥6,230 as of; ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) (x) Consolidated Mar-12 Actual 89,241 -10.5 10,662 -33.0 11,238 -34.6 7,196 -34.3 213.6 -34.4 Mar-13 1Q 24,152 -3.0 2,839 -30.3 3,024 -27.2 1,972 -21.5 58.5 -21.5 2Q 27,216 15.7 4,656 64.8 4,790 62.1 3,384 52.7 100.5 52.7 3Q 20,250 8.8 1,979 97.1 1,830 51.7 1,067 114.7 31.8 115.1 Mar-13 CS E 3/15 91,400 2.4 11,500 7.9 12,100 7.7 7,800 8.4 229.4 7.4 27.2 CoE 11/8 91,500 2.5 10,000 -6.2 10,600 -5.7 6,800 -5.5 201.8 -5.5 30.9 IBES E 92,057 3.2 11,133 4.4 11,692 4.0 7,266 1.0 216.5 1.4 28.8 Mar-14 CS E 3/15 93,500 2.3 14,500 26.1 15,100 24.8 10,400 33.3 305.9 33.3 20.4 IBES E 96,736 5.1 14,459 29.9 14,964 28.0 9,750 34.2 290.5 34.2 21.4 Mar-15 CS E 3/15 97,000 3.7 16,300 12.4 16,900 11.9 11,700 12.5 344.2 12.5 18.1 IBES E 103,166 6.6 17,143 18.6 17,703 18.3 11,452 17.5 341.9 17.7 18.2 Note: Recurring profit from I/B/E/S equals pretax profit, as there is no such term Source: Company data, I/B/E/S, Credit Suisse estimates

Page 6 of 23

Friday, 26 April 2013

Japan Daily

NEUTRAL Kyocera (6971) Dividend propensity heading north of 30%, earnings trending well; TP JPY 9,000 slightly positive ■ Results/guidance: Neutral to slightly positive impression Akinori Kanemoto 81 3 4550 7363 ■ Kyocera’s FY3/13 results, announced after the 25 April close, included OP of ¥76.9bn, [email protected] which surpassed guidance of ¥73.0bn and our ¥73.2bn forecast. Fourth-quarter Yohei Ohya earnings beat expectations owing, we believe, to improved profitability of ceramic 81 3 4550 7366 packages and solar batteries; we estimate operating margins for these products [email protected]

improved to around 20% and 10%, respectively. Management released FY3/14 OP guidance of ¥140bn premised on exchange rates of ¥95/$ and ¥123/€—largely in line with market expectations. The targeted improvement appears attributable to the non-

recurrence of one-off expenses related to the AVX acquisition, the yen’s depreciation, and improved profitability of solar batteries and other fine ceramics applications, minus the offsetting impact of increased depreciation charges (¥10bn-plus YoY) in connection

with the start-up of a new plant in Vietnam. ■ The strength of the company’s forecasts vary by segment, but the overall picture is as

we expected. However, the company projects a sharp recovery for its telecommunications business, which failed to make budget in FY3/13. Given the rising domestic share of the iPhone market held by network operator au and a resulting decline in the volume of handsets supplied by Kyocera, the cause for such optimism needs to be clarified. Also, we seek further detail regarding progress of reorganization efforts within the electronic device business involving crystal devices and thin film. ■ Short-term stock impact: Positive ■ Compounding the favorable impression from the ongoing earnings recovery, the company’s surprisingly rigorous new focus on shareholder return strategies strikes us as positive. Returns have historically centered on a dividend propensity of 20–25%, but management is raising this benchmark to more than 30% from this year, thereby raising DPS from ¥120 to ¥160 by our estimate. Market valuations of Kyocera have heretofore typically ignored net cash, but we expect cash to increasingly figure into investors’ calculations and gradually lift valuations. Having said that, Kyocera has traditionally managed strong FCF, and we think this change of strategy is a harbinger of more to come.

Earnings forecast summary Kyocera Sales Operating profits Pretax profits Net profits EPS BPS Capex Dep R&D EBITDA 6971 ¥ mn YoY ¥ mn YoY Margin ¥ mn YoY ¥ mn YoY ¥ ¥ ¥ mn ¥ mn ¥ mn ¥ mn

2010/3 1,073,805 -4.9% 63,860 47.1% 5.9% 60,798 8.6% 40,095 35.9% 218.5 7,330.1 37,869 60,602 49,911 124,462 2011/3 1,266,924 18.0% 155,924 144.2% 12.3% 172,332 183.5% 122,448 205.4% 667.2 7,739.3 70,680 59,794 49,474 215,718 2012/3 1,190,870 -6.0% 97,675 -37.4% 8.2% 114,893 -33.3% 79,357 -35.2% 432.6 8,010.6 66,408 62,374 45,559 160,049 2013/3 E 1,282,392 7.7% 73,218 -25.0% 5.7% 92,566 -19.4% 60,933 -23.2% 332.2 8,222.8 59,707 60,122 36,815 133,340 2013/3 Actual 1,280,054 7.5% 76,926 -21.2% 6.0% 101,363 -11.8% 66,473 -16.2% 362.4 8,973.8 56,688 63,119 47,520 140,045 2013/3 CoE 1,280,000 7.5% 73,000 -25.3% 5.7% 91,500 -20.4% 57,000 -28.2% 310.7 - 60,000 60,000 52,000 133,000 2013/3 IBES 1,276,120 7.2% 76,050 -22.1% 6.0% 95,260 -17.1% 60,330 -24.0% 328.9 - - - - - 2014/3 E 1,403,856 9.7% 132,054 71.7% 9.4% 143,054 41.1% 99,689 50.0% 543.4 8,606.2 60,000 60,000 56,000 192,054 2014/3 New CoE 1,400,000 9.4% 140,000 82.0% 10.0% 150,000 48.0% 96,000 44.4% 523.3 - 75,000 74,000 52,000 214,000 2014/3 IBES 1,372,590 7.6% 135,070 77.6% 9.8% 149,350 56.8% 96,260 59.6% 524.7 - - - - - 2015/3 E 1,447,587 3.1% 151,477 14.7% 10.5% 162,477 13.6% 114,259 14.6% 622.9 9,029.1 60,000 60,000 58,000 211,477 2013/3 1Q 297,726 -2.5% -2,002 - -0.7% 4,727 -88.2% 6,570 -73.5% 35.8 - 13,191 13,849 11,745 11,847 2Q 310,705 3.9% 27,893 -19.0% 9.0% 31,005 -13.0% 18,801 -14.4% 102.5 - 13,335 14,835 12,121 42,728 3Q 318,093 13.2% 25,343 23.0% 8.0% 33,150 22.6% 19,599 -22.7% 106.8 - 14,181 16,438 11,749 41,781 4QE 355,868 16.5% 21,984 136.3% 6.2% 23,684 92.7% 15,963 120.3% 87.0 - 19,000 15,000 1,200 36,984 4QA 353,530 15.7% 25,692 176.2% 7.3% 32,481 164.3% 21,503 196.7% 117.2 - 15,981 17,997 11,905 43,689 2014/3 1QE 337,827 13.5% 27,434 - 8.1% 32,434 586.1% 22,425 241.3% 122.2 - 15,000 13,500 14,000 40,934 2QE 352,171 13.3% 34,580 24.0% 9.8% 35,080 13.1% 24,410 29.8% 133.1 - 15,000 14,500 14,000 49,080 3QE 351,773 10.6% 37,130 46.5% 10.6% 42,130 27.1% 29,697 51.5% 161.9 - 15,000 15,500 14,000 52,630 4QE 362,085 1.7% 32,910 49.7% 9.1% 33,410 41.1% 23,157 45.1% 126.2 - 15,000 16,500 14,000 49,410 Source: Company data, IBES、Credit Suisse estimates

Page 7 of 23

Friday, 26 April 2013

Japan Daily

NEUTRAL [V] Ibiden (4062) Neutral impression despite lower-than-expected results; await TP JPY 1,700 details at briefing ■ Impression of results/guidance: results negative, guidance neutral Akinori Kanemoto 81 3 4550 7363 ■ Ibiden announced FY3/13 results after the close of trading on 25 April. OP came in at [email protected] ¥5.4bn, below both our forecast and guidance (¥7.0bn and ¥6.5bn, respectively). Yohei Ohya There was a larger-than-expected correction in business with North American 81 3 4550 7366 smartphone makers, while losses on the related PCB business swelled, and FC-CSP [email protected]

earnings were lower than forecast. Looking at weak yen benefits at the FC-PKG business, trading terms and conditions with key customers suggest that the effective ¥/$ rate in Jan–Mar was ¥80–81/$. We expect weak yen benefits to become fully

apparent from 1Q. ■ FY3/14 guidance calls for OP of ¥18bn (assuming ¥90/$ and ¥115/€). This is the same

as FY3/14 guidance assuming ¥80/$ issued when the company announced 1H FY3/13 results. We shall have to wait until the briefing scheduled for tomorrow for more details about FY3/14 guidance. We are unsure whether the company has left guidance

unchanged, drawn up conservative forecasts or actually adjusted its numbers. However, we see ¥18bn as conservative, given beneficial yen depreciation, declining depreciation expenses, and improvement in PCB yields, even though weaker-than- expected business with key smartphone makers will likely have an impact. ■ Short-term share price impact: Neutral ■ Given that the consensus forecast for OP is upwards of ¥19bn, we see no need to view guidance of ¥18bn negatively. We regard any correction due to weaker-than-expected results as an opportunity to accumulate on weakness. ■ OP guidance for 1H FY3/14 is ¥6bn. This looks conservative, as we believe OP could recover to around ¥5–6bn in 1Q FY3/14, versus ¥0.9bn in 4Q FY3/13, even if PCB/FC- CSP sales volume remains low, due to declining depreciation expenses (down ¥3-4bn QoQ), weak yen benefits (around ¥2bn) and improvement in the FC-PKG mix.

Earnings forecast summary Ibiden Sales Operating profits Recurring profits Net profits EPS BPS Capex Dep R&D EBITDA 4062 ¥ mn YoY ¥ mn YoY Margin ¥ mn YoY ¥ mn YoY ¥ ¥ ¥ mn ¥ mn ¥ mn ¥ mn

2010/3 274,204 -11.3% 21,272 100.7% 7.8% 19,447 458.2% 11,896 - 81.8 1,821.9 18,697 38,800 12,679 60,072 2011/3 304,968 11.2% 33,811 58.9% 11.1% 33,575 72.6% 19,740 65.9% 138.0 1,870.7 60,335 40,697 14,600 74,508 2012/3 300,863 -1.3% 15,516 -54.1% 5.2% 16,256 -51.6% 10,648 -46.1% 74.4 1,894.5 47,313 42,387 16,123 57,903 2013/3 E 286,913 -4.6% 6,993 -54.9% 2.4% 10,419 -35.9% 3,971 -62.7% 27.7 1,907.2 46,006 43,136 15,744 50,129 2013/3 Actual 285,946 -5.0% 5,419 -65.1% 1.9% 10,890 -33.0% 2,232 -79.0% 15.9 2,043.3 43,262 42,697 15,100 48,116 2013/3 CoE 282,000 -6.3% 6,500 -58.1% 2.3% 5,900 -63.7% 300 -97.2% 2.1 - 46,000 43,000 - 49,500 2013/3 IBES 284,570 -5.4% 6,410 -58.7% 2.3% 9,090 -44.1% 2,930 -72.5% 20.5 - - - - - 2014/3 E 345,356 20.4% 29,000 314.7% 8.4% 29,200 180.3% 19,540 392.1% 136.6 2,028.8 44,000 37,000 18,000 66,000 2014/3 New CoE 290,000 1.4% 18,000 232.2% 6.2% 17,000 56.1% 9,000 303.2% 65.2 - 36,000 36,000 - 54,000 2014/3 IBES 305,230 7.3% 19,430 203.1% 6.4% 19,790 117.7% 12,810 337.2% 89.5 - - - - - 2015/3 E 356,376 3.2% 33,600 15.9% 9.4% 33,800 15.8% 22,622 15.8% 158.1 2,156.9 40,000 37,000 18,000 70,600 2013/3 1Q 69,541 1.9% 3,895 -6.2% 5.6% 3,335 -4.0% -105 - - - 12,508 9,158 3,984 13,053 2Q 71,423 -0.5% 2,228 -4.6% 3.1% 1,475 - 810 - - - 7,081 10,130 4,172 12,358 3Q 67,822 -9.2% -1,630 - -2.4% 3,059 -29.0% 1,563 45.7% - - 12,417 11,324 3,788 9,694 4QE 78,127 -9.3% 2,500 -57.0% 3.2% 2,550 -72.8% 1,703 -80.8% - - 14,000 12,524 3,800 15,024 4QA 77,160 -10.4% 926 -84.1% 1.2% 3,021 -67.8% -36 - - - 11,256 12,085 3,156 13,011 2014/3 1QE 79,024 13.6% 5,900 51.5% 7.5% 5,950 78.4% 3,981 - - - 11,000 7,750 4,500 13,650 2QE 87,314 22.2% 7,800 250.1% 8.9% 7,850 432.2% 5,254 548.6% - - 11,000 8,750 4,500 16,550 3QE 89,254 31.6% 8,500 - 9.5% 8,550 179.5% 5,723 266.1% - - 11,000 9,750 4,500 18,250 4QE 89,764 14.9% 6,800 172.0% 7.6% 6,850 168.6% 4,584 169.2% - - 11,000 10,750 4,500 17,550 Source: Company data, I/B/E/S, Credit Suisse estimates

Page 8 of 23

Friday, 26 April 2013

Japan Daily

OUTPERFORM Yahoo Japan (4689) Rich media ads blossoming; awaiting initiatives to leverage e- TP JPY 46,000 commerce ■ Impression of results: Neutral; rich media ads boost advertising business Yuki Nakayasu 81 3 4550 9966 ■ Fourth-quarter FY3/13 OP was ¥50.9bn, slightly above our estimate of ¥49.6bn. The [email protected] brand panel business benefited from a recovery in prices and a contribution from new Hitoshi Hayakawa rich media ad offerings. Smartphone advertising, which looked at risk of a slowdown in 81 3 4550 9952 3Q, resumed growth in 4Q, and the weighting of the smartphone business increased [email protected]

2.4ppt QoQ to 15.6%. E-commerce operations are still an issue, in our view. Yahoo! Auction transactions were flat YoY, while Yahoo! Shopping transactions shrank 2%, again worse than the market average. We await details of improvement initiatives,

including how these e-commerce offerings will coexist with Smart Kitchen (a collaboration with Lawson) and LOHACO (a collaboration with Askul).

■ Short-term share price impact: Cautious guidance, slightly below consensus ■ First-half FY3/14 guidance calls for OP to grow 7.7% YoY to ¥92bn. This looks fairly cautious (we estimate ¥97bn in 1H, ¥207.3bn full-year). The firm’s target may be

received negatively given that the market expectation is on the high side. That said, the promotional ad business is solid and it looks likely that the premium ad business will

continue to benefit from rising unit prices for the time being, owing to a contribution from rich media ads. Guidance also seems to factor in buffers for costs like SG&A and personnel costs, implying potential upside. We await initiatives aimed at helping the e- commerce business regain lost ground.

Consolidated earnings summary Sales Operating profit Recurring profit Net profit EPS DPS P/E ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) ¥ (x) Consolidated 12/3 A 302,088 3.3 165,004 3.4 167,300 4.4 100,559 9.1 1,733.7 9.1 347.0 13/3 A 342,989 13.5 186,351 12.9 188,645 12.8 115,035 14.4 1,982.8 14.4 401.0 13/3 1Q A 77,596 8.0 42,158 8.6 42,771 8.8 25,094 7.6 432.6 7.6 - - NM 2Q A 78,787 6.8 43,289 6.7 43,964 7.2 27,128 11.8 467.6 11.8 - - NM 3Q A 88,631 15.8 49,973 19.5 50,054 18.1 30,947 21.9 533.4 21.9 - - NM 4Q A 97,975 22.6 50,931 16.3 51,856 16.2 31,866 15.4 549.2 15.4 - - NM 14/3 CS E 379,800 10.7 207,300 11.2 209,300 10.9 125,180 8.8 2,157.7 8.8 431.5 23.3 IBES E 370,564 8.0 204,629 9.8 205,559 9.0 125,479 9.1 2,154.2 8.6 432.7 23.3 1H14 CoE (new) 180,000 15.1 92,000 7.7 92,200 6.3 56,900 9.0 981.5 9.0 - NM 15/3 CS E 401,400 5.7 220,800 6.5 222,800 6.5 133,280 6.5 2,297.3 6.5 459.5 21.9 IBES E 399,959 5.3 222,751 7.5 225,647 7.8 137,874 10.1 2,358.8 9.3 479.3 21.3 Source: Company data, I/B/E/S, Credit Suisse estimates

Page 9 of 23

Friday, 26 April 2013

Japan Daily

NEUTRAL [V] CyberAgent, Inc (4751) Still looking for profit rebound TP JPY 170,000 ■ Results impression: Neutral; weak rebound from earnings bottom Yuki Nakayasu 81 3 4550 9966 ■ Jan–Mar OP finished at ¥3.6bn, basically in line with our ¥3.5bn forecast. OP improved [email protected] owing to strong performance in the advertising agency business, cost curbs in SAP,

and lower valuation losses on content assets (extraordinary losses). Ameba sales (fee income plus advertising revenues) rose ¥600mn QoQ due to aggressive spending on

commercials in Oct–Dec 2012 (¥3.0bn), but we believe the ads provided an insufficient return. Prospects for an earnings improvement in the near term appear remote as CyberAgent is likely to step up advertising, particularly for its Ameba community

service, from as early as May. ■ Near-term share price impact: Slightly negative; await improvement in cost

effectiveness ■ At the results briefing, the company announced its commitment to (1) attaining the ¥10bn OP guidance for FY9/13, and (2) achieving a rebound to the OP target of ¥24bn

in FY9/14. The company aims to turn Ameba profitable in FY9/14 with OP of ¥2.0bn (−¥3.1bn in Oct–Dec 2012, −¥1.6bn in Jan–Mar 2013) through sustained investment in

application development and advertising in the near term. However, we continue to believe that until recent cost cuts start to show up in results, the market will not gain faith in the company achieving its earnings targets and that a share price rise is therefore unlikely.

Consolidated earnings summary Sales Operating profit Recurring profit Net profit EPS DPS P/E ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) ¥ (x) Consolidated 11/9 A 119,578 23.7 14,349 53.7 14,114 53.0 7,323 33.3 11,281.9 NA 3,500.0 12/9 A 141,111 18.0 17,410 21.3 17,146 21.5 8,522 16.4 13,162.6 16.7 3,500.0 12/9 1Q 32,146 11.7 4,915 38.1 4,888 40.0 2,054 39.7 3,172.5 40.1 - - NM 2Q 35,964 17.2 6,149 51.6 6,081 51.7 3,035 32.8 4,687.7 33.1 - - NM 3Q 33,792 15.8 3,493 8.3 3,438 10.2 1,823 0.3 2,815.7 0.5 - - NM 4Q 39,209 26.7 2,853 -18.7 2,739 -21.6 1,610 -7.9 2,486.7 -7.7 - - NM 13/9 CS E 172,600 22.3 13,000 -25.3 13,000 -24.2 6,420 -24.7 9,915.9 -24.7 2,600.0 20.3 13/9 CoE 170,000 20.5 10,000 -42.6 10,000 -41.7 12,000 40.8 18,536.0 40.8 3,500.0 10.9 IBES E 168,644 19.5 13,458 -22.7 13,289 -22.5 12,739 49.5 19,944.0 51.5 3,717.8 10.1 1Q A 40,825 27.0 1,543 -68.6 1,622 -66.8 3,251 58.3 5,022.1 58.3 - - NM 2Q A 41,367 15.0 3,628 -41.0 3,726 -38.7 6,304 107.7 9,736.8 107.7 - - NM 14/9 CS E 179,000 3.7 17,000 30.8 17,000 30.8 8,660 34.9 13,375.7 34.9 3,500.0 15.1 IBES E 184,661 7.0 19,408 49.3 19,216 47.8 10,118 57.6 16,316.5 64.5 4,126.5 12.3 15/9 CS E 184,400 3.0 18,100 6.5 18,100 6.5 9,276 7.1 14,327.1 7.1 3,700.0 14.1 IBES E 196,661 6.5 22,771 17.3 22,434 16.7 11,909 17.7 19,150.4 17.4 4,441.3 10.5 Source: Company data, I/B/E/S, Credit Suisse estimates

Page 10 of 23

Friday, 26 April 2013

Japan Daily

Sony (6758) NEUTRAL Upward revision reveals larger-than-expected discrepancy TP JPY 1,600 between pretax profit and NP ■ Action: Sony’s upward revision of its overly conservative FY3/13 guidance came as no Shunsuke Tsuchiya 81 3 4550 9740 surprise. The main point worthy of note was the larger-than-expected discrepancy [email protected] between the company’s new pretax profit target of ¥240.0bn and NP projection of ¥40.0bn. Our impression is that management was unable to balance the booking of

upfront costs (which will contribute to FY3/14 earnings) with achieving a return to the black. Moreover, the upward revision does not reflect improvement in the company’s

core electronics business. We believe concerns of a YoY profit decline in FY3/14 in tandem with a drop-out of gains from asset sales could emerge in the run-up to the full- year results announcement on 9 May.

■ Overview of upward revision to FY3/13 targets: Sony’s revised FY3/13 guidance calls for OP of ¥230.0bn (previously ¥130.0bn; our forecast ¥190.0bn; consensus

¥181.3bn), pretax profit of 240.0bn (¥150.0bn; ¥210.0bn; ¥190.1bn), and NP of ¥40.0bn (¥20.0bn; ¥50.6bn; ¥39.7bn). The main factors driving the revisions are: (1) higher profits from asset sales, (2) valuations gains, (3) outperformance in the financial

business, and (4) weak-yen benefits. Restructuring charges look to be largely in line with expectations. It is unclear whether Sony will need to reverse deferred tax assets. ■ Jan–Mar OP came to ¥147.0bn, but we suspect Sony booked an operating loss of ¥40.0bn in real terms, after stripping out gains on asset sales and restructuring charges. Factoring in an uptick at the financial business and gains from the weaker yen, we believe earnings momentum in the electronics and game businesses was largely unchanged QoQ. In other words, we assume Sony did not book large amounts in inventory valuation losses and other upfront costs. ■ Valuation: Our ¥1,600 TP is derived from a P/B of 0.8x applied to our FY3/14 BPS estimate of ¥2,070, adjusted for medium-term risks: (1) ¥100/share in writeoffs of game business goodwill, and (2) ¥40/share of deferred tax asset reversals related to European and Chinese operations.

Financial and valuation metrics Share price performance Year 3/12A 3/13E 3/14E 3/15E Price (LHS) Rebased Rel (RHS) Revenue (¥ bn) 6,493.2 6,562.0 7,064.0 7,291.0 4000 120 Operating profit (¥ bn) -67.3 190.0 180.0 214.0 3000 Pre-tax profit (¥ bn) -83.2 210.0 175.0 209.0 2000 70 1000 Net income (¥ bn) -456.7 50.6 45.0 68.9 0 20 EPS (¥) -455.0 50.4 44.8 68.7 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Change from previous EPS (%) n.a. 0 0 0 IBES Consensus EPS (¥) n.a. 37.0 59.4 75.6 EPS growth (%) n.m. n.m. -11.1 53.1 The price relative chart measures performance P/E (x) -3.7 32.3 36.3 23.7 against the TOPIX which closed at 1172.78 on Dividend yield (%) 1.5 1.5 1.5 1.5 25/04/13 EV/EBITDA(x) 7.9 3.9 4.2 3.9 On 25/04/13 the spot exchange rate was ¥99.47/US$1 P/B (x) 0.84 0.79 0.79 0.77 Performance 1M 3M 12M ROE(%) -20.0 2.5 2.2 3.3 AbsoluteOver (%) -2.3 26.1 23.0 Net debt/equity (%) 13.7 19.0 23.3 24.1 Relative (%) -14.6 -1.8 -21.9

Source: Company data, Thomson Reuters, IFIS, Credit Suisse estimates.

Page 11 of 23

Friday, 26 April 2013

Japan Daily

OUTPERFORM Komatsu (6301) FY3/13 results: likely to be well received by investors TP JPY 2,700 ■ Results impression: Neutral Shinji Kuroda 81 3 4550 9994 ■ Komatsu announced FY3/13 results at 3 p.m. on 25 April, reporting OP of ¥211.6bn— [email protected] down 18% YoY and slightly below guidance of ¥230bn and the IFIS consensus Yunchao Zhao forecast of ¥233.4bn. The miss was largely due to a sluggish recovery in Chinese 81 3 4550 9903 demand and lower-than-expected mining machinery sales. [email protected]

■ Impression of guidance: Neutral ■ Based on ¥95/$, ¥123/€, and ¥15.3/RMB, Komatsu’s FY3/14 guidance calls for OP of

¥305bn (up 43% YoY), for an OPM of 14.9%. This is as projected by the Nikkei on 28 February. We highlight three key points. First, every ¥1 shift against the dollar, euro and RMB moves OP by ¥5.3bn, ¥0.4bn and ¥3.5bn, respectively. Second, the

company projects a 25% YoY decline in mining machinery sales volume but, because of yen depreciation, it expects a drop of only 9% in value terms, to ¥405bn. It sees sales of mining machinery parts rising 17% YoY to ¥201bn. We gather also that

margins on mining machinery have not deteriorated. Third, the company expects sales to increase slightly in Japan, Asia, and the Middle East, but stay flat YoY in North

America and China if benefits from yen weakness are stripped out. At the construction, mining, and utility equipment segment, Komatsu expects OP to rise from ¥208.9bn in FY3/13 to ¥302bn, the net effect of yen devaluation (+¥70bn), higher selling prices (+¥29.1bn), lower fixed costs (+¥7bn), and decreased volume (–¥13bn). ■ Near-term share price impact: Positive ■ Komatsu is also targeting a FY3/14 dividend of ¥58 (dividend yield of 2.2%), up from ¥48 in FY3/13. It seems the company is also entertaining the prospect of record-high profit in FY3/14 if forex remains favorable. As the consensus OP forecast among US and European buyside analysts is ¥250–260bn, we anticipate a positive impact on the share price.

Komatsu (6301) – Earnings forecasts summary Sales Operating profit Recurring profit Net profit EPS ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) Consolidated Mar-13 A 1,884,991 -4.9 211,602 -17.5 204,603 -18.0 126,321 -24.4 132.6 -23.2 Mar-13 CS E 1,851,000 -6.6 259,000 1.0 250,300 0.3 157,000 -6.0 164.9 -4.5 CoE 1,920,000 -3.1 230,000 -10.3 222,000 -11.1 138,000 -17.4 144.9 -16.0 IFIS E 1,905,587 -3.8 233,439 -8.9 224,850 -9.9 141,172 -15.5 147.8 -14.4 Mar-14 CS E 1,898,000 0.7 331,000 56.4 324,500 58.6 206,000 63.1 216.3 63.1 CoE (new) 2,050,000 8.8 305,000 44.1 297,000 45.2 184,000 45.7 193.1 45.6 IFIS E 1,991,453 5.6 288,822 36.5 278,348 36.0 176,818 40.0 185.1 39.6 Mar-15 CS E 1,996,000 5.2 366,300 10.7 360,000 10.9 229,000 11.2 240.5 11.2 IFIS E 2,079,370 4.4 322,269 11.6 311,345 11.9 199,240 12.7 208.4 12.6 Source: Company data, IFIS, Credit Suisse estimates

Page 12 of 23

Friday, 26 April 2013

Japan Daily

OUTPERFORM Hino Motors (7205) FY3/13 results: Consensus estimate likely to rise TP JPY 1,350 ■ Results impression: Neutral: Hino Motors reported FY3/13 consolidated OP of ¥65.1bn Issei Takahashi 81 3 4550 7884 (4Q ¥21.3bn), slightly below our ¥66.8bn estimate (¥23.0bn) but slightly above the [email protected] ¥63.4bn I/B/E/S consensus (¥17.0bn). The dividend was ¥23/share (payout ratio 27.5%).

■ Guidance impression: Neutral: Hino projects FY3/14 consolidated OP of ¥85.0bn (our

forecast ¥100.0bn, I/B/E/S ¥85.3bn). Forex assumptions are a conservative ¥90/$, ¥3.03/THB, and Rp0.0094/$. The dividend forecast is ¥30/share (payout ratio 28.6%).

■ We see three main points. (1) Allocation of weak-yen effects: Any benefits from greater-than-expected yen weakness are to be allocated one-third to profit (implying a ¥1.5bn OP boost per ¥1/$), one-third to effective price discounts, and one-third to

dealer expansion and other upfront investment. (2) Bullish assumption for overseas sales volume (130,000 units, +19,000/17% YoY; Asia +12,000, South America +4,000, Europe & Africa +2,200): Guidance for 35% volume growth in South America despite

weak overall demand toward end-FY3/13 represents a high hurdle, in our view, even assuming effective price discounting on weak-yen effects. However, we think the ¥85bn OP target is attainable even with a top-line miss and assuming ¥90/$, as costs associated with capacity expansion will decline and assumptions for raw-material costs look conservative. (3) Low effective tax rate: Guidance assumes the elimination of loss carry-forwards and reversion to a normal tax rate. The fact that guidance nonetheless has EPS at ¥105 on OP of ¥85bn suggests to us that Hino is assuming a lower effective tax rate than our forecast and the I/B/E/S consensus. ■ Near-term share price impact: Positive: We expect the market to react favorably to the announcement in view of: (1) FY3/14 OP guidance being on par with the I/B/E/S consensus despite the ¥90/$ assumption and (2) prospects for further weak-yen effects. ■ Sector read-across: Assuming Hino is correct in anticipating strong sales/demand even in South America, we think expectations could also rise for Isuzu Motors, for which weak sales in this region have likely been a discount factor.

Earnings forecast summary Sales Operating profit Recurring profit Net profit EPS ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) Consolidated Mar-12 A 1,314,588 5.8 37,527 29.8 34,577 38.0 16,303 NM 28.6 NM Mar-12 A 1,541,357 17.3 65,118 73.5 66,922 93.5 47,685 192.5 83.6 192.1 Mar-13 CS E 1,497,372 13.9 66,776 77.9 67,547 95.4 44,885 175.3 78.8 175.4 CoE 1,500,000 14.1 60,000 59.9 59,000 70.6 42,000 157.6 73.6 157.3 IBES E 1,514,326 15.2 63,355 68.8 62,855 81.8 43,206 165.0 74.1 159.2 Mar-14 CS E 1,578,300 2.4 100,000 53.6 99,910 49.3 62,840 31.8 110.3 32.0 CoE (new) 1,620,000 5.1 85,000 30.5 81,000 21.0 60,000 25.8 105.0 25.7 IBES E 1,626,244 7.4 85,298 34.6 84,599 34.6 55,558 28.6 96.6 30.3 Mar-15 CS E 1,652,500 4.7 111,000 11.0 110,910 11.0 68,040 8.3 119.4 8.3 IBES E 1,712,267 5.3 94,819 11.2 94,266 11.4 59,987 8.0 103.8 7.4 Source: Company data, I/B/E/S, Credit Suisse estimates

Page 13 of 23

Friday, 26 April 2013

Japan Daily

OUTPERFORM Daihatsu Motor (7262) FY3/13 results: Increase in up-front investment greater than we TP JPY 2,380 anticipated ■ Impression of results—Neutral: Daihatsu released FY3/13 results on 25 April. Issei Takahashi 81 3 4550 7884 Consolidated OP came in at ¥133bn (¥39.6bn in 4Q), in line with our estimate of [email protected] ¥132.5bn (¥39bn in 4Q) and the I/B/E/S consensus of ¥133.7bn (¥38.1bn in 4Q). Scheduled DPS was unsurprising at ¥56 (payout ratio of 29.3%).

■ Impression of guidance—Negative, fixed costs growth higher than expected: FY3/14

guidance calls for consolidated OP of ¥135bn (our estimate ¥149bn; I/B/E/S consensus ¥142.5bn). Guidance is predicated on exchange rates of ¥93/$ and IDR9,800/$. Guidance looks conservative, but the projected increase in fixed costs is

greater than anticipated. ■ We identify four key points in the guidance. First, overseas sales targets are bullish.

The firm aims to grow sales volume in Indonesia to 600,000 units (+137,000 YoY), even though the introduction of the LCGC (low-cost green car) policy in the country has been delayed. It is still unclear when LCGC will be introduced, but we understand

Daihatsu is prepared to rapidly shift to full parallel production at a new plant (standard production capacity of 120,000 units) once the go-ahead for the policy is given. Second, the company expects higher up-front investment costs, mainly in the form of fixed costs. FY3/14 guidance earmarks ¥115bn for capex (+57% YoY). The firm expects depreciation and R&D costs to increase ¥12.1bn in aggregate. The increase in investment for the construction of new factories in Japan and Malaysia is within the range we expected, but targets for spending to replace equipment in Japan and capex in Indonesia are greater than we expected. Third is the allocation of benefits from yen depreciation. If the yen weakens more than the firm expects, we understand the benefits will likely accrue as profits rather than being applied to costs. Fourth is the postponement of the FY3/14 DPS forecast. This is unsurprising given that the delay to the introduction of the LCGC policy in Indonesia meant profit and dividend forecasts were likely to be on the conservative side. That said, given the potential increase in investment cash flow, we think the FY3/14 payout ratio could be around 30%. ■ Short-term share price impact—Fairly negative: Even accounting for growth in fixed costs, on a forex assumption of ¥95/$ there is a limited possibility of consolidated OP falling short of the I/B/E/S consensus. Assuming the firm’s bullish sales volume targets are correct, profit guidance looks conservative. We think the market will probably conclude that: fixed costs will increase; the bullish sales volume targets hinge on the timing of the LCGC policy introduction; and the outlook is opaque. ■ Implications for other stocks: We note that the increase in up-front investment costs is a pattern that may be repeated at other OEMs.

Earnings forecast summary Sales Operating profit Recurring profit Net profit EPS ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) Consolidated Mar-12 A 1,631,320 4.6 115,462 11.6 128,223 14.3 65,138 23.9 152.9 23.9 Mar-12 A 1,764,976 8.2 133,040 15.2 148,173 15.6 81,406 25.0 191.1 25.0 Mar-13 CS E 1,730,000 6.0 132,463 14.7 146,772 14.5 81,297 24.8 190.8 24.8 CoE 1,730,000 6.0 130,000 12.6 143,000 11.5 78,000 19.7 183.1 19.8 IBES E 1,743,454 6.9 133,677 15.8 145,829 13.7 78,562 20.6 183.9 20.3 Mar-14 CS E 1,855,000 5.1 149,000 12.0 162,879 9.9 89,278 9.7 209.5 9.7 CoE (new) 1,800,000 2.0 135,000 1.5 150,000 1.2 82,000 0.7 192.4 0.7 IBES E 1,799,347 3.2 142,493 6.6 153,889 5.5 82,265 4.7 192.6 4.7 Mar-15 CS E 1,852,000 -0.2 156,000 4.7 170,079 4.4 90,723 1.6 212.9 1.6 IBES E 1,845,150 2.5 148,707 4.4 160,148 4.1 85,096 3.4 200.1 3.9 Source: Company data, I/B/E/S, Credit Suisse estimates

Page 14 of 23

Friday, 26 April 2013

Japan Daily

NEUTRAL Tokai Rika (6995) FY3/13 results: Substantial rise in up-front investment for FY3/14 a TP JPY 1,700 negative surprise ■ Earnings impression: Negative Masahiro Akita 81 3 4550 7361 ■ Tokai Rika announced FY3/13 results at 2:40pm on 25 April. OP came to ¥23.2bn, [email protected] slightly ahead of the I/B/E/S consensus forecast of ¥21.5bn and our ¥21.0bn estimate.

However, FY3/14 OP guidance was disappointing, representing only a 3.3% YoY increase. In particular, an increase in up-front investment budgeted for FY3/14 came

as a negative surprise. ■ Near-term share price impact: Negative

■ Weak-yen benefits appear to have played a substantial part in FY3/13 OP having beaten estimates. The resulting boost appears to be behind the 4Q widening of the operating margin to a high of 8.1%. Domestically, OPM increased to 8.6% owing to not

only the weak yen but also sales to Toyota Motor amid ongoing strong sales volumes for heavy vehicle applications and a rebound in volumes for use in high-end vehicles (Lexus and Crown). OPM in North American operations improved to 2.7% due to

refunds of import duties and higher sales volumes for the RAV4. In Asia, OPM bounced back to 8.9%, the same level as a year earlier, as sales in China picked back

up firmly and Thai production volumes continued to rise. ■ Company OP guidance of ¥24.0bn for FY3/14 gives an unfavorable impression considering the FY3/13 result, but excluding forex effects this does not necessarily seem conservative. The company’s forex assumptions are ¥95/USD and ¥125/euro. Tokai Rika also assumes Toyota’s global production volume will be 9,220,000 vehicles (up 8% from FY3/13), basically in line with our outlook. However, we expect higher up- front investment than we had initially anticipated to restrict profit growth. The company expects capex to roughly double from ¥13.7bn in FY3/13 to ¥27.5bn in FY3/14. It sees higher expenses including depreciation and R&D weighing substantially on profits. ■ Management’s plan to substantially increase up-front investment is aimed at longer- term growth. While we are impressed by the company shifting to take the offensive, we expect that in the near term the market will focus on the higher investment costs. This may be a share-price negative. ■ Implications for other names ■ Toyota group suppliers are slated to announce results from tomorrow. We expect their outlooks for Toyota output to be in line with Tokai Rika’s but for forex assumptions to vary by company. Although we expect guidance for higher profits in reflection of the weak yen and higher volumes, we also see a possible accompanying rise in costs (relocation of anticipated future earnings).

Tokai Rika (6995) – Earnings forecast summary Sales Operating profit Recurring profit Net profit EPS ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) Consolidated Mar-12 A 319,577 -2.5 13,156 -30.4 14,977 -25.3 8,123 55.2 90.0 55.2 Mar-12 A 371,932 16.4 23,238 76.6 24,505 63.6 5,187 -36.1 57.4 -36.1 Mar-13 CS E 363,000 13.6 21,000 59.6 22,000 46.9 2,000 -75.4 22.1 -75.4 CoE 363,000 13.6 21,000 59.6 22,000 46.9 2,000 -75.4 22.2 -75.4 IBES E 364,400 14.0 21,543 63.8 22,483 50.1 2,250 -72.3 25.6 -71.5 Mar-14 CS E 392,000 5.4 25,000 7.6 26,000 6.1 15,000 189.2 161.9 181.9 CoE (new) 419,000 12.7 24,000 3.3 25,500 4.1 15,000 189.2 166.1 189.1 IBES E 396,283 8.7 25,907 20.3 26,425 17.5 15,633 594.8 177.8 593.8 Mar-15 CS E 407,000 3.8 26,000 4.0 27,000 3.8 16,000 6.7 177.2 9.4 IBES E 409,833 3.4 28,114 8.5 28,658 8.5 17,067 9.2 193.8 9.0 Source: Company data, I/B/E/S, Credit Suisse estimates

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OUTPERFORM [V] Start Today (3092) Could beat FY3/14 guidance for solid growth TP JPY 1,800 ■ Results impression and near-term investment impact: Positive Taketo Yamate 81 3 4550 9963 ■ FY3/13 consolidated OP up 11% YoY: FY3/13 consolidated OP rose 11% YoY to [email protected] ¥8.5bn, beating guidance for ¥7.8bn and our estimate of ¥8.2bn. The variance with our

estimate seems primarily due to the company controlling SG&A (including outsourcing fees) more tightly than we had expected. In addition, 4Q OP increased 35% YoY and

OPM was a record-high 11%. ■ FY3/14 OP guidance for 21% growth to ¥10.3bn; see a steady path to further growth:

FY3/14 OP guidance is in line with the I/B/E/S consensus estimate (¥10.4bn) but slightly below our ¥11.3bn estimate. Guidance strikes us as decidedly conservative considering the company’s assumption of 13% YoY growth in transaction value, the

firm’s rising earnings momentum, and the turnaround in the business climate. Moreover, a breakdown of projected transaction value indicates that while Start Today expects a 34% rise in fees for the support services it provides to clients for their own e-

commerce sites, it is projecting only 11% growth for its mainstay consignment sales operations. The company thus seems to assume only moderate sales growth. In addition, although Start Today expects fixed costs to rise as it expands distribution facilities from 3Q FY3/14, it assumes improvement in OPM on a transaction value basis of 9.5%, an improvement from 8.9% in FY3/13. The company stated that its current projections do not include additional promotional spending or accompanying higher sales. We see the company leaving itself this leeway as a positive for profits rather than a negative (spending that yields poor results). We intend to review our earnings estimates.

Earnings forecasts As of Apr-25 Sales Operating profit Recurring profit Net profit EPS DPS P/E ¥bn YoY (%) ¥bn YoY (%) ¥bn YoY (%) ¥bn YoY (%) ¥ YoY (%) ¥ (x) Consolidated 12/3 Actual 31.8 33.6 7.7 31.7 7.6 29.9 4.6 49.3 42.2 49.2 15.0 36.2 13/3 Actual 35.1 10.2 8.5 10.7 8.6 12.5 5.4 15.7 49.6 17.5 20.0 23.5 14/3 CS E 42.4 21.0 11.3 32.1 11.3 31.5 6.7 25.2 61.1 23.2 32.0 24.5 CoE 36.8 5.0 10.3 21.0 10.3 20.4 6.3 17.9 59.1 19.3 20.0 25.3 IBES E 39.6 13.1 10.4 22.4 - - 6.2 16.0 57.2 15.4 21.9 26.2 15/3 CS E 52.2 23.2 17.0 50.6 17.0 50.8 10.1 50.7 92.0 50.7 40.0 16.3 IBES E 44.5 12.4 12.9 23.8 - - 7.4 19.7 68.7 20.1 26.0 21.8 Source: Company data, I/B/E/S, Credit Suisse estimates

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Japan Tobacco (2914) OUTPERFORM Favorable results; move to bring forward 50% payout ratio positive TP JPY 4,000 ■ Favorable results: FY3/13 EBITDA of ¥622.1bn (+8% YoY) finished ahead of our Satsuki Kawasaki 81 3 4550 9941 ¥615.5bn forecast. The company’s FY3/14 EBITDA target of ¥730.0bn (+17%) also [email protected] exceeded our ¥720.1bn previous forecast and ¥723.8bn I/B/E/S consensus estimate. Guidance is estimated to factor in a ¥17.0bn boost from anticipatory demand ahead of Taketo Yamate 81 3 4550 9963 the consumption tax hike and the resultant increase in prices. As evidenced by [email protected] earnings and guidance, the results reflect the strength in the company’s businesses

(see page 2 for details). We revise our forecasts to reflect changes to our domestic volume assumptions, but maintain our ¥4,000 TP and OUTPERFORM rating.

■ Bolstering shareholder returns positive; 50% payout ratio likely in FY3/16: Japan Tobacco originally aimed to attain 50% payout ratio in FY3/17. Thus, the announcement that it is now likely to achieve the target one year ahead of schedule

(FY3/16) is positive. The company also raised FY3/13 DPS from ¥65 to ¥68. FY3/14 guidance calls for DPS of ¥92 (payout ratio of 40%).

■ Catalysts/risks: Catalysts: (1) rising expectations of profit growth driven by price hikes overseas, mainly in Russia; (2) increased prospects for domestic price hikes; and (3) quarterly results that reconfirm strong earnings along with the first two factors. The main risks, on the other hand, are: (1) forex rates, particularly RUB/USD, and (2) smoking regulations worldwide. ■ Valuation: We base our ¥4,000 TP on a theoretical P/B derived from ROE/cost of equity. We use FY3/14 as the base year and assume an equity risk premium of 6.5% and risk-free rate of 0.73%. Our adjusted FY3/14 ROE estimate is 21.4%, theoretical P/B is 3.5x, and implied P/E is 18x (on FY3/14E EPS).

Financial and valuation metrics Share price performance Year 3/13A 3/14E 3/15E 3/16E Price (LHS) Rebased Rel (RHS) Revenue (¥ bn) 2,120.2 2,355.6 2,432.0 2,477.9 4000 Operating profit (¥ bn) 532.4 617.3 666.4 739.9 3000 180 Recurring profit (¥ bn) 509.6 599.3 653.2 729.3 2000 130 1000 Net income (¥ bn) 343.6 415.9 454.0 507.9 0 80 EPS (¥) 184.6 228.6 249.6 279.2 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Change from previous EPS (%) n.a. 2.9 0.8 IBES Consensus EPS (¥) n.a. 222.3 240.7 262.2 EPS growth (%) 9.5 23.9 9.2 11.9 The price relative chart measures performance P/E (x) 16.3 15.3 14.0 12.5 against the TOPIX which closed at 1172.78 on 25/04/13 Dividend yield (%) 2.3 2.6 3.2 4.0 On 25/04/13 the spot exchange rate was EV/EBITDA(x) 9.4 8.5 7.7 6.6 ¥99.13/US$1

P/B (x) 3.2 3.1 2.7 2.4 Performance 1M 3M 12M ROE(%) 20.0 21.4 20.5 20.3 AbsoluteOver (%) 15.7 25.4 53.3 Net debt/equity (%) 9.5 net cash net cash net cash Relative (%) 3.4 -2.4 8.5

Source: Company data, Thomson Reuters, IFIS, Credit Suisse estimates.

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Shin-Etsu Chemical (4063) OUTPERFORM Foresee further growth in profit, on weak yen, wafer recovery, TP JPY (from 6,200) 7,820 strong PVC performance ■ Action: We revise up our earnings estimates and increase our target price for Shin- Masami Sawato 81 3 4550 9729 Etsu Chemical from ¥6,200 to ¥7,820 (potential upside 14%). We maintain our [email protected] OUTPERFORM rating and introduce our estimates for FY3/16. Maiko Saito ■ Investment case: Shin-Etsu shares continue to reach fresh YTD highs amid an 81 3 4550 9936 increase in investors' appetite for Japanese stocks since late last year. The P/E on our [email protected]

upwardly revised EPS estimate for FY3/15 is now on par with the 20x historical Koshiro Tsukiyama average. As shown in our quants team's analysis (outlined later), though, in past rallies 81 3 4550 9892 of a comparable scale (in 2003 and 2005), the P/E was as high as 23x (Figure 1). We [email protected]

therefore see further upside in the P/E. We expect FY3/14 OP to advance 23.5% YoY, while over the medium term we believe Shin-Etsu will be one of only a few Japanese companies benefiting from the shale gas revolution. It accordingly seems likely that

valuations will rise toward the end of the year. ■ Catalysts/risks: Catalysts include confirmation via the 1Q results announcement of

FY3/14 OP guidance surpassing the ¥190.1bn consensus. Other potential catalysts are a rebound in silicon wafer demand and progress with price hikes, while risks include a semiconductor market downturn and a return to yen appreciation. ■ Valuation: We derive our ¥7,820 TP by applying a fair-value P/E of 23x (a 15% premium over the 20x average since 2000) to FY3/15E EPS of ¥340. (With FY3/13 results now out, we change the reference year for our valuation model from FY3/14 to FY3/15.)

Financial and valuation metrics Share price performance Year 3/13A 3/14E 3/15E 3/16E Price (LHS) Rebased Rel (RHS) Revenue (¥ bn) 1,025.4 1,140.0 1,180.0 1,210.0 8000 140 Operating profit (¥ bn) 157.0 194.0 204.0 214.0 6000 120 Recurring profit (¥ bn) 170.2 204.0 215.0 225.0 4000 100 Net income (¥ bn) 105.7 137.0 144.5 151.5 2000 80 EPS (¥) 249.0 322.7 340.3 356.8 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Change from previous EPS (%) n.a. 4.6 4.7 IBES Consensus EPS (¥) n.a. 308.0 342.1 437.0 EPS growth (%) 5.0 29.6 5.5 4.8 The price relative chart measures performance P/E (x) 25.1 21.3 20.2 19.2 against the TOPIX which closed at 1164.35 on 24/04/13 Dividend yield (%) 1.6 1.5 1.5 1.5 On 24/04/13 the spot exchange rate was EV/EBITDA(x) 9.2 8.8 8.4 8.1 ¥99.47/US$1

P/B (x) 1.7 1.7 1.6 1.5 Performance 1M 3M 12M ROE(%) 7.0 8.4 8.4 8.3 AbsoluOver te (%) 7.7 21.8 53.5 Net debt/equity (%) net cash net cash net cash net cash Relative (%) -3.8 -5.1 9.6

Source: Company data, Thomson Reuters, IFIS, Credit Suisse estimates.

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Hitachi Chemical (4217) OUTPERFORM Expect V-shaped recovery in earnings on higher demand for TP JPY (from 1,630) 2,160 semiconductor materials ■ Action: We revise up our estimates and raise our target price for Hitachi Chemical from Masami Sawato 81 3 4550 9729 ¥1,630 to ¥2,160 (potential upside 31.6%). We maintain our OUTPERFORM rating and [email protected] introduce our FY3/16 forecasts. Maiko Saito ■ Investment case: Share price performance has been lackluster since end-March amid 81 3 4550 9936 concern that semiconductor inventory adjustments could dampen demand for [email protected]

semiconductor materials. However we see the semiconductor market recovering, and with help from yen weakness (we calculate every ¥1 fall against the dollar buoys OP by ¥700mn annually), we see FY3/14 OP surging 52.8% YoY. We believe rebounding

semiconductor demand will fuel a V-shaped recovery, as semiconductor materials carry high marginal profit ratios. As such, we anticipate share price gains from July, when we think investors will start factoring in a QoQ upturn in 1Q profit.

■ Changes to our estimates: We raise our FY3/14 OP estimate slightly, from ¥35bn to ¥36bn. While anticipating help from yen weakness, we think recoveries in demand for

semiconductor and LiB anode materials will be slower than expected. We accordingly limit our upward revision to ¥1bn.

■ Catalysts/risks: Potential catalysts include higher-than-forecast monthly sales in electronic materials and automotive components. Higher demand for touch panel materials and wider adoption of the company’s automotive LiB anode materials could also drive share price gains. Risks include yen strength and slowing semiconductor and LCD market demand. ■ Valuation: We obtain our ¥2,160 TP by applying a fair-value P/B of 1.4x—calculated by multiplying the TOPIX average P/B of 1.28x (previously 1x) by 1.1x (average TOPIX- relative P/B for the past 10 years)—to FY3/14E BPS of ¥1,544 (previously ¥1,482).

Financial and valuation metrics Share price performance Year 3/13A 3/14E 3/15E 3/16E Price (LHS) Rebased Rel (RHS) Revenue (¥ bn) 464.7 500.0 525.0 543.0 1800 120 Operating profit (¥ bn) 23.6 36.0 42.0 46.0 1600 100 Recurring profit (¥ bn) 27.3 36.0 42.0 46.0 1400 1200 80 Net income (¥ bn) 18.8 22.6 26.5 29.1 1000 60 EPS (¥) 90.4 108.5 127.3 139.7 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Change from previous EPS (%) n.a. -1.7 1.1 IBES Consensus EPS (¥) n.a. 99.2 114.7 168.1 EPS growth (%) 14.6 20.1 17.3 9.8 The price relative chart measures performance P/E (x) 15.8 15.1 12.9 11.7 against the TOPIX which closed at 1172.78 on 25/04/13 Dividend yield (%) 2.7 2.2 2.2 2.2 On 25/04/13 the spot exchange rate was EV/EBITDA(x) 6.3 5.7 5.0 4.6 ¥99.13/US$1

P/B (x) 1.0 1.1 1.0 0.9 Performance 1M 3M 12M ROE(%) 6.4 7.2 8.0 8.3 AbsoluteOver (%) 12.5 24.8 15.6 Relative (%) 0.2 -3.1 -29.2 Net debt/equity (%) 3.6 2.5 1.8 1.3

Source: Company data, Thomson Reuters, IFIS, Credit Suisse estimates.

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All headline prices are as of the previous day's close unless otherwise noted.

Companies Mentioned (Price as of 25-Apr-2013)

Anritsu (6754.T, ¥1,506) Advantest (6857.T, ¥1,533) Hitachi Kokusai Electric (6756.T, ¥1,054) DISCO (6146.T, ¥6,230) Taiwan Semiconductor Manufacturing (2330.TW, NT$107.0) Kyocera (6971.T, ¥9,800) Apple Inc (AAPL.OQ, $405.66) IBIDEN (4062.T, ¥1,695) Yahoo Japan (4689.T, ¥50,300) Lawson (2651.T, ¥7,510) CyberAgent, Inc (4751.T, ¥206,100) Sony (6758.T, ¥1,627) Komatsu (6301.T, ¥2,587) Hino Motors (7205.T, ¥1,430) Daihatsu Motor (7262.T, ¥1,979) Tokai Rika (6995.T, ¥1,902) Toyota Motor (7203.T, ¥5,730) Start Today (3092.T, ¥1,498) Japan Tobacco (2914.T, ¥3,500) Shin-Etsu Chemical (4063.T, ¥6,670) Hitachi Chemical (4217.T, ¥1,641)

Disclosure Appendix Important Global Disclosures The analysts identified in this report each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities As of December 10, 2012 Analysts’ stock rating are defined as follows: Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months. Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months. Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months. *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; Australia, New Zealand are, and prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stock’s total return relative to the average total return of the relevant country or regional benchmark. Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

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Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution Rating Versus universe (%) Of which banking clients (%) Outperform/Buy* 43% (54% banking clients) Neutral/Hold* 39% (47% banking clients) Underperform/Sell* 15% (39% banking clients) Restricted 3% *For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein. Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research and analytics/disclaimer/managing_conflicts_disclaimer.html Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.

Please refer to the firm's disclosure website at www.credit-suisse.com/researchdisclosures for the definitions of abbreviations typically used in the target price method and risk sections.

See the Companies Mentioned section for full company names The subject company (2914.T, 7205.T, 2330.TW, 4689.T, 6301.T, AAPL.OQ, 7262.T, 6758.T, 7203.T) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse provided investment banking services to the subject company (2914.T, 7205.T, 7262.T, 7203.T) within the past 12 months. Credit Suisse provided non-investment banking services to the subject company (2914.T, 6301.T, AAPL.OQ, 6758.T, 7203.T) within the past 12 months Credit Suisse has managed or co-managed a public offering of securities for the subject company (2914.T, 7205.T, 7262.T, 7203.T) within the past 12 months. Credit Suisse has received investment banking related compensation from the subject company (2914.T, 7205.T, 7262.T, 7203.T) within the past 12 months Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (2914.T, 4217.T, 7205.T, 2330.TW, 4689.T, 2651.T, 6301.T, AAPL.OQ, 3092.T, 6971.T, 4751.T, 7262.T, 4062.T, 7203.T, 6756.T) within the next 3 months. Credit Suisse has received compensation for products and services other than investment banking services from the subject company (2914.T, 6301.T, AAPL.OQ, 6758.T, 7203.T) within the past 12 months As of the date of this report, Credit Suisse makes a market in the following subject companies (AAPL.OQ, 6971.T, 6758.T, 7203.T). As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (6971.T, 6857.T, 6758.T). Credit Suisse has a material conflict of interest with the subject company (2330.TW). Credit Suisse is acting as the financial advisor to Motech Industries Inc in relation to the share subscription by Taiwan Semiconductor Manufacturing Co., Ltd. Important Regional Disclosures Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report. The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (2914.T, 4217.T, 7205.T, 6146.T, 2330.TW, 4689.T, 2651.T, 6301.T, 3092.T, 6971.T, 6857.T, 6995.T, 4751.T, 7262.T, 4062.T, 6758.T, 4063.T, 7203.T, 6754.T, 6756.T) within the past 12 months An analyst involved in the preparation of this report has visited certain material operations of the subject company (AAPL.OQ) within the past 12 months The travel expenses of the analyst in connection with such visits were not paid or reimbursed by the subject company, other than de minimus local travel expenses. Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS-- Subordinate Voting Shares. Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit http://www.csfb.com/legal_terms/canada_research_policy.shtml. As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.

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Principal is not guaranteed in the case of equities because equity prices are variable. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that. To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Credit Suisse Securities (Japan) LimitedHideyuki Maekawa ; Chika Fukumoto ; Akinori Kanemoto ; Yohei Ohya ; Yuki Nakayasu ; Hitoshi Hayakawa ; Shunsuke Tsuchiya ; Shinji Kuroda ; Yunchao Zhao ; Issei Takahashi ; Masahiro Akita ; Taketo Yamate ; Satsuki Kawasaki ; Masami Sawato ; Maiko Saito ; Koshiro Tsukiyama

For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at www.credit- suisse.com/researchdisclosures or call +1 (877) 291-2683.

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