dfd Monday, 13 May 2013

(First Edition) Daily Featured stocks Top of the Pack Price TP Upside Motor (7201) OUTPERFORM TP ¥1,150 Takahashi Rating 10 May TP FY3/13 results: when will "surplus" cash be returned to shareholders? Results 6752 Corporation O 749 750 0.1% FOCUS LIST STOCK Square Enix Sumitomo Electric Industries (5802) OUTPERFORM TP ¥1,500 Okumoto/ Yamada 9684 Holdings O 1240 1450 16.9% Potential OP upside of ¥50bn; margin deterioration unlikely amid rising production Results 6501 N 645 510 -20.9% FOCUS LIST STOCK 7735 Mfg. N 536 510 -4.9% Square Enix Holdings (9684) Neutral->OUTPERFORM TP ¥1,150->¥1,450 Tsuchiya Nippon Telegraph Announcement of additional structural reforms should mark the end of bad news Upgrade Rating 9432 and Telephone O 5080 4700 -7.5% Yakult Honsha (2267) Underperform-> NEUTRAL TP ¥2,700->¥4,100 Kawasaki/Yamate Upgrade to NEUTRAL; Positive on better cost awareness Upgrade Rating 4902 Holdings N 759 650 -14.4% 3659 O 1192 1300 9.1% Technology 6640 Dai-ichi N 1548 1300 -16.0% Panasonic Corporation (6752) OUTPERFORM TP ¥750 Tsuchiya 7915 Nissha Printing N 2186 1660 -24.1% Prospects for bringing forward restructuring positive Results 7201 Nissan Motor Co. O 1063 1150 8.2% Square Enix Holdings (9684) Neutral->OUTPERFORM TP ¥1,150->¥1,450 Tsuchiya 6141 Mori Seiki U 1267 900 -29.0% Announcement of additional structural reforms should mark the end of bad news Upgrade Rating 6471 NSK O 873 800 -8.4% 6326 U 1434 1150 -19.8% Hitachi (6501) NEUTRAL TP ¥510 Maekawa/ Fukumoto 6268 Nabtesco Corp N 2457 1650 -32.8% Little prospect of organic growth, Smart Transformation-driven profit expansion Results 2229 Calbee N 9490 7300 -23.1% Dainippon Screen Mfg. (7735) NEUTRAL TP ¥510 Maekawa/ Fukumoto 2267 Yakult Honsha N 4480 4100 -8.5% Guidance reflects less bullish expectations of 2H memory investment rebound than at peers Results Dainippon 4506 Sumitomo Pharma U 1786 980 -45.1% Nippon Telegraph and Telephone (9432) OUTPERFORM TP ¥4,700 Hayakawa 4507 N 2189 1700 -22.3% Honoring commitments Results 4540 Tsumura & Co O 3225 3800 17.8% (4902) NEUTRAL TP ¥650 Yoshida Taisho Cost reductions in office equipment business to be key Results Pharmaceutical 4581 Holdings N 7380 6300 -14.6% NEXON(3659) OUTPERFORM TP ¥1,300 Nakayasu Isetan Mitsukoshi Online games strong; await unlocking potential in mobile platform Results 3099 Holdings U 1553 740 -52.4% Dai-ichi Seiko (6640) NEUTRAL [V] TP ¥1,300 Ohya/ Kanemoto 2651 Lawson N 7720 7200 -6.7% 1Q FY12/13 results: operating rates remain low at domestic plants; positives still lacking Results 3382 Seven & i Holdings O 3840 4300 12.0% 8028 FamilyMart O 4575 5000 9.3% Nissha Printing (7915) NEUTRAL TP ¥1,660 Ohya/ Kanemoto 8804 O 903 1400 55.0% Risk of dependence on major clients comes to the surface Results 1925 Industry O 2204 2400 8.9% Capital Goods 3402 O 711 610 -14.2% Nissan Motor (7201) OUTPERFORM TP ¥1,150 Takahashi 4042 U 382 280 -26.7% FY3/13 results: when will "surplus" cash be returned to shareholders? Results 4183 Chemicals U 234 210 -10.3% FOCUS LIST STOCK Sumitomo Electric Mori Seiki (6141) UNDERPERFORM TP ¥900 Kuroda/ Zhao 5802 Industries O 1397 1500 7.4% FY3/13 results: Negative impression; valuations look high Results 5707 N 381 460 20.7% NSK (6471) OUTPERFORM TP ¥800 Kuroda/ Zhao FY3/13 results: Focus now on new medium-term business plan due out 15 May Results Kubota (6326) UNDERPERFORM TP ¥1.150 Kuroda/ Zhao FY3/13 results: More positive than expected Results Nabtesco Corporation (6268) NEUTRAL TP ¥1,650 Kuroda/ Zhao FY3/13 results: Guidance premised on recovery in 2H Results Japan Research Calbee (2229) NEUTRAL TP ¥7,300 Kawasaki/Yamate FY3/13 results: Bullish profit guidance Results Yakult Honsha (2267) Underperform-> NEUTRAL TP ¥2,700->¥4,100 Kawasaki/Yamate Upgrade to NEUTRAL; Positive on better cost awareness Upgrade Rating Pharma sector (MARKETWEIGHT) Sakai Results and briefings: Tsumura, Dainippon Sumitomo, Shionogi, Taisho Pharmaceutical Results

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

Monday, 13 May2013

Japan Daily

Isetan Mitsukoshi Holdings (3099) UNDERPERFORM TP ¥740 Yamate/ Yamada Results reveal unrealized losses in place of unrealized gains Results Convenience store flash report (Apr 2013) (MARKET WEIGHT) Yamate/ Yamada Inclement weather a drag; only Seven-Eleven Japan manages same-store sales growth Sector Review Tokyo Tatemono (8804) OUTPERFORM [V] TP ¥1,400 Mochizuki/ Takemura 1Q results: Slightly positive; NP run rate reaches 67% of full-year target Results Daiwa House Industry (1925) OUTPERFORM TP ¥2,400 Mochizuki/ Takemura Upbeat FY3/13 results: Dividend hiked; look for further profit growth in new medium-term Results plan Chemical sector: First take on FY12 results (MARKET WEIGHT) Sawato / Saito Positive for Toray and Tosoh Results Sumitomo Electric Industries (5802) OUTPERFORM TP ¥1,500 Okumoto/ Yamada Potential OP upside of ¥50bn; margin deterioration unlikely amid rising production Results FOCUS LIST STOCK (5707) NEUTRAL [V] TP ¥460 Okumoto/ Yamada Resources segment still a drag Results 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 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 From Overseas – click report title to download Asia India Market Strategy: Stay selective: Rally indiscriminate so far, but will get differentiated Asia Steel Sector: Yen & You: How a falling yen impacts Asian companies; Yen, testing the 'metal' of Asian producers; Rating Changes; Revising Ests & TPs Indian IT Services: Two positive takeaways from CTSH's 1Q numbers

Australian First Edition …and more in Asian Daily Americas Major Pharmaceuticals: Anti-PD-1s: Much "Adieu" About Something! - Future Data Releases Could Dimension Upside for BMY and MRK US Focus List: Latest update …and more in First Edition U.S. Alert Europe European Consulting Engineers: Until growth returns look elsewhere; Downgrade Atkins to Underperform from Neutral; TP changes 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 30

Monday, 13 May2013

Japan Daily

OUTPERFORM Panasonic Corporation (6752) Prospects for bringing forward restructuring positive TP JPY 750 ■ Impression of results and guidance: Positive Shunsuke Tsuchiya 81 3 4550 9740 ■ FY3/14 guidance was unsurprising as the targets were already announced as a part of [email protected] the firm’s medium-term management plan in end-March. However, we expect investors

to see the following in a positive light: (1) the high likelihood of Panasonic attaining its FY3/14 targets (Jan–Mar OP upside/conservative forex assumptions), and (2) the

restructuring plan running ahead of schedule (booking of impairment charges on PDP assets in FY3/13; ahead-of-schedule restructuring in FY3/14).

■ Near-term share price impact: Slightly positive ■ We expect investor concerns on Panasonic’s restructuring schedule to ease if the one- off gain of ¥79.8bn stemming from the amended pension plan the company announced

recently and the scope for potential earnings upside in FY3/14 further speed up the restructuring process.

■ However, the risk of balanced contraction stemming from a shrinking capex outlay represents a key concern (¥310.0bn in FY3/13; ¥200.0bn/year from FY3/14-16). At the 30 May business briefing, we intend to confirm details on how Panasonic intends to maintain its current sales and workforce levels while it scales down its asset size and the process through which it will transform to such a business model. ■ Key points of FY3/13 results and FY3/14 guidance ■ Jan–Mar OP of ¥39.0bn finished roughly ¥20.0bn ahead of guidance. We believe the upside is mainly attributable to reduced fixed costs. ■ Panasonic’s FY3/14 guidance calls for OP of ¥250.0bn, and NP of ¥50.0bn. The ¥120.0bn restructuring costs appear somewhat steep relative to the amount we anticipated based on the medium-term plan announced in March. ■ Panasonic’s forex assumptions of ¥85/$, ¥110/€, and ¥13.7/RMB appear conservative. The current forex rates imply an upside of ¥30.0bn versus guidance (each ¥1 decline vs. the above currencies boosts annual OP by ¥1.0bn vs. the dollar, ¥1.7bn vs. the euro, and ¥5.2bn vs. the RMB.

Earnings summary Panasonic (6752) consolidated 10-May-13 Sales Operating profit Pretax profit Net profit EPS DPS P/E ¥749 ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) ¥ (x) Consolidated Mar-12 A 7,846,216 -9.7 43,725 -85.7 -812,844 NM -772,172 NM -334.0 NM 10.0 Mar-13 1Q 1,814,498 -6.0 38,603 592.3 37,825 NM 14,543 NM 5.5 NM NM 2Q 1,823,662 6.7 48,763 -40.4 -316,496 NM -697,095 NM -301.9 NM NM 3Q 1,801,503 -22.6 34,587 NM 9,273 NM 63,318 -82.0 26.5 NM NM 4Q 1,863,382 -0.9 38,983 831.5 -128,988 NM -135,016 NM -56.4 NM NM Mar-13 A (new) 7,303,045 -6.9 160,936 268.1 -398,386 NM -754,250 NM -326.3 NM 0.0 NM IBES E 7,249,381 -7.6 145,751 233.3 -357,738 NM -747,486 NM -324.8 NM 0.0 NM Mar-14 CS E 7,250,900 -0.7 211,000 31.1 81,000 NM 50,500 NM 21.8 NM 0.0 34.3 CoE (new) 7,200,000 -1.4 250,000 55.3 140,000 NM 50,000 NM 21.6 NM 34.6 IBES E 7,331,233 1.1 240,883 65.3 130,158 NM 67,310 NM 28.8 NM 4.8 26.0 Mar-15 CS E 7,237,700 -0.2 252,000 19.4 202,000 149.4 124,700 146.9 53.9 146.9 10.0 13.9 IBES E 7,319,795 -0.2 275,001 14.2 182,496 40.2 86,631.0 28.7 38.6 34.0 8.5 19.4 Source: Company data, I/B/E/S, Credit Suisse estimates

Page 3 of 30

Monday, 13 May2013

Japan Daily

Square Enix Holdings (9684) (from Neutral) OUTPERFORM Announcement of additional structural reforms should mark the TP JPY (from 1,150) 1,450 end of bad news ■ Action: We foresee a risk of Square Enix revising guidance concurrently with its 13 Shunsuke Tsuchiya 81 3 4550 9740 May results. Further restructuring measures should enhance its resilience against [email protected] slumping sales of packaged software. SNS/online games—two segments with substantial growth potential—have enjoyed firm momentum in Asia, and an improved

product mix for these should contribute to profits. Earnings are likely to grow YoY in FY3/15 supported by the launch of new blockbuster titles. Accordingly, we expect the

company’s relative P/B, which has been languishing at historically low levels, to correct. We revise our forecasts, raise our TP from ¥1,150 to ¥1,450 (potential return 17.9%) and upgrade the stock from Neutral to OUTPERFORM.

■ Additional restructuring: Restructuring in FY3/14 is likely to center on overseas development (former Eidos Interactive). Assuming further write-downs, we believe BPS

could drop to just below ¥1,000 (restructuring charges of ¥5.0–6.0bn). However, the shares have fallen substantially following the sharp cut to FY3/13 targets in March, so risk of BPS erosion looks already priced in. If the shares drop on below-consensus

FY3/14 guidance (and particularly, a lower-than-expected NP target), we would welcome this as an opportunity to accumulate on weakness. ■ Growth potential: Although obscured by the slump in packaged software sales, we see potential for earnings growth driven by SNS/online games, sales of which are trending firm. Overseas native applications developed with local makers have taken off, with monthly sales of ¥600mn in spiking as high as ¥1.0bn. Square Enix plans to develop similar applications for China and . In FY3/14, we expect high- margin remake titles to help stabilize earnings in the troubled package software business, while SNS/online games should also easily contribute. ■ Catalysts: Catalysts include growth in SNS operations overseas, development of Dragon Quest titles for SNS platforms, and announcement of blockbuster titles. The main downside risk is the absence of further restructuring measures. ■ Valuation: Although we revise down our forecasts, we raise our TP to ¥1,450 based on a P/B of 1.3x (on par with the industry average) and our FY3/15 BPS forecast. We previously valued the shares using P/E, but shift to P/B as the company is embarking on another period of restructuring.

Financial and valuation metrics Share price performance Year 3/12A 3/13E 3/14E 3/15E Revenue (¥ bn) 128.1 143.4 140.0 150.0 Price (LHS) Rebased Rel (RHS) Operating profit (¥ bn) 10.7 -6.0 7.5 16.7 1800 140 Recurring profit (¥ bn) 10.3 -5.0 7.7 16.9 1300 90 Net income (¥ bn) 6.1 -13.0 1.3 10.0 800 40 EPS (¥) 52.7 -113.0 11.3 86.9

Change from previous EPS (%) n.a. n.m -88.3 -10.7 IBES Consensus EPS (¥) n.a. -48.5 58.7 75.6 EPS growth (%) n.m. n.m. n.m. 669.2 P/E (x) 33.0 -10.9 108.9 14.2 The price relative chart measures performance Dividend yield (%) 1.7 2.4 2.4 2.4 against the TOPIX which closed at 1181.83 on 09/05/13 EV/EBITDA(x) 8.2 81.6 5.7 3.2 On 09/05/13 the spot exchange rate was ¥98.7/US$1

P/B (x) 1.5 1.2 1.2 1.1 Performance 1M 3M 12M ROE(%) 4.5 -10.1 1.1 8.3 AbsoluteOver (%) 14.2 5.4 -18.1 Net debt/equity (%) net cash net cash net cash net cash Relative (%) 8.8 -18.0 -72.5

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

Page 4 of 30

Monday, 13 May2013

Japan Daily

NEUTRAL Hitachi (6501) Little prospect of organic growth, Smart Transformation-driven TP JPY 510 profit expansion ■ Impression of results and guidance: Neutral to slightly negative Hideyuki Maekawa 81 3 4550 9723 ■ Hitachi announced FY3/13 OP of ¥422bn and FY3/14 guidance calling for OP of [email protected] ¥500bn, roughly in line with consensus forecasts and therefore leaving a neutral Chika Fukumoto impression at first glance. However, management expects growth to be largely driven 81 3 4550 7358 by ¥70bn in weak-yen gains (assuming ¥95/$ [versus ¥83 in FY3/13] and ¥120/€ [email protected]

[¥107]), and another roughly ¥70bn increase from the weaker yen for consolidated subsidiaries. Moreover, while we have forecast a ¥300bn YoY gain from cost reductions (¥200bn from reduced material costs and ¥100bn from the Smart

Transformation [ST] project), management only looks for ¥200bn, owing partly to the weaker yen demerit. On the whole, we found the projections for the parent company somewhat disappointing. Integration of the company’s thermal power business with

Mitsubishi Heavy Industries and a downsizing of preventive maintenance operations in the nuclear power business should detract from parent profits. Also, although earnings should get support from one-off factors such as a decline in loss-making projects

(FY3/13 ¥20bn; FY3/14 ¥10bn) and reduced restructuring charges for digital media and consumer TVs, we see little sign of organic growth. Accordingly, we believe that unless the new medium-term plan (due out on 16 May) shows clear prospects for profit growth associated with the ST project or potential for organic growth, market expectations are unlikely to rise. ■ Near-term share price impact: Neutral ■ The results announcement seems unlikely to affect the share price, as FY3/14 guidance largely mirrors consensus forecasts and recent share-price performance has been in line with TOPIX and has thus muted expectations. We think market interest will now shift to the medium-term plan briefing, but as mentioned above we see little that could drive the shares higher at this point.

Hitachi – FY3/13–15 earnings forecasts Hitachi (6501) 5/10 price (¥) Est. Operating revenue Operating profit Pretax Profit Net profit EPS P/E ¥645 as of; ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) (x) Consolidated Mar-12 Actual 9,665,883 3.8 412,280 -7.3 557,730 29.0 347,179 45.3 76.8 45.2 Mar-13 Actual 9,041,071 -6.5 422,028 2.4 344,537 -38.2 175,326 -49.5 37.3 -51.5 Mar-13 CS E 2/27 8,900,000 -7.9 425,000 3.1 355,000 -36.3 176,000 -49.3 37.1 -51.7 17.4 CoE 2/4 8,900,000 -7.9 420,000 1.9 330,000 -40.8 150,000 -56.8 32.2 -58.1 20.0 IBES E 8,946,124 -7.4 427,589 3.7 348,795 -37.5 159,784 -54.0 34.3 -55.3 18.8 Mar-14 CS E 2/27 8,929,000 -1.2 522,000 23.7 522,000 51.5 274,000 56.3 57.7 54.9 11.2 CoE 5/10 9,200,000 1.8 500,000 18.5 425,000 23.4 210,000 19.8 43.5 16.6 14.8 IBES E 9,195,818 1.7 524,750 24.3 495,232 43.7 256,980 46.6 54.1 45.0 11.9 Mar-15 CS E 2/27 9,036,000 1.2 567,000 8.6 567,000 8.6 282,000 2.9 59.4 2.9 10.9 IBES E 9,299,848 1.1 571,647 8.9 555,971 12.3 288,942 12.4 60.7 12.3 10.6

Source: Company data, IBES, Credit Suisse estimates

Page 5 of 30

Monday, 13 May2013

Japan Daily

NEUTRAL [V] Dainippon Screen Mfg. (7735) Guidance reflects less bullish expectations of 2H memory TP JPY 510 investment rebound than at peers ■ Results and guidance impression: Neutral Hideyuki Maekawa 81 3 4550 9723 ■ FY12 operating losses of ¥6.9bn and FY13 OP guidance of ¥6.5bn are both basically [email protected] in line with consensus forecasts, leaving a neutral impression. While we need to check Chika Fukumoto more closely, it appears investor focus for FY13 onward has shifted to earnings in 81 3 4550 7358 semiconductor and FPD equipment from shipments to finished installations. We [email protected]

believe that the company will move into the black in FY13 due mainly to fixed cost cuts (around ¥5bn), improvement in the SPE product mix (with the weighting of the company's SU-3200 single wafer cleaner rising from just over 40% in FY12 to around

55% in FY13), cuts in SPE variable expenses, and the booking of strategic costs (¥1.5–2.0bn) in FY12. Looking for SPE sales to reach ¥68bn in 1H and ¥65bn in 2H, the company is not expecting memory investment to rebound to the extent that other

SPE makers are, so sales downside risk is likely limited. However, as the firm is looking for a bigger improvement in SPE profits than we are, we intend to keep an eye on progress toward guidance.

■ SPE orders in Jan–Mar reached ¥35bn (up 21% QoQ, slightly up on guidance, same as our preview forecast), while FPD orders came to ¥2.3bn (down 72% QoQ). We believe that SPE orders benefitted from the earlier-than-scheduled placement of an order from a Taiwanese foundry. The company has not disclosed orders guidance for Apr–Jun onwards, but we estimate that it expects orders to remain flat, with increased orders for memory offsetting a decline in orders from foundries. However, we do not believe that investment in memory will increase sufficiently to offset the downturn in orders from foundries. ■ Near-term share price impact: Somewhat negative ■ Looking at the company's SPE sales forecasts, we cannot help but feel that orders momentum has peaked out. While Dainippon Screen's expectations for South Korean memory investment differ from those of its peers, as this is due to a structural difference (the company's low profile in the South Korean market), we think that Dainippon Screen's shares look increasingly likely to underperform as SPE makers' expectations for memory investment increase.

Dainippon Screen Mfg. – FY3/13-15 earnings forecasts Dainippon Screen Mfg. (7735) 5/10 price (¥) Est. Operating revenue Operating profit Recurring Profit Net profit EPS P/E ¥536 as of; ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) (x) Consolidated Mar-12 Actual 250,089 -1.9 13,498 -49.7 12,284 -53.7 4,637 -81.9 19.5 -81.9 Mar-13 Actual 189,923 -24.1 -6,986 NM -7,205 NM -13,486 NM -56.8 NM Mar-13 CS E 3/15 188,500 -24.6 -6,500 NM -7,000 NM -12,300 NM -51.8 NM NM CoE 11/5 190,000 -24.0 -7,000 NM -7,500 NM -14,000 NM -59.0 NM NM IBES E 189,567 -24.2 -7,046 NM -7,819 NM -13,776 NM -56.3 NM NM Mar-14 CS E 3/15 191,500 0.8 2,400 NM 1,900 NM 1,500 NM 6.3 NM 84.8 CoE 5/10 204,000 7.4 6,500 NM 5,500 NM 4,000 NM 16.9 NM 31.8 IBES E 207,785 9.4 5,403 NM 4,590 NM 3,010 NM 13.3 NM 40.4 Mar-15 CS E 3/15 203,800 6.4 6,100 154.2 5,600 194.7 4,451 196.7 18.8 196.7 28.6 IBES E 224,841 8.2 11,765 117.7 10,841 136.2 7,441 147.2 32.0 141.0 16.7 Note: Recurring profit from I/B/E/S equals pretax profit, as there is no such term Source: Company data, IBES, Credit Suisse estimates

Page 6 of 30

Monday, 13 May2013

Japan Daily

OUTPERFORM Nippon Telegraph and Telephone (9432) Honoring commitments TP JPY 4,700 ■ Impression of results and guidance: Positive Hitoshi Hayakawa 81 3 4550 9952 ■ Nippon Telegraph and Telephone (NTT) reported favorable FY12 results, also [email protected] announcing plans to buy back ¥250bn in shares in FY13 (4.22% of shares outstanding

if treasury stock is excluded). Consolidated OP of ¥1.2tn was in line with our ¥1.2tn estimate and guidance for ¥1.2tn, while the company’s FY13 OP target of ¥1.23tn

exceeds our ¥1.21tn forecast. NTT sees EPS rising to ¥503 (15% above our ¥436 estimate) on the strength of rebounding profit and share buybacks. The company also projects a ¥205bn YoY decrease in costs in FY13 and aims to lower the capex-to-sales

ratio from 18.4% in FY12 to 17% (spending of ¥100bn; goal is 15% ratio by FY15). CEO Hiroo Unoura has expressed resolve to slash costs across the board, with no areas considered sacred. It would seem the company is making steady progress. We

now see an increasing likelihood of the company attaining its FY15 EPS goal of ¥600 with the aid of large-scale share repurchases. We plan to review our ¥4,700 target price after examining FY12 results, and reiterate our OUTPERFORM rating.

■ Near-term share price impact: Positive

■ NTT undertook share buybacks worth ¥150bn in FY12 and plans to repurchase up to ¥250bn in shares in FY13. It also intends to keep the annual dividend at ¥160 per share. Flagging demand for optical fiber presents challenges for the fixed-line operations of NTT East and NTT West. With a view to boosting earnings momentum, the company has committed to cutting costs via such means as consolidating branches. Abenomics have made companies with ample landholdings more attractive investments, and NTT appears likely to ride this wave.

Consolidated earnings forecast summary Sales Operating profit Recurring profit Net profit EPS DPS P/E ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) ¥ (x) Consolidated 3/12 A 10,507,362 2.0 1,222,966 0.7 1,239,330 5.4 467,701 -8.2 367 -4.8 140 13.9 3/13 A 10,700,740 1.8 1,201,968 -1.7 1,201,099 -3.1 524,071 12.1 432 17.9 160 21.8 CS E 10,756,485 2.4 1,198,127 -2.0 1,192,425 -3.8 550,677 17.7 442 20.7 160 11.5 CoE 10,810,000 2.9 1,200,000 -1.9 1,170,000#ERR: Invalid-5.6 time period:530,000 'Error 2023'13.3 437 19.2 160 11.6 IBES E 10,757,360 2.4 1,211,560 -0.9 1,189,355 -4.0 530,230 13.4 448 22.1 160 11.3 3/14 CS E 10,842,848 1.3 1,208,251 0.5 1,202,549 0.1 542,323 3.5 436 0.8 170 11.7 CoE 11,000,000 2.8 1,230,000 2.3 1,280,000 6.6 585,000 11.6 503 16.4 160 10.1 IBES E 10,799,168 0.9 1,229,785 2.3 1,218,504 1.4 555,234 5.9 469 8.4 166 10.8 3/15 CS E 10,967,422 1.1 1,244,672 3.0 1,238,970 3.0 542,434 0.0 436 0.0 180 11.7

Source: Company data, I/B/E/S, Credit Suisse estimates

Page 7 of 30

Monday, 13 May2013

Japan Daily

NEUTRAL Konica Minolta (4902) Cost reductions in office equipment business to be key TP JPY 650 ■ Impression from results: Slightly negative Yu Yoshida 81 3 4550 9815 ■ OP in 4Q was ¥13.6bn, below our ¥15.8bn forecast, the ¥17.2bn I/B/E/S consensus, [email protected] and guidance of ¥20.9bn, leaving a negative impression. The company had left its

initial guidance unchanged, but it hinted when it announced 3Q results that results could miss by a bit, and we surmise that OP came up ¥3.0bn short of guidance in both

the information equipment and the industrial materials and equipment businesses. The main factors behind the shortfall for information equipment were (1) slower-than- expected progress on cost reductions from moving to a single platform for color copiers

and (2) sales mix deterioration from volume growth in lower-speed color copiers. In industrial materials and equipment, the most significant drag was weakness in TAC film. Market share fell among key retardation film customers as expected, but we think

panel inventory corrections were greater than anticipated. ■ For FY3/14, Konica Minolta targets OP of ¥55.0bn, somewhat lower than our ¥57.0bn

forecast and the ¥56.1bn I/B/E/S consensus, but after adjusting for the company’s forex assumptions of ¥93/$ and ¥123/€, these estimates fall more closely into line.

■ Short-term share price impact: Neutral ■ We believe the results announcement is unlikely to have much short-term share price impact. The weaker-than-expected results are unwelcome, but guidance is basically in line with consensus. The company expects a boost of ¥8.0bn in FY3/14 from cost reductions in the information equipment business, a factor which was a ¥4.4bn negative in FY3/13. A key point to watch will likely be the extent to which such savings are realized.

Earnings summary Konica Minolta Sales Operating profit Recurring profit Net profit EPS P/E (4902) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) (x) Consolidated Mar-11 A 777,953 -3.3 40,022 -9.0 33,155 -18.8 25,896 53.0 48.8 53.0 14.3 Mar-12 A 767,879 -1.3 40,346 0.8 34,758 4.8 20,424 -21.1 38.5 -21.1 18.8 Mar-13 Q1 A 189,373 1.7 6,339 93.8 4,786 87.2 154 NM 0.3 NM NM Q2 A 194,445 1.2 13,940 13.0 13,464 48.9 7,455 93.1 14.1 92.9 NM Q3 A 193,909 6.5 6,811 -11.3 7,867 7.8 2,708 64.3 5.1 64.8 NM Q4 A (new) 235,346 13.4 13,569 -20.5 12,784 -19.4 4,807 -68.0 9.1 -68.0 NM Q4 CS E 220,873 6.4 15,810 -7.3 12,783 -19.4 8,683 -42.2 16.4 -42.2 NM Mar-13 A (new) 813,073 5.9 40,659 0.8 38,901 11.9 15,124 -25.9 28.5 -26.0 26.6 CS E 798,600 4.0 42,900 6.3 38,900 11.9 19,000 -7.0 35.8 -7.0 21.2 CoE 800,000 4.2 48,000 19.0 44,000 26.6 22,000 7.7 41.5 7.7 18.3 IBES E 797,713 3.9 44,311 9.8 NM NM 21,121 3.4 39.8 3.2 19.1 Mar-14 CS E 866,200 6.5 57,000 40.2 53,000 36.2 28,800 90.4 54.3 90.4 14.0 CoE (new) 900,000 10.7 55,000 35.3 53,000 36.2 26,000 71.9 49.0 71.9 15.5 IBES E 840,039 3.3 56,057 37.9 NM NM 30,230 99.9 56.8 99.3 13.4 Mar-15 CS E 876,400 1.2 60,900 6.8 56,900 7.4 31,100 8.0 58.6 8.0 12.9 IBES E 863,992 2.9 61,294 9.3 NM NM 33,475 10.7 63.3 11.3 12.0 Source: Company data, I/B/E/S, Credit Suisse estimates

Page 8 of 30

Monday, 13 May2013

Japan Daily

OUTPERFORM NEXON (3659) Online games strong; await unlocking potential in mobile platform TP JPY 1,300 ■ Results impression: Positive; better-than-anticipated recovery at D&F in China and Yuki Nakayasu 81 3 4550 9966 existing games in Korea [email protected] ■ Nexon’s 1Q FY13 OP of ¥20.7bn (IFRS basis; +24% YoY) outpaced our ¥16bn Contribution by Amanda Chen forecast (JGAAP). We attribute the gap between the result and our forecast to: (1) 86 21 3856 0229 strong growth in user fees supported by the Tier 1 update for Arad Senki in China, and [email protected]

(2) a market share recovery for existing titles (Sudden Attack, Arad Senki) in South Korea. The launch of a new title by a rival in Korea led to a decline in user-generated fees in 2012, but Nexon appears to be gradually regaining ground. Profits were also

boosted by a lower yen, particularly in China, which has a sizable profit weighting. ■ Second-quarter targets attainable; await hit smartphone and Dota2 application in

Korea ■ Nexon’s 2Q FY13 guidance calls for sales of ¥34–36bn (down 19–23% QoQ) and OP of ¥11.4–12.3bn (down 41–45%). The firm is likely to incur higher SG&A costs (Nexon

estimates around ¥1bn QoQ) from an increase in marketing expenses for the mobile platform and an increase in development costs for PC online games. We anticipate a

slightly sharper sales decline than usual seasonal levels, but a sustained recovery in existing game titles in South Korea and a contribution from FIFA Online 3 could lift sales higher than we expect. Key points include whether: (1) Dota 2, scheduled for launch in 3Q, helps Nexon regain market share from South Korean rivals; (2) Nexon can foster a successful title to follow Arad Senki in China; (3) Nexon can launch hit smartphone-native games, even on a staggered basis, for the rapidly growing smartphone platform in Japan, China and South Korea (sales weighting of PC games in 1Q FY13 was a high 83%).

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 11/12 A J-GAAP 87,613 25.6 38,249 26.7 36,905 29.6 25,756 19.0 71.7 NA 0.0 12/12 A J-GAAP 108,448 23.8 47,874 25.2 44,541 20.7 25,401 -1.4 58.9 -17.8 5.9 12/12 1Q J-GAAP 30,377 46.0 17,384 86.1 17,677 74.1 12,377 63.2 28.9 34.0 - - NM 2Q J-GAAP 22,876 11.8 10,679 24.1 9,368 17.8 6,769 32.2 15.6 7.5 - - NM 3Q J-GAAP 24,257 0.4 10,033 -8.4 9,058 -10.9 6,349 -12.2 14.8 -27.9 - - NM 4Q J-GAAP 30,938 39.4 9,778 4.5 8,438 -2.2 -94 NM -0.4 NM- - NM 13/12 CS E J-GAAP 156,000 43.8 57,000 19.1 55,500 24.6 36,300 42.9 84.1 42.9 8.4 14.2 CoE (High) J-GAAP 108,210 -0.2 47,253 -1.3 45,450 2.0 30,966 21.9 71.6 21.6 - 16.7 CoE (Low) J-GAAP 104,973 -3.2 44,431 -7.2 42,628 -4.3 28,876 13.7 66.8 13.4 - 17.9 IBES E J-GAAP 147,443 36.0 54,769 14.4 53,419 19.9 37,140 46.2 85.0 44.3 3.1 14.0 1Q A IFRS 44,364 - 20,716 - - - 15,350 - 35.7 -- - NM 1Q CoE (HIGH) J-GAAP 38,519 26.8 14,378 -17.3 14,041 -20.6 9,318 -24.7 21.5 -25.4 - NM 1Q CoE (LOW) J-GAAP 35,965 18.4 12,330 -29.1 11,991 -32.2 7,840 -36.7 18.2 -37.1 - NM 2Q CoE (HIGH) IFRS 35,991 - 12,325 - - - 8,890 - 20.6 - - NM 2Q CoE (LOW) IFRS 34,021 - 11,356 - - - 8,393 - 19.4 - - NM 14/12 CS E J-GAAP 176,800 13.3 64,000 12.3 62,500 12.6 40,800 12.4 94.6 12.4 9.5 12.6 IBES E J-GAAP 160,056 2.6 60,348 5.9 58,101 4.7 41,693 14.9 93.8 11.5 2.4 12.7 15/12 CS E J-GAAP 200,000 13.1 72,000 12.5 70,500 12.8 46,000 12.7 106.6 12.7 10.7 11.2 IBES E J-GAAP 175,470 9.6 66,384 10.0 61,397 5.7 45,582 9.3 105.0 11.9 3.1 11.3 Source: Company data, I/B/E/S, Credit Suisse estimates

Page 9 of 30

Monday, 13 May2013

Japan Daily

NEUTRAL [V] Dai-ichi Seiko (6640) 1Q FY12/13 results: operating rates remain low at domestic plants; TP JPY 1,300 positives still lacking ■ Results impression: Negative Yohei Ohya 81 3 4550 7366 ■ Dai-ichi Seiko reported 1Q FY12/13 sales of ¥9.25bn and an operating loss of ¥0.2bn, [email protected] falling short of our estimates of ¥10.4bn for sales and OP of ¥0.44bn. This mainly Akinori Kanemoto reflected weaker demand QoQ for multi-pin small-gauge coaxial connectors made in 81 3 4550 7363 Japan, with sales dropping from ¥2.45bn in 4Q FY3/12 to ¥1.68bn. The company has [email protected]

now reported two straight quarters of operating losses and FY12/13 OP guidance of ¥3bn looks challenging.

■ Near-term share price impact: Negative ■ Shipments of multi-pin small-gauge coaxial connectors have seen modest growth recently, but end-March inventories rose to ¥7.5bn (an increase of ¥0.8bn from end-

December: ¥0.5bn for finished products, ¥0.27bn for work in process), suggesting that operating rates at domestic plants are unlikely to improve in line with any recovery in demand.

■ Dai-ichi is currently focusing on new FPC/FFC/BtoB connectors. Sales of these products totaled ¥0.44bn in 1Q and the company sees this rising to around ¥1bn in 2Q. Sales appear to be in line with guidance. However, the increase in volume for these new products is unlikely to be sufficient to offset the impact of weak demand of small- gauge coaxial connectors and rising inventories. ■ The stock looks overpriced, trading on a FY12/13E P/E of 14.5x. We think the share price is unlikely to avoid a correction in the near term.

Earnings forecast summary Daiichi-Seiko Sales Operating profits Recurring profits Net profits EPS BPS Capex Dep R&D EBITDA 6640 ¥ mn YoY ¥ mn YoY Margin ¥ mn YoY ¥ mn YoY ¥ ¥ ¥ mn ¥ mn ¥ mn ¥ mn

2010/3 44,999 6.6% 7,417 116.7% 16.5% 7,023 114.9% 4,511 9.6% 296.3 1,811.1 6,582 5,094 1,070 12,511 2011/3 46,807 4.0% 7,478 0.8% 16.0% 6,717 -4.4% 4,569 1.3% 297.9 2,441.9 7,001 4,912 1,095 12,390 2011/12 31,721 -32.2% 3,182 -57.5% 10.0% 3,248 -51.6% 1,820 -60.2% 108.8 2,321.5 4,568 3,689 906 6,871 2012/12 41,174 -2.6% 526 -87.6% 1.3% 1,043 -75.9% -697 -128.7% -40.4 2,269.8 6,490 5,042 1,100 5,568 2013/12 New E 44,600 8.3% 3,220 512.6% 7.2% 3,200 206.9% 1,980 - 118.4 2,378.2 6,600 5,200 1,100 8,420 2012/12 CoE 45,000 6.4% 3,000 -29.3% 6.7% 2,800 -35.3% 1,800 -25.8% 107.6 - 6,600 5,200 - 8,200 2012/12 IBES 44,300 4.7% 2,760 -34.9% 6.2% 2,700 -37.6% 1,690 -30.4% 101.1 - - - - - 2014/12 New E 46,340 3.9% 4,050 25.8% 8.7% 4,030 25.9% 2,500 26.3% 149.5 2,517.7 7,000 5,600 1,100 9,650 2013/12 IBES 46,910 5.9% 3,420 23.9% 7.3% 3,370 24.8% 2,110 24.9% 126.2 - - - - - 2015/12 New E 47,140 1.7% 4,270 5.4% 9.1% 4,250 5.5% 2,700 8.0% 161.5 2,669.1 7,100 5,700 1,100 9,970 2012/12 1Q 9,650 -5.3% 134 -85.7% 1.4% 217 -80.4% 192 -79.9% ------2Q 10,219 6.8% 186 -82.1% 1.8% 111 -87.1% 119 -63.1% ------3Q 11,185 -1.7% 743 -49.3% 6.6% 608 -65.4% 138 -89.2% ------4Q 10,121 -6.1% -538 - -5.3% 107 -83.2% -1,146 ------2014/3 1QE 10,360 7.4% 440 228.0% 4.2% 435 100.4% 265 38.3% ------4QA 9,249 -4.2% -197 - -2.1% 370 70.5% 293 52.9% ------2QE 11,360 11.2% 990 433.1% 8.7% 985 791.3% 615 416.2% ------3QE 11,650 4.2% 920 23.8% 7.9% 915 50.5% 565 309.6% ------4QE 11,230 11.0% 870 - 7.7% 865 709.0% 535 ------

Source: Company data, IBES、Credit Suisse estimates

Page 10 of 30

Monday, 13 May2013

Japan Daily

NEUTRAL [V] Nissha Printing (7915) Risk of dependence on major clients comes to the surface TP JPY 1,660 ■ Impression of results/guidance: Negative Yohei Ohya 81 3 4550 7366 ■ FY3/13 sales of ¥89.4bn and operating losses of ¥6.8bn were broadly in line with our [email protected] forecasts (¥88.6bn and operating losses of ¥7.3bn). However, while FY3/14 guidance Akinori Kanemoto (assuming ¥95/$) calls for sales to rise sharply (by 45% YoY) to ¥130bn, the company 81 3 4550 7363 expects OP of only ¥4bn, far lower than both our forecast and the I/B/E/S consensus [email protected]

(¥8bn and ¥6.9bn, respectively). Although FY3/14 guidance factors in a ¥12.8bn YoY boost to OP from forex effects (OP forex sensitivity is around ¥900mn per one-yen change vs. the USD), it appears that the company expects this to wiped out by a

¥11.4bn drag from declines in device prices. ■ Near-term share price impact: Negative

■ At the results briefing (held the same day as the results announcement), the company suggested that it had broadly factored anticipated declines in device prices in FY3/14 into guidance. However, we believe that unit prices could still fall further. We think that

the company will continue to give in easily to pricing pressure due to its relationship with its customers, which is in part due to the advance payments it receives from major

clients. ■ Guidance factors in a ¥6.5bn YoY boost to OP from growth in device sales volume, but as the company expects sales at the devices segment to rise by ¥39.4bn, we get the impression that ¥6.5bn is rather conservative (the effective marginal profits ratio is around 20%), and considering that the share price has risen sharply recently, we see a near-term correction as unavoidable. ■ At the briefing, the company said that in response to demand for both 7.85-inch and 9.7-inch touch sensors manufactured using photolithography, it had raised its monthly production target from 32mn (4-inch equivalent) in 1H FY3/14 to 48mn by this October (monthly capacity is currently 24mn). ■ Capacity expansion had placed Nissha in a dangerous financial position, but the company has allayed these concerns via improved investment efficiency. In our view cash and equivalents (¥24bn at end-FY3/13), while not abundant, presents no problem for now as it corresponds to three months’ turnover. We regard diminished risk on the fund procurement front as a positive.

Earnings forecast summary Nissha Printing Sales Operating profits Recurring profits Net profits EPS BPS Capex Dep R&D EBITDA 7915 ¥ mn YoY ¥ mn YoY Margin ¥ mn YoY ¥ mn YoY ¥ ¥ ¥ mn ¥ mn ¥ mn ¥ mn

2009/3 127,767 25.7% 16,304 -2.8% 12.8% 15,494 -0.6% 8,690 -15.5% 201.0 1,902.1 24,165 7,892 1,365 24,196 2010/3 126,965 -0.6% 11,258 -30.9% 8.9% 12,061 -22.2% 6,934 -20.2% 160.4 2,051.1 15,071 9,132 2,601 20,390 2011/3 114,054 -10.2% -4,946 - -4.3% -5,396 - -2,466 - -57.3 1,867.9 11,020 10,338 2,477 5,392 2012/3 80,160 -29.7% -11,716 - -14.6% -11,320 - -28,683 - -668.4 1,141.4 6,724 8,599 2,543 -3,117 2013/3 E 88,620 10.6% -7,290 - -8.2% -6,540 - -7,140 - -166.6 976.1 17,200 10,100 3,000 2,810 2013/3 Actual 89,427 11.6% -6,783 - -7.6% -4,643 - -5,438 - -126.7 1,036.7 13,669 9,530 2,699 2,747 2013/3 CoE 86,500 7.9% -8,400 - -9.7% -7,000 - -7,800 - -182.0 - 17,000 11,000 3,000 2,600 2013/3 IBES 87,560 9.2% -7,560 - -8.6% -6,620 - -7,470 ------2014/3 E 123,300 39.1% 8,000 - 6.5% 7,960 - 6,450 - 150.6 1,127.9 6,000 12,000 3,000 20,000 2014/3 New CoE 130,000 45.4% 4,000 - 3.1% 4,400 - 3,000 - 69.9 - 14,000 12,000 2,500 16,000 2014/3 IBES 121,690 39.0% 6,910 - 5.7% 6,950 - 5,550 ------2015/3 E 126,350 2.5% 9,000 12.5% 7.1% 8,960 12.6% 7,270 12.7% 170.0 1,299.2 6,000 10,000 3,000 19,000 2013/3 1Q 16,336 -27.4% -2,922 - -17.9% -3,304 - -3,485 - -81.2 1,059.4 - 1,879 - -1,043 2Q 20,150 -6.6% -2,158 - -10.7% -2,566 - -2,834 - -66.0 982.8 - 2,169 - 11 3Q 27,881 44.3% 46 - 0.2% 1,598 - 1,450 - - - - 2,683 - 2,729 4QE 24,250 44.8% -2,260 - -9.3% -2,270 - -2,270 - - - - 3,369 - 1,109 4QA 25,060 49.7% -1,749 - -7.0% -371 - -569 - - - - 2,799 - 1,050 2014/3 1QE 25,410 55.5% -140 - -0.6% -150 - -120 - - - - 2,600 - 2,460 2QE 31,580 56.7% 2,260 - 7.2% 2,250 - 1,820 - - - - 2,800 - 5,060 3QE 35,320 26.7% 3,700 7943.5% 10.5% 3,690 130.9% 2,990 106.2% - - - 3,100 - 6,800 4QE 30,990 27.8% 2,180 - 7.0% 2,170 - 1,760 - - - - 3,500 - 5,680 Source: Company data, IBES、Credit Suisse estimates

Page 11 of 30

Monday, 13 May2013

Japan Daily

OUTPERFORM Nissan Motor (7201) FY3/13 results: when will "surplus" cash be returned to TP JPY 1,150 shareholders? ■ Results impression: Neutral Issei Takahashi 81 3 4550 7884 ■ Nissan reported FY3/13 consolidated OP of ¥523.5bn, below our estimate of ¥535.2bn [email protected] and the I/B/E/S consensus of ¥542.3bn (guidance ¥575.0bn). At the 3Q FY3/13 results

briefing in February, management expressed confidence in achieving guidance, but sales volumes and profits were significantly below target. We take a neutral view,

however, as we had anticipated the unfavorable results in advance. DPS is ¥25. ■ Guidance impression: slightly negative on profit guidance; dividend policy in focus

■ Nissan projects global retail sales volumes of 5.3mn units in FY3/14. The company targets consolidated OP of ¥700bn (guidance based on China consolidation), compared with our estimate of ¥800bn and the I/B/E/S consensus of ¥775.8bn. Nissan

projects ¥100 EPS, versus our estimate of ¥114 and the I/B/E/S consensus of ¥115. Nissan assumes ¥95/$. We take a slightly negative view on the profit target, but think the real focus is the dividend.

■ Nissan has set its FY3/14 dividend at ¥30 per share (30% dividend payout ratio). This is consistent with the Power 88 medium-term business plan, which specifies a "minimum" dividend payout ratio of 25%. ■ The next focus is the policy explained in the Power 88 plan to "return surplus cash to shareholders". The following points summarize our understanding of Nissan's explanation of its targeted net cash position: (1) 5–6% of automotive sales (i.e., ¥500– 600bn), (2) ¥0.8–1tn during unforeseen circumstances such as a financial crisis, and (3) on par with competitors. ■ Targets tend to be higher and more vague, but the company is generating the right conditions for a major dividend increase. Nissan had net cash of ¥915.9bn at end- FY3/13. FY3/14 FCF may exceed ¥300bn. Furthermore, the external environment has clearly improved compared with fall 2012. External factors are important in determining whether Nissan achieves a market share of 8% or operating margin of 8%, but the company can decide internally whether it will use surplus cash for dividend payments as promised. Assuming around ¥200bn of surplus cash is used for the dividend, DPS would be ¥70 and the current dividend yield would exceed 7%. ■ Short-term share-price impact: slightly negative ■ The I/B/E/S consensus for consolidated OP and EPS is unlikely to rise, so we think the market may take a negative view of the FY3/13 results and FY3/14 guidance.

Earnings forecast summary Sales Operating profit Recurring profit Net profit EPS ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) Consolidated Mar-12 A 9,409,026 7.2 545,839 1.6 535,090 -0.5 341,433 7.0 81.7 6.8 Mar-13 A 9,629,574 2.3 523,544 -4.1 529,320 -1.1 342,446 0.3 81.7 0.0 Mar-13 CS E 9,274,138 -1.4 535,188 -2.0 527,602 -1.4 326,748 -4.3 78.0 -4.5 CoE 9,815,000 4.3 575,000 5.3 545,000 1.9 320,000 -6.3 76.4 -6.5 IBES E 9,563,297 1.6 542,295 -0.6 541,075 1.1 332,719 -2.6 80.4 -1.6 Mar-14 CS E 9,679,487 0.5 800,000 52.8 793,000 49.8 480,026 40.2 114.5 40.2 CoE (new) 10,370,000 7.7 610,000 16.5 645,000 21.9 420,000 22.6 100.2 22.7 IBES E 10,371,231 8.4 775,789 43.1 767,705 41.9 475,067 42.8 114.5 42.5 Mar-15 CS E 10,367,167 7.1 854,000 6.7 847,000 6.8 514,206 7.1 122.7 7.1 IBES E 11,117,900 7.2 883,230 13.8 881,275 14.8 545,661 14.9 131.8 15.2 Source: Company data, I/B/E/S, Credit Suisse estimates

Page 12 of 30

Monday, 13 May2013

Japan Daily

UNDERPERFORM Mori Seiki (6141) FY3/13 results: Negative impression; valuations look high TP JPY 900 ■ Impression of results: Slightly negative Shinji Kuroda 81 3 4550 9994 ■ Mori Seiki released FY3/13 results at 1pm on 10 May. OP fell 39% YoY to ¥4.1bn. This [email protected] is above our estimate and guidance (both ¥4bn) but 7% below the IFIS consensus Yunchao Zhao (¥4.4bn). Benefits from yen depreciation had been expected, but there was drag from 81 3 4550 9903 lower revenue and increased costs. [email protected]

■ Impression of guidance: Negative ■ FY3/14 guidance is predicated on exchange rates of ¥95/$ and ¥125/€ and calls for

OP to grow 69% to ¥7.0bn. This is 22% below our estimate (¥9.0bn) and 19% below the IFIS consensus (¥8.6bn). The order climate is relatively robust, but orders are expected to sustain a roughly flat pace (i.e., sales are expected to decline YoY in real

terms, excluding forex impact). Moreover, not all of the benefits are expected to be retained in-house, given an increase in costs due to the launch of the new Tianjin plant and that some of the benefits of yen depreciation will be used to fund growth in market

share. ■ Short-term share price impact: Negative ■ Mori Seiki’s shares have gained a good reputation because high earnings forex sensitivity places the firm well to benefit from yen depreciation. However, forex sensitivity is declining and FY3/14 guidance is, while admittedly conservative, weaker than expected. The results briefing (also 10 May) left some areas of uncertainty. The shares trade on a P/E of 19.8x on FY3/14 EPS guidance (pre-tax) looks overvalued. We think the shares will be weighed down by profit taking initially.

Mori Seiki (6141) – earnings forecasts summary Sales Operating profit Recurring profit Net profit EPS ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) Consolidated Mar-13 A 148,559 -4.4 4,134 -39.1 5,005 -15.4 5,170 -8.0 47.3 -7.5 Mar-13 CS E 148,000 -4.7 4,000 -41.1 5,000 -15.5 5,500 -2.1 50.0 -2.1 CoE 150,000 -3.4 4,000 -41.1 4,000 -32.4 4,000 -28.8 36.6 -28.4 IFIS E 149,033 -4.0 4,389 -35.3 3,983 -32.6 4,042 -28.1 36.9 -27.9 Mar-14 CS E 161,000 8.4 9,000 117.7 9,700 93.8 7,900 52.8 71.9 52.0 CoE (new) 155,000 4.3 7,000 69.3 7,500 49.9 7,000 35.4 64.0 35.4 IFIS E 158,550 6.7 8,630 108.8 8,533 70.5 6,950 34.4 63.4 34.2 Mar-15 CS E 166,000 3.1 9,700 7.8 9,700 0.0 7,000 -11.4 63.7 -11.4 IFIS E 167,700 5.8 11,768 36.4 11,660 36.6 8,600 23.7 78.3 23.5 Source: Company data, IFIS, Credit Suisse estimates

Page 13 of 30

Monday, 13 May2013

Japan Daily

OUTPERFORM NSK (6471) FY3/13 results: Focus now on new medium-term business plan due TP JPY 800 out 15 May ■ Results impression: Positive Shinji Kuroda 81 3 4550 9994 ■ NSK announced FY3/13 results at 3pm on 10 May, with OP declining 27% YoY to [email protected] ¥32.4bn. OP came in 16% above guidance, which was raised from ¥27bn to ¥28bn on Yunchao Zhao 29 March. This outperformance reflected rising demand for automotive products. 81 3 4550 9903 ■ Guidance impression: Positive [email protected]

■ NSK projects FY3/14 OP of ¥49bn (+51% YoY) based on ¥90/USD and ¥120/EUR. OP guidance is 13% higher than our ¥43.5bn estimate and 12% above the ¥43.7bn IFIS

forecast. NSK sees growth coming on continued strong demand from overseas automakers, as well as a recovery in demand from Japanese automakers in China and an upturn in demand from 2H for high-margin industrial machinery bearings. It also

sees a boost of ¥8bn from the weak yen. NSK plans to raise its dividend from ¥11 to ¥12 per share.

■ Near-term share price impact: Positive ■ Earnings at bearings makers tend to recover more rapidly than forecast during periods of demand recovery. We had expected a similar trend this time, but earnings have been strengthening even more quickly than we anticipated. NSK is slated to announce a new medium-term business plan at its earnings briefing scheduled for 9am on 15 May. We will be watching for details of how it plans to drive earnings growth. We expect further gains for the share price, which does not look overvalued at a FY3/14E P/E of 15.7x.

NSK (6471) – earnings forecasts summary Sales Operating profit Recurring profit Net profit EPS ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) Consolidated Mar-13 A 732,842 0.0 32,361 -27.1 30,310 -27.8 15,739 -44.8 29.1 -44.8 Mar-13 CS E 716,700 -2.2 28,000 -37.0 27,500 -34.5 17,500 -38.6 32.4 -38.6 CoE 725,000 -1.1 28,000 -37.0 26,000 -38.1 13,000 -54.4 24.1 -54.4 IFIS E 725,250 -1.1 28,099 -36.7 25,875 -38.4 13,000 -54.4 24.1 -54.4 Mar-14 CS E 774,000 5.6 43,500 34.4 42,700 40.9 27,200 72.8 50.3 72.7 CoE (new) 790,000 7.8 49,000 51.4 46,000 51.8 30,000 90.6 55.6 90.7 IFIS E 770,750 5.2 43,709 35.1 38,125 25.8 25,300 60.7 46.8 60.7 Mar-15 CS E 810,000 4.7 50,000 14.9 49,200 15.2 31,400 15.4 58.1 15.4 IFIS E 795,400 3.2 52,251 19.5 44,025 15.5 29,175 15.3 54.0 15.3 Source: Company data, IFIS, Credit Suisse estimates

Page 14 of 30

Monday, 13 May2013

Japan Daily

UNDERPERFORM Kubota (6326) FY3/13 results: More positive than expected TP JPY 1,150 ■ Results impression: Neutral Shinji Kuroda 81 3 4550 9994 ■ Kubota announced FY3/13 results at 3:00pm on 10 May, with OP rising 7% YoY to [email protected] ¥113.2bn. OP was 6% higher than guidance and our estimate of ¥107bn, and 3% Yunchao Zhao above the IFIS forecast of ¥109.5bn. Overall, we view the results as neutral. 81 3 4550 9903 ■ Guidance impression: Positive [email protected]

■ Assuming forex rates of ¥95/USD (vs. ¥80 for FY3/13) and ¥125/EUR (¥103), Kubota projects FY3/14 OP of ¥160bn (+41% YoY), beat our estimate of ¥140bn by 14% and

the IFIS forecast of ¥142.6bn by 12%. OP guidance is also higher than the market consensus of ¥130bn. The OP guidance of ¥160bn appears to be based on underlying FY3/13 OP of around ¥120bn (after factoring in a drop in pension costs of ¥4.3bn and

a decline in goodwill for Kverneland of over ¥1bn), plus a boost from the weak yen of around ¥25bn and organic profit growth of ¥15bn.

■ Near-term share price impact: Positive ■ We had recommended a shift from Kubota shares, which have enjoyed a strong phase of gains, to Komatsu shares, which have clearly lagged the sector despite prospects for strong YoY profit growth. However, profit growth forecasts for Kubota (41% YoY) and Komatsu (44%) are now almost identical. Kubota does not look particularly attractive on a prospective P/E of 18x, but we see prospects for share price gains in the near term.

Kubota (6326) – earnings forecasts summary Sales Operating profit Recurring profit Net profit EPS ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) Consolidated Mar-13 A 1,167,628 15.8 113,161 7.1 120,463 19.3 73,688 19.7 58.7 20.5 Mar-13 CS E 1,157,000 14.8 107,000 1.2 114,000 12.9 70,000 13.7 55.7 14.4 Co E 1,160,000 15.1 107,000 1.2 110,000 9.0 68,000 10.5 54.1 11.2 IFIS E 1,157,654 14.8 109,522 3.6 112,569 11.5 69,015 12.1 54.8 12.4 Mar-14 CS E 1,269,000 8.7 140,000 23.7 145,000 20.4 90,500 22.8 72.1 22.8 CoE (new) 1,400,000 19.9 160,000 41.4 165,000 37.0 100,000 35.7 79.6 35.7 IFIS E 1,248,362 6.9 142,569 26.0 143,500 19.1 89,200 21.1 70.8 20.6 Mar-15 CS E 1,335,000 5.2 150,000 7.1 153,000 5.5 95,300 5.3 75.9 5.3 IFIS E 1,306,383 4.6 157,209 10.3 158,075 10.2 98,583 10.5 78.2 10.4

Source: Company data, IFIS, Credit Suisse estimates

Page 15 of 30

Monday, 13 May2013

Japan Daily

NEUTRAL Nabtesco Corporation (6268) FY3/13 results: Guidance premised on recovery in 2H TP JPY 1,650 ■ Results impression: Slightly positive Shinji Kuroda 81 3 4550 9994 ■ Nabtesco announced FY3/13 results at 4:00pm on 10 May, with OP declining 34% YoY [email protected] to ¥15bn. OP was roughly 6–7% higher than our estimate (¥14bn), guidance (¥14.2bn) Yunchao Zhao and the IFIS consensus forecast (¥14.1bn). Rising demand for hydraulic parts at a 81 3 4550 9903 Chinese subsidiary and higher plant utilization rates contributed to the outperformance. [email protected]

■ Guidance impression: Slightly positive ■ Nabtesco forecasts FY3/14 OP of ¥22bn (+47% YoY), 13% higher than our ¥19.5bn

estimate and 21% above the ¥18.2bn IFIS forecast. However, guidance counts heavily on recovery in 2H, with the company forecasting 1H OP of ¥7.4bn (–3% YoY) and 2H OP of ¥14.6bn (+97%). Also, although forex sensitivity is typically low, Nabtesco has

factored in a boost of ¥1.8bn from the weak yen. ■ Near-term share price impact: Slightly negative

■ We view results and guidance as positive. However, March orders (released on the same day as FY3/13 results) showed declines of 60% YoY and 5% MoM for the precision equipment business. Hydraulic equipment orders rose 5% YoY but slumped 25% MoM. Orders also declined for the second straight month in the railroad products business, falling 65% YoY. We think the stock looks pricey on a P/E of 19.6x FY3/14 EPS guidance and profit taking is likely to weigh on the share price.

Nabtesco (6268) – earnings forecasts summary Sales Operating profit Recurring profit Net profit EPS ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) Consolidated Mar-13 A 179,543 -9.6 15,013 -34.3 17,890 -27.4 13,269 -10.1 104.6 -10.4 Mar-13 CS E 179,000 -9.8 14,000 -38.8 16,700 -32.3 12,100 -18.0 95.3 -18.3 CoE 180,500 -9.1 14,200 -37.9 16,400 -33.5 12,000 -18.7 94.6 -19.0 IFIS E 180,138 -9.3 14,086 -38.4 16,313 -33.8 11,638 -21.1 91.4 -21.7 Mar-14 CS E 188,000 4.7 19,500 29.9 22,400 25.2 14,300 7.8 112.7 7.8 CoE (new) 201,000 12.0 22,000 46.5 25,100 40.3 15,900 19.8 125.3 19.8 IFIS E 190,838 6.3 18,157 20.9 20,338 13.7 13,463 1.5 108.2 3.5 Mar-15 CS E 197,000 4.8 21,100 8.2 23,900 6.7 15,200 6.3 119.8 6.3 IFIS E 202,688 6.2 21,469 18.2 23,600 16.0 15,588 15.8 124.8 15.4 Source: Company data, IFIS, Credit Suisse estimates

Page 16 of 30

Monday, 13 May2013

Japan Daily

NEUTRAL Calbee (2229) FY3/13 results: Bullish profit guidance TP JPY 7,300 ■ Impression of results: Slightly positive Satsuki Kawasaki 81 3 4550 9941 ■ FY3/13 OP came in at ¥15.8bn (+29% YoY), slightly below our estimate (¥16bn) but [email protected] basically in line with expectations. 4Q sales beat the firm’s previous target, but there Taketo Yamate was growth in advertising and other up-front costs and the firm focused spending on 81 3 4550 9963 employee incentives. The growth in sales promotion costs looks somewhat limited [email protected]

relative to the strategic overhead spending. 4Q profits effectively set the stage for profit growth in FY3/14.

■ Bullish profit guidance: FY3/14 guidance calls for OP to grow 14% YoY to ¥18bn, above our estimate for ¥17.2bn. Despite the groundwork laid in 4Q FY3/14, we think guidance looks bullish given expected headwinds like a ¥1.5bn increase in raw

ingredient costs and an expected loss of ¥0.5bn at the Chinese business due to up- front investment. Management expects profit growth to be driven by sales growth (+¥4.6bn) and cost improvement (+¥2.1bn). We think these assumptions need to be

examined carefully given that the expected benefit from cost improvement exceeds the FY3/13 figure in real terms and it is unclear to what extent domestic sales promotion spending can actually be restricted. We intend to review our estimates following further research. ■ Start of business collaboration in North America: Shipments of Jagabee products in North America started in April via a collaboration with PepsiCo. The initial unit retail price was $1.49, but we understand this was reduced to $1.09 following negotiations (the price at which Calbee ships to PepsiCo was unchanged). The reduced retail price is positive given that the firm believes a sub-$1 price is feasible if backed by sales promotions. There will likely be plenty of interest in how sales trends develop.

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 Mar-12 Actual 163,268 5.0 12,247 14.3 12,486 18.1 7,096 66.8 220.3 50.4 42.0 19.1 Mar-13 Actual 179,411 9.9 15,790 28.9 17,127 37.2 9,440 33.0 288.7 31.1 62.0 32.9 CoE 179,900 10.2 16,000 30.6 16,600 32.9 8,900 25.4 272.6 23.8 50.0 34.8 CoE 175,300 7.4 15,800 29.0 16,400 31.3 8,700 22.6 265.8 20.7 50.0 35.7 IBES E 178,133 9.1 16,033 30.9 16,700 33.7 8,867 25.0 271.7 23.3 50.0 34.9 Mar-14 CS E 191,300 6.6 17,200 8.9 17,600 2.8 10,200 8.1 311.6 7.9 60.0 30.5 CoE (NEW) 190,000 5.9 18,000 14.0 18,000 5.1 10,400 10.2 315.8 9.4 72.0 30.1 IBES E 189,900 6.6 17,133 6.9 17,650 5.7 10,200 15.0 312.2 14.9 59.0 30.4 Mar-15 CS E 201,600 5.4 19,400 12.8 19,800 12.5 11,500 12.7 351.3 12.7 70.0 27.0 IBES E 203,967 7.4 19,600 14.4 20,000 13.3 11,667 14.4 357.1 14.4 68.0 26.6 Source: Company data, IBES, Credit Suisse estimates

Page 17 of 30

Monday, 13 May2013

Japan Daily

Yakult Honsha (2267) (from Underperform) NEUTRAL Upgrade to NEUTRAL; Positive on better cost awareness TP JPY (from 2,700) 4,100 ■ Upgrade to NEUTRAL: We raise our TP from ¥2,700 to ¥4,100 (potential return: −9%) Satsuki Kawasaki 81 3 4550 9941 and upgrade our rating from Underperform to NEUTRAL. We raise our FY3/14 OP [email protected] estimate to ¥29.8bn (+29% YoY; previous estimate: ¥23.7bn), reflecting FY3/13 results and current forex rates. FY3/13 results and FY3/14 guidance gave us the impression Taketo Yamate 81 3 4550 9963 that Yakult is more focused on profitability. The shares still do not appear undervalued, [email protected] but we believe this new cost awareness makes the company more likely to grow profits

in its strong overseas business. We therefore see limited share-price downside. ■ Positive results with good cost awareness: Yakult Honsha reported FY3/13 OP of

¥23.1bn (+10.8% YoY), above our estimate of ¥20.5bn and company guidance of ¥21.0bn. Yakult more than offset the fall in pharmaceutical profits with a strong performance overseas and cost cuts. We take a positive view on the results and better

cost awareness. The FY3/14 OP guidance of ¥29bn (+25.7% YoY) is above the I/B/E/S consensus (¥25.2bn). This equates to 11% earnings growth if we exclude the boost from forex effects (¥3.3bn). We still see potential for a decline in the pharmaceutical

business, but cost assumptions appear conservative. We see room for a further ¥2bn increase in earnings at current forex levels and think Yakult's profit guidance is achievable. ■ Risks: Risks include (1) a sudden change in the Chinese business environment, (2) sharp fluctuations in forex rates (particularly vs. the Chinese yuan, Mexican peso, and Brazilian real), and (3) a TOB by Danone. ■ Valuation: We base our ¥4,100 TP on theoretical P/B derived from ROE and the cost of equity. We use our FY3/14 forecasts, an equity risk premium of 6.5%, and an assumed risk-free rate of 0.73%. We assign a 60% premium to theoretical P/B of 1.9x. Implied P/E is 34x (based on our FY3/14 EPS forecast).

Financial and valuation metrics Share price performance Year 3/13A 3/14E 3/15E 3/16E Price (LHS) Rebased Rel (RHS) Revenue (¥ bn) 319.2 354.8 370.1 388.8 6000 5000 180 Operating profit (¥ bn) 23.1 29.8 33.6 38.1 4000 130 3000 Recurring profit (¥ bn) 29.4 35.9 39.6 44.1 2000 80 Net income (¥ bn) 16.4 21.1 23.5 26.5 EPS (¥) 95.0 119.9 133.6 150.6 Change from previous EPS (%) n.a. 22.0 17.5 IBES Consensus EPS (¥) n.a. 104.3 114.8 127.2 EPS growth (%) 22.9 26.2 11.4 12.8 The price relative chart measures performance P/E (x) 40.0 37.3 33.5 29.7 against the TOPIX which closed at 1210.6 on Dividend yield (%) 0.60 0.54 0.60 0.67 10/05/13 EV/EBITDA(x) 14.7 14.8 13.5 12.3 On 10/05/13 the spot exchange rate was ¥101.05/US$

P/B (x) 2.5 2.8 2.6 2.4 Performance 1M 3M 12M ROE(%) 6.7 7.8 8.2 8.6 AbsoluteOver (%) 1.5 27.6 49.1

Net debt/equity (%) net cash net cash net cash net cash Relative (%) -6.5 1.2 -9.1 Source: Company data, Thomson Reuters, IFIS, Credit Suisse estimates.

Page 18 of 30

Monday, 13 May2013

Japan Daily

Pharma sector MARKET WEIGHT Results and briefings: Tsumura, Dainippon Sumitomo, Shionogi,

Taisho Pharmaceutical ■ Tsumura & Co (4540, OUTPERFORM, TP ¥3,800): Tsumura held a results briefing at Fumiyoshi Sakai 81 3 4550 9737 9am on 10 May. We take a positive view on the results. Botanical ingredient import [email protected] prices driven higher by the weak yen had been a concern, but domestic demand for prescription kampo medicines is expected to continue growing at around 10% per

annum, which is likely to absorb any cost increases and allow it to maintain sales and profit growth. We think the market could become more interested in Tsumura as a

specialty pharmaceutical company that returns stable growth. The company's drug fostering efforts for kampo medicines in Japan may now turn to oncology. Japanese doctors are particularly interested in rikkunshito, goshajinkigan, and hangeshashinto that alleviate cancer chemotherapy side effects. Overseas, phase 2 trials are underway

in the US on the use of daikenchuto to treat postoperative ileus, irritable bowel syndrome, and Crohn's disease. Tsumura shares have been trading at around ¥3,200 because of concerns over the weak yen, but we think such concerns are likely to prove

unfounded as it cuts costs through improved productivity. ■ Dainippon Sumitomo Pharma (DSP; 4506, UNDERPERFORM, TP ¥980): DSP held a results briefing at 1pm on 10 May. We take a positive view for the time being. In terms of the share price, we think the market could focus on the development of the novel anticancer BBI608 by DSP, Japan's oldest bio-venture. We await the presentation of BBI608 phase 1 data on 15 May at the American Society of Clinical Oncology (ASCO) meeting. The share price has risen on expectations for these data and we think that current earnings and valuations will not affect share price trends. ■ Shionogi (4507, NEUTRAL, TP ¥1,700): Shionogi held a results briefing at 3pm on 10 May. We take a positive view. President Isao Teshirogi commented that the FY3/14 guidance represented the minimum and there was room for a further ¥5bn in OP if the company receives higher royalties on the cholesterol-lowering drug Crestor and cuts costs across the company. Shionogi has set conservative first-year sales guidance of ¥5.5bn for Osphena that is to launch in the US on 3 June for the treatment of dyspareunia (painful intercourse) due to menopause. We think market expectations are quite high. Although Shionogi still has to get through the Crestor US patent expiry in 2016, share-price gains could pick up again if Osphena and the HIV drug dolutegravir are thought to have blockbuster potential.

Tsumura (4540) – Earnings summary Sales Operating profit Recurring profit Net profit EPS DPS P/E ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) ¥ (x) 3/13 A 105,638 10.7 23,124 8.9 24,310 11.6 15,373 14.4 218.0 14.4 62.0 14.8 3/13 CS E 105,000 10.0 23,000 8.3 23,100 6.0 14,500 7.9 205.6 7.9 62.0 15.7 CoE 104,500 9.5 22,800 7.4 22,900 5.1 14,400 7.2 204.2 7.2 62.0 15.8 IBES E 105,130 10.1 23,132 8.9 - - 14,720 9.6 207.9 9.2 61.8 15.5 3/14 CS E 114,000 8.6 26,000 13.0 26,200 13.4 16,500 13.8 234.0 13.8 70.0 13.8 CoE 112,000 6.0 24,700 6.8 25,100 3.2 16,300 6.0 231.1 6.0 64.0 14.0 IBES E 112,110 6.6 25,073 8.4 - - 15,797 7.3 222.4 7.0 64.3 14.5 3/15 CS E 122,000 7.0 28,000 7.7 28,200 7.6 17,700 7.3 251.0 7.3 80.0 12.9 IBES E 116,967 4.3 25,987 3.6 - - 16,346 3.5 231.4 4.0 68.8 13.9

Source: Company data, IBES, Credit Suisse estimates

Page 19 of 30

Monday, 13 May2013

Japan Daily

UNDERPERFORM Isetan Mitsukoshi Holdings (3099) Results reveal unrealized losses in place of unrealized gains TP JPY 740 ■ Results impression and near-term share price impact: Neutral Taketo Yamate 81 3 4550 9963 ■ FY3/13 results unsurprising: FY3/13 consolidated OP rose 12% YoY to ¥26.6bn, [email protected] finishing slightly ahead of ¥25.0bn guidance and our ¥25.7bn forecast. The gap Hiroko Yamada between the results and our forecasts is mainly attributable to better-than-expected 81 3 4550 7478 performance in streamlining expenses at the firm’s domestic department stores. Isetan [email protected]

Mitsukoshi, however, booked impairment losses (¥6.4bn) for Mitsukoshi stores in Nagoya and Hiroshima in FY3/13. Isetan Mitsukoshi tends to be viewed as a stock with unrealized real estate gains, but its FY3/13 results revealed not unrealized gains but

unrealized losses. ■ FY3/14 OP guidance calls for 13% increase: FY3/14 guidance calls for a 13% YoY

increase in consolidated OP to ¥30.0bn. The OP guidance is 4–7% lower than our ¥32.5bn forecast and ¥31.4bn I/B/E/S consensus. However, the target appears reasonable as we were expecting the initial target to be set around that level. Although

the sales projection (+3.4% for the parent) does not appear particularly conservative, the firm’s cost estimates probably have a buffer built in, as has been the case in the past. ■ EPS outlook hinges on contraction of losses at Osaka store: FY3/14 guidance calls for ¥55.8 in EPS. However, this is substantially higher than our ¥38.8 EPS forecast and ¥45.3 I/B/E/S consensus, both of which put FY3/14 OP above guidance. We think this is largely attributable to equity investments swinging to a profit of ¥3.5bn in FY3/14 from a sizable loss in FY3/13 (−¥5.8bn; equity-method income not eligible for tax effect). This could probably be taken to indicate that the substantial losses at JR Osaka Mitsukoshi Isetan, which wrote off profit contribution from an equity-method affiliate in Taiwan, would shrink in FY3/14. However, this view may be slightly optimistic. We intend to review our forecasts, but still see the current share price as exceeding the levels that could be explained through indicators for prospective earnings.

Earnings forecasts As of May-10 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 1,239.9 1.6 23.8 116.8 38.5 41.9 58.9 2,130.7 149.3 2,130.8 10.0 6.5 13/3 Actual 1,236.3 -0.3 26.6 11.8 34.2 -11.0 25.3 -57.1 64.1 -57.1 10.0 21.2 14/3 CS E 1,265.1 2.3 32.5 22.0 31.1 -9.1 15.3 -39.5 38.8 -39.5 10.0 40.1 CoE 1,280.0 3.5 30.0 12.6 33.0 -3.6 22.0 -13.0 55.8 -13.0 10.0 27.9 IBES E 1,253.3 1.4 31.4 18.0 - - 17.9 -29.4 45.3 -29.4 10.5 34.3 15/3 CS E 1,249.4 -1.2 30.0 -7.7 28.4 -8.7 14.8 -3.3 37.5 -3.3 10.0 41.4 IBES E 1,253.8 0.0 33.5 6.8 - - 19.9 11.6 50.5 11.6 11.1 30.7

Source: Company data, I/B/E/S, Credit Suisse estimates

Page 20 of 30

Monday, 13 May2013

Japan Daily

Convenience store flash report (Apr 2013) MARKET WEIGHT Inclement weather a drag; only Seven-Eleven Japan manages same-store sales growth ■ Summary: April same-store sales at major convenience store chains were below prior- Taketo Yamate 81 3 4550 9963 year levels, with the exception of Seven Eleven Japan (SEJ). Not only did the earlier- [email protected] than-usual blooming of cherry blossoms this year push demand from flower-viewing parties forward to March, the weather on weekends in April was consistently Hiroko Yamada 81 3 4550 7478 unfavorable. Once again, cigarettes weighed down same-store sales by around 1%. [email protected] Excluding these factors, the overall trend was not as weak as the figures may initially

look. ■ Seven & i Holdings (SEJ; 3382, ¥3,840, OUTPERFORM, TP ¥4,300): SEJ reported an

0.1% YoY increase in same-store sales (customer footfall up 0.6%, average customer

spend down 0.5%). SEJ maintained its lead over rivals as it emerged as the sole chain to secure same-store sales growth (more than 1%) excluding the adverse impact (about 1%) of a decline in cigarette sales. In the two months from the start of the new

fiscal year, SEJ raised the number of domestic stores by 235 (83 in the new operating territory of Shikoku). ■ Lawson (2651, ¥7,720, NEUTRAL, TP ¥7,200): Lawson struggled as same-store sales fell 5.1% YoY on a consolidated basis (customer footfall down 3.1%, average customer spend down 2.1%). In addition to the negative sales impact from cigarettes (around 1.5%), a snapback decline in ticket sales (roughly 1.5%) probably weighed on Lawson’s performance. Adjusting for these factors, we estimate the same-store sales decline at around 2%. Performance at consolidated subsidiary Ninety-nine Plus remained sluggish as same-store sales declined 6%. ■ FamilyMart (8028, ¥4,575 OUTPERFORM, TP ¥5,000): FamilyMart reported a 1.6% YoY decline in same-store sales (customer footfall down 1.8%, average customer spend up 0.2%). Stripping out the adverse impact of lower cigarette sales, FamilyMart’s performance appears reasonable, particularly in light of inclement weather in April. The chain bolstered its premium chicken products, which went out of stock in 2H 2012. Sales of fresh-cut vegetables remained strong. FamilyMart has opened 75 new stores since the start of the new fiscal year, which is just a fraction of its annual target of 1,500 (new store openings are normally concentrated in August and February). Although the sample size is small, the new stores appear to have cleared the annual target for average daily sales (¥450,000).

Page 21 of 30

Monday, 13 May2013

Japan Daily

OUTPERFORM [V] Tokyo Tatemono (8804) 1Q results: Slightly positive; NP run rate reaches 67% of full-year TP JPY 1,400 target ■ Results impression: Slightly positive Masahiro Mochizuki 81 3 4550 7389 ■ Although 1Q OP was in line with our estimates, 1Q NP of ¥5.4bn already accounts for [email protected] the bulk of the firm’s ¥8.0bn full-year NP target. The high NP run rate apparently stems Atsuro Takemura from negative goodwill generated at subsidiaries. First-quarter OP of ¥5.6bn finished 81 3 4550 7372 largely in line with our ¥3.0bn forecast. Although 1Q OP fell by ¥14.9bn YoY, the profit [email protected]

decline mostly owes to capital gains of around ¥16bn booked in 1Q FY12/12. ■ Effect from qualitative and quantitative changes in the foreseeable future

■ Tokyo Tatemono expects to complete the Otemachi 1-6 project in September 2013. The company has also made steady progress in leasing office space in Nakano Central Park and Tokyo Square Garden. We expect qualitative and quantitative

changes in the firm’s earnings once these major office buildings start contributing to results.

■ Progress in leasing office space is currently over 80% for Nakano Central Park and over 60% for Tokyo Square Garden. In view of its successful leasing, Tokyo Tatemono has increased asking rents for office space.

Tokyo Tatemono (8804) – Consolidated earnings forecast summary Sales Operating profit Recurring profit Net profit EPS ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) Consolidated Dec-12 Actual 194,161 16.3 30,892 NM 21,741 NM 10,243 NM 23.8 NM Dec-13 1Q Actual 57,450 0.0 5,610 -72.7 3,616 -80.0 5,400 -52.8 - - 1Q CS E 39,500 -31.3 3,000 -85.4 700 -96.1 400 -96.5 - - Dec-13 CS E 219,700 13.2 21,400 -30.7 13,000 -40.2 8,000 -21.9 18.6 -21.9 CoE 215,000 10.7 21,000 -32.0 12,000 -44.8 8,000 -21.9 18.6 -21.9 Shikiho E 215,000 10.7 21,000 -32.0 12,000 -44.8 8,000 -21.9 18.6 -21.9 IBES E 215,702 11.1 21,364 -30.8 NA NA 7,972 -22.2 18.6 -21.6 Dec-14 CS E 207,700 -5.5 35,200 64.5 18,700 43.8 11,400 42.5 26.5 42.5 IBES E 224,131 3.9 32,220 50.8 NA NA 8,939 12.1 22.2 19.2 Dec-15 CS E 225,200 8.4 41,200 17.0 26,400 41.2 16,200 42.1 37.6 42.1

Source: Company data, Toyo Keizai "Shikiho" (Japan Company Handbook), I/B/E/S, Credit Suisse estimates

Page 22 of 30

Monday, 13 May2013

Japan Daily

OUTPERFORM Daiwa House Industry (1925) Upbeat FY3/13 results: Dividend hiked; look for further profit TP JPY 2,400 growth in new medium-term plan ■ Impression of results: Neutral Masahiro Mochizuki 81 3 4550 7389 ■ Daiwa House reported FY3/13 OP of ¥128.0bn (guidance ¥125.0bn; our forecast [email protected] ¥130.1bn; I/B/E/S consensus ¥128.2bn), largely in line with market expectations. Atsuro Takemura ■ Impression of guidance: Neutral 81 3 4550 7372 [email protected] ■ FY3/14 guidance calls for OP of ¥140.0bn (our forecast ¥141.7bn, I/B/E/S consensus ¥139.6bn), also more or less in line with market forecasts. However, since the company tends to be conservative in its projections, we believe guidance leaves room

for earning upside. Although orders at housing makers have recently been growing at a double-digit pace, guidance only assume a 3.6% YoY rise at the parent level in FY3/14. Consequently, we believe orders are likely to exceed guidance and see

above-target orders driving sales and earnings upside. ■ Dividend hiked; new medium-term plan likely to be released with 2Q results

■ We believe the announcement of a dividend hike and prospects of long-term profit growth are positive for the shares. Daiwa House raised its FY3/14 DPS projection to ¥38 (from ¥35 in FY3/13). Based on management’s forecasts, the shares are trading at a FY3/14 P/E of 17.4x and the dividend yield 1.7%. Daiwa House’s current medium- term plan calls for FY3/15 OP of ¥120.0bn, but the company achieved that target ahead of schedule. The company is scheduled to release a new-medium target plan with 2Q results. We expect valuations to rise further on prospects of profit growth driven by (1) higher orders for retail and logistics facilities, and (2) balance sheet expansion.

Daiwa House Industry (1925) – Consolidated earnings forecast summary Sales Operating profit Recurring profit Net profit EPS ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) Consolidated Mar-12 Actual 1,848,797 9.4 114,955 31.1 108,506 37.3 33,200 21.8 57.4 21.8 Mar-13 Actual 2,007,989 8.6 128,024 11.4 145,395 34.0 66,274 99.6 114.5 99.6 Mar-13 CS E 1,985,500 7.4 130,100 13.2 126,900 17.0 64,900 95.5 112.1 95.5 Co E 1,970,000 6.6 125,000 8.7 121,000 11.5 62,000 86.7 107.1 86.8 Shikiho E 1,970,000 6.6 125,000 8.7 121,000 11.5 62,000 86.7 107.1 86.7 IBES E 1,979,297 7.1 128,227 11.5 NA NA 66,450 100.2 113.6 98.1 Mar-14 CS E 2,093,200 4.2 141,700 10.7 138,700 -4.6 77,900 17.5 134.6 17.5 Co E (new) 2,400,000 19.5 140,000 9.4 135,000 -7.1 73,000 10.1 126.2 10.2 Shikiho E 2,350,000 17.0 135,000 5.4 131,000 -9.9 70,000 5.6 121.0 5.7 IBES E 2,286,483 13.9 139,673 9.1 NA NA 79,150 19.4 134.8 17.7 Mar-15 CS E 2,204,700 5.3 153,400 8.3 162,400 17.1 94,700 21.6 163.6 21.6

Source: Company data, Toyo Keizai "Shikiho" (Japan Company Handbook), I/B/E/S, Credit Suisse estimates

Page 23 of 30

Monday, 13 May2013

Japan Daily

Chemical sector: First take on FY12 results MARKET WEIGHT Positive for Toray and Tosoh ■ (4183, UNDPERFORM, TP ¥210): Neutral Masami Sawato 81 3 4550 9729 ■ Our impression of Mitsui Chemicals’ FY3/14 OP guidance is neutral, as the company’s [email protected] ¥28bn projection is basically on par with the I/B/E/S consensus estimate of ¥28.9bn. Maiko Saito The company’s NP guidance is low, though, at only ¥5bn. Management is projecting a 81 3 4550 9936 ¥23.7bn YoY increase in OP, stemming from (1) a change in fiscal year-end for [email protected]

overseas subsidiaries (+¥4.1bn); (2) the absence of adverse effects from the Iwakuni- Ohtake Works' explosion and fire (+¥8.4bn); cost savings (about +¥5bn); and yen depreciation (+¥6bn). While capacity expansion overseas should provide a boost to

volume, this is likely to be offset by contraction in phenol margins and further

deterioration in supply–demand conditions for purified terephthalic acid (resulting from increased capacity).

■ Toray Industries (3402, OUTPERFORM, TP ¥610): Positive ■ We take a positive view of Toray Industries’ FY3/14 OP guidance, as at ¥120bn it is 16% higher than the I/B/E/S consensus of ¥103.4bn. Of the ¥36.6bn YoY increase in forecast OP, Toray expects ¥9.8bn to come from the fibers & textiles segment and looks for ¥12bn to come from IT-related products. The company sees these two segments together generating 60% of its OP growth. Toray expects growth in garment sales to SPAs to be the driving force behind increased profit at the fibers & textiles segment; it sees such sales rising from approximately ¥290bn in FY3/13 to ¥330– 340bn in FY3/14. In IT-related products, Toray anticipates demand growth for touch panel materials. ■ Tosoh (4042, UNDERPERFORM, TP ¥280): Positive ■ Our take on Tosoh’s FY3/14 OP guidance is positive, as the company’s ¥40bn target is 23.5% higher than the I/B/E/S consensus of ¥32.4bn. Of the ¥15.5bn YoY increase Tosoh is projecting, it expects contributions of ¥4bn from the disappearance of VCM plant accident costs; ¥2bn from a fall in scheduled repair costs; and ¥2bn from lower variable costs for urethane-feedstock (¥2bn). It also anticipates boosts from caustic soda and polyethylene price hikes. Tosoh shares have been on the rise since the company raised FY3/13 guidance on 23 April. With the announcement of FY3/14 guidance calling for steep growth in profit, however, we think robust earnings are pretty much priced in.

Earnings summary Share price Rating Target FY12OP FY2013 OP estimates FY2014 OP estimates EPS CSE PER CSE (¥bn) 9-May price Actual CSE Co.E IBESE CSE IBESE FY12 FY13 FY14 FY12 FY13 FY14 4042 Tosoh 338 UNDERPERFORM 280 24.5 30.0 40.0 32.4 35.0 36.0 16.7 23.4 28.1 20.2 14.5 12.0 4183 Mitsui Chemicals 240 UNDERPERFORM 210 4.3 26.0 28.0 28.9 36.0 40.1 -9.9 9.9 15.8 - 24.3 15.2 3402 Toray 682 OUTPERFORM 610 83.4 102.0 120.0 103.4 114.0 116.7 30.1 38.1 43.0 22.7 17.9 15.9

Source: Company data, IBES, Credit Suisse estimates

Page 24 of 30

Monday, 13 May2013

Japan Daily

OUTPERFORM Sumitomo Electric Industries (5802) Potential OP upside of ¥50bn; margin deterioration unlikely amid TP JPY 1,500 rising production ■ Results impression: Guidance quite conservative, but with EBITDA above consensus Shinya Yamada 81 3 4550 9910 ■ Sumitomo Electric Industries released FY3/14 OP guidance of ¥100bn, falling below [email protected] the consensus forecast of ¥118.4bn and our ¥140.0bn estimate. However, SEI expects Kazumasa Okumoto depreciation to increase ¥19.4bn YoY to ¥110bn to reach its highest level to date, 81 3 4550 7266 handily eclipsing our ¥90bn estimate and probably surpassing the consensus as well. [email protected]

On this basis we see EBITDA having effectively beaten the consensus. ■ Further upside potential on FY3/14 guidance

■ SEI assumes ¥90/$ and ¥120/€ in FY3/14. We estimate that every ¥1 fluctuation versus the dollar affects OP by ¥1.3bn and every change versus the euro affects its by ¥200mn, so there is upside potential of ¥16.7bn in OP if we use current forex rates

(¥101/$, ¥132/€). ■ We also think SEI has set relatively conservative assumptions for the auto business.

The company expects global auto production to increase 2.1% YoY, far below our estimate of 4%. SEI projects higher share, 5% growth in wire harness sales volumes, and increased production, yet assumes that profit margins will deteriorate. This scenario appears highly improbable. The company explained that OP would deteriorate (5.0% in FY3/13, 4.7% in FY3/14) because depreciation and R&D spending will increase (total forecast increase: ¥11bn), but we think OPM before depreciation and R&D expense is unlikely to deteriorate (from 14.5% to 13.7%) when production is increased. ■ Margins actually correlate closely with production, improving the last time production was increased and deteriorating when production was cut (Figure 1). We attribute the improvement to higher capacity utilization. We expect YoY upturn in FY3/14 following the Chinese boycott of Japanese products and therefore think margins are unlikely to contract. The last time production was increased (FY3/11), OPM before depreciation and R&D expense was 16.1%. This time, SEI's guidance of ¥171.5bn in OP before depreciation and R&D expense would increase ¥30.1bn to ¥201.6bn if the company could record the same OPM. SEI also projects a small OP increase of ¥1.9bn to ¥17.0bn (¥18.5bn in FY3/11) for the cemented carbide tools business (industrial materials), which has recovered sharply since March. We see ¥5–10bn profit upside in this segment as well. Combining these factors, we see around ¥50bn potential upside, including ¥16.7bn from yen depreciation, ¥30.1bn from a higher margin in the auto business, and ¥5–10bn from potential upside in industrial materials. ■ Short-term share-price impact: May be negative over the short term, but recommend accumulating on dips if share price drops ■ If the share price falls because the market takes a dislike to higher depreciation, we expect a sharp rebound as seen with shares a few years ago (at the FY3/06 results release). Therefore, we see opportunities to accumulate. We maintain our OUTPERFORM rating. Earnings forecast summary Sales Operating profit Recurring profit Net profit EPS ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) Consolidated Mar-11 2,033,827 103,810 129,099 70,614 89.0 Mar-12 2,059,344 1.3 86,946 -16.2 106,696 -17.4 58,861 -16.6 74.2 -16.6 Mar-13 A 2,159,942 4.9 76,790 -11.7 94,116 -11.8 37,955 -35.5 47.9 -35.5 Mar-14 CS E 2,350,000 8.8 140,000 82.3 158,000 67.9 98,000 158.2 123.5 158.2 CoE (new) 2,400,000 11.1 100,000 30.2 120,000 27.5 60,000 58.1 75.6 58.1 IBES E 2,277,392 5.4 118,417 54.2 138,792 47.5 78,136 105.9 99.3 107.5 Mar-15 CS E 2,450,000 4.3 160,000 14.3 180,000 13.9 112,000 14.3 141.2 14.3 IBES E 2,360,700 3.7 135,000 14.0 154,600 11.4 86,756 11.0 110.9 11.6 Source: Company data, I/B/E/S, Credit Suisse estimates

Page 25 of 30

Monday, 13 May2013

Japan Daily

NEUTRAL [V] Toho Zinc (5707) Resources segment still a drag TP JPY 460 ■ Guidance impression: Negative Kazumasa Okumoto 81 3 4550 7266 ■ Toho Zinc’s FY3/14 OP guidance is ¥4.1bn, well below our forecast (¥7.5bn), [email protected] conveying a negative impression. The main disparity between guidance and our Shinya Yamada forecast apparently relates to the resources business. Whereas we look for OP of 81 3 4550 9910 ¥2.7bn at the resources segment, the company appears to be expecting an operating [email protected]

loss of around ¥2bn. Moreover, if we revised the company’s assumptions for zinc and lead prices, and its forex assumption (Figure 1) to current levels, FY3/14 OP guidance would come to only around ¥3bn.

■ Near-term share price impact: Negative ■ The stock looks overvalued on a P/E of 31x its EPS forecast of ¥12.52, and with no

prospect of the resources business moving back into the black in addition to softening resources prices, we expect the share price to react negatively.

Earnings forecast summary Sales Operating profit Recurring profit Net profit EPS ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) Consolidated Mar-11 103,628 8,497 8,725 7,545 55.6 Mar-12 105,914 2.2 2,802 -67.0 2,875 -67.0 1,005 -86.7 7.4 -86.7 Mar-13 A 103,654 -2.1 534 -80.9 2,636 -8.3 -5,156 NM -38.0 NM Mar-14 CS E 119,300 15.1 7,490 1,302.6 7,550 186.4 5,647 NM 41.6 NM CoE (new) 129,000 24.5 4,100 667.8 4,700 78.3 1,700 NM 12.5 NM IBES E 118,650 14.5 6,445 1,106.9 6,275 138.1 4,474 NM 32.9 NM Mar-15 CS E 124,800 4.6 10,590 41.4 10,650 41.1 8,252 46.1 60.8 46.1 IBES E 122,250 3.0 9,395 45.8 9,275 47.8 6,726 50.3 49.5 50.4

Source: Company data, I/B/E/S, Credit Suisse estimates

Page 26 of 30

Monday, 13 May2013

Japan Daily

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

Companies Mentioned (Price as of 10-May-2013)

Panasonic Corporation (6752.T, ¥749) Square Enix Holdings (9684.T, ¥1,240) Hitachi (6501.T, ¥645) Mitsubishi Heavy Industries (7011.T, ¥695) Dainippon Screen Mfg. (7735.T, ¥536) Nippon Telegraph and Telephone (9432.T, ¥5,080) KONICA MINOLTA, INC. (4902.T, ¥759) NEXON (3659.T, ¥1,192) Dai-ichi Seiko (6640.T, ¥1,548) Nissha Printing (7915.T, ¥2,186) Nissan Motor (7201.T, ¥1,063) Mori Seiki (6141.OS, ¥1,267) NSK (6471.T, ¥873) Kubota (6326.T, ¥1,434) Komatsu (6301.T, ¥2,785) Nabtesco Corporation (6268.T, ¥2,457) Calbee (2229.T, ¥9,490) Yakult Honsha (2267.T, ¥4,480) Dainippon Sumitomo Pharma (4506.T, ¥1,786) Shionogi (4507.T, ¥2,189) Tsumura & Co (4540.T, ¥3,225) Taisho Pharmaceutical (4581.T, ¥7,380) Isetan Mitsukoshi Holdings (3099.T, ¥1,553) Lawson (2651.T, ¥7,720) Seven & i Holdings (3382.T, ¥3,840) FamilyMart (8028.T, ¥4,575) Tokyo Tatemono (8804.T, ¥903) Daiwa House Industry (1925.T, ¥2,204) Toray Industries (3402.T, ¥711) Tosoh (4042.T, ¥382) Mitsui Chemicals (4183.T, ¥234) Sumitomo Electric Industries (5802.T, ¥1,397) Suzuki Motor (7269.T, ¥2,785) Toho Zinc (5707.T, ¥381)

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 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. 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.

Page 27 of 30

Monday, 13 May2013

Japan Daily

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 cove r multiple sectors.

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

Global Ratings Distribution Rating Versus universe (%) Of which banking clients (%) Outperform/Buy* 43% (53% 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 (6301.T, 9432.T, 3382.T, 5802.T, 8028.T, 6501.T, 1925.T, 6326.T, 4506.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 (9432.T, 8028.T) within the past 12 months. Credit Suisse provided non-investment banking services to the subject company (6301.T, 9432.T, 5802.T, 6501.T, 1925.T) within the past 12 months Credit Suisse has managed or co-managed a public offering of securities for the subject company (9432.T) within the past 12 months. Credit Suisse has received investment banking related compensation from the subject company (9432.T, 8028.T) within the past 12 months Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (6752.T, 6301.T, 9432.T, 2267.T, 3382.T, 4902.T, 5802.T, 2651.T, 7011.T, 8028.T, 6501.T, 1925.T, 6326.T, 7269.T, 4507.T, 7735.T, 3402.T, 7201.T, 4506.T) within the next 3 months. Credit Suisse has received compensation for products and services other than investment banking services from the subject company (6301.T, 9432.T, 5802.T, 6501.T, 1925.T) within the past 12 months As of the date of this report, Credit Suisse makes a market in the following subject companies (6752.T, 9432.T, 7201.T). As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (2229.T, 5707.T). 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 (6752.T, 4042.T, 4183.T, 6141.OS, 6301.T, 9432.T, 2267.T, 4540.T, 6268.T, 3382.T, 4902.T, 5802.T, 2229.T, 4581.T, 3659.T, 6471.T, 6640.T, 3099.T, 2651.T, 7011.T, 5707.T, 8028.T, 6501.T, 1925.T, 6326.T, 7915.T, 7269.T, 4507.T, 9684.T, 8804.T, 7735.T, 3402.T, 7201.T, 4506.T) within the past 12 months 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.

Page 28 of 30

Monday, 13 May2013

Japan Daily

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. The following disclosed European company/ies have estimates that comply with IFRS: (6141.OS, 7201.T). 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. 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) Limited ..... Shunsuke Tsuchiya ; Hideyuki Maekawa ; Chika Fukumoto ; Hitoshi Hayakawa ; Yu Yoshida ; Yuki Nakayasu ; Yohei Ohya ; Akinori Kanemoto ; Issei Takahashi ; Shinji Kuroda ; Yunchao Zhao ; Satsuki Kawasaki ; Taketo Yamate ; Fumiyoshi Sakai ; Hiroko Yamada ; Masahiro Mochizuki ; Atsuro Takemura ; Masami Sawato ; Maiko Saito ; Kazumasa Okumoto ; Shinya Yamada Credit Suisse () Limited Shanghai Representative Office ...... Contribution by Amanda Chen

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.

Page 29 of 30

Monday, 13 May2013

Japan Daily

References in this report to Credit Suisse include all of the subsidiaries and affiliates of Credit Suisse operating under its investment banking division. For more information on our structure, please use the following link: https://www.credit-suisse.com/who_we_are/en/.This report may contain material that is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse AG or its affiliates ("CS") to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates. The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. CS will not treat recipients of this report as its customers by virtue of their receiving this report. The investments and services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. CS does not advise on the tax consequences of investments and you are advised to contact an independent tax adviser. Please note in particular that the bases and levels of taxation may change. Information and opinions presented in this report have been obtained or derived from sources believed by CS to be reliable, but CS makes no representation as to their accuracy or completeness. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in the future issue, other communications that are inconsistent with, and reach different conclusions from, the information presented in this report. Those communications reflect the different assumptions, views and analytical methods of the analysts who prepared them and CS is under no obligation to ensure that such other communications are brought to the attention of any recipient of this report. CS may, to the extent permitted by law, participate or invest in financing transactions with the issuer(s) of the securities referred to in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. CS may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment. Additional information is, subject to duties of confidentiality, available on request. Some investments referred to in this report will be offered solely by a single entity and in the case of some investments solely by CS, or an associate of CS or CS may be the only market maker in such investments. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by CS and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR's, the values of which are influenced by currency volatility, effectively assume this risk. Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct their own investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase. Some investments discussed in this report may have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed any such site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS's own website material) is provided solely for your convenience and information and the content of any such website does not in any way form part of this document. Accessing such website or following such link through this report or CS's website shall be at your own risk. This report is issued and distributed in Europe (except Switzerland) by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is regulated in the United Kingdom by The Financial Services Authority ("FSA"). This report is being distributed in Germany by Credit Suisse Securities (Europe) This report is being distributed in the United States and Canada by Credit Suisse Securities (USA) LLC; in Switzerland by Credit Suisse AG; in Brazil by Banco de Investimentos Credit Suisse (Brasil) S.A or its affiliates; in Mexico by Banco Credit Suisse (México), S.A. (transactions related to the securities mentioned in this report will only be effected in compliance with applicable regulation); in Japan by Credit Suisse Securities (Japan) Limited, Financial Instruments Firm, Director-General of Kanto Local Finance Bureau (Kinsho) No. 66, a member of Japan Securities Dealers Association, The Financial Futures Association of Japan, Japan Investment Advisers Association, Type II Financial Instruments Firms Association; elsewhere in Asia/ Pacific by whichever of the following is the appropriately authorised entity in the relevant jurisdiction: Credit Suisse (Hong Kong) Limited, Credit Suisse Equities (Australia) Limited, Credit Suisse Securities (Thailand) Limited, having registered address at 990 Abdulrahim Place, 27 Floor, Unit 2701, Rama IV Road, Silom, Bangrak, Bangkok 10500, Thailand, Tel. +66 2614 6000, Credit Suisse Securities (Malaysia) Sdn Bhd, Credit Suisse AG, Singapore Branch, Credit Suisse Securities (India) Private Limited regulated by the Securities and Exchange Board of India (registration Nos. INB230970637; INF230970637; INB010970631; INF010970631), having registered address at 9th Floor, Ceejay House, Dr.A.B. Road, Worli, Mumbai - 18, India, T- +91-22 6777 3777, Credit Suisse Securities (Europe) Limited, Seoul Branch, Credit Suisse AG, Taipei Securities Branch, PT Credit Suisse Securities Indonesia, Credit Suisse Securities (Philippines ) Inc., and elsewhere in the world by the relevant authorised affiliate of the above. Research on Taiwanese securities produced by Credit Suisse AG, Taipei Securities Branch has been prepared by a registered Senior Business Person. Research provided to residents of Malaysia is authorised by the Head of Research for Credit Suisse Securities (Malaysia) Sdn Bhd, to whom they should direct any queries on +603 2723 2020. This report has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (each as defined under the Financial Advisers Regulations) only, and is also distributed by Credit Suisse AG, Singapore branch to overseas investors (as defined under the Financial Advisers Regulations). By virtue of your status as an institutional investor, accredited investor, expert investor or overseas investor, Credit Suisse AG, Singapore branch is exempted from complying with certain compliance requirements under the Financial Advisers Act, Chapter 110 of Singapore (the "FAA"), the Financial Advisers Regulations and the relevant Notices and Guidelines issued thereunder, in respect of any financial advisory service which Credit Suisse AG, Singapore branch may provide to you. This research may not conform to Canadian disclosure requirements. In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. Non-U.S. customers wishing to effect a transaction should contact a CS entity in their local jurisdiction unless governing law permits otherwise. U.S. customers wishing to effect a transaction should do so only by contacting a representative at Credit Suisse Securities (USA) LLC in the U.S. Please note that this research was originally prepared and issued by CS for distribution to their market professional and institutional investor customers. Recipients who are not market professional or institutional investor customers of CS should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not regulated by the FSA or in respect of which the protections of the FSA for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case are available upon request in respect of this report. CS may provide various services to US municipal entities or obligated persons ("municipalities"), including suggesting individual transactions or trades and entering into such transactions. Any services CS provides to municipalities are not viewed as "advice" within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. CS is providing any such services and related information solely on an arm's length basis and not as an advisor or fiduciary to the municipality. In connection with the provision of the any such services, there is no agreement, direct or indirect, between any municipality (including the officials, management, employees or agents thereof) and CS for CS to provide advice to the municipality. Municipalities should consult with their financial, accounting and legal advisors regarding any such services provided by CS. In addition, CS is not acting for direct or indirect compensation to solicit the municipality on behalf of an unaffiliated broker, dealer, municipal securities dealer, municipal advisor, or investment adviser for the purpose of obtaining or retaining an engagement by the municipality for or in connection with Municipal Financial Products, the issuance of municipal securities, or of an investment adviser to provide investment advisory services to or on behalf of the municipality. If this report is being distributed by a financial institution other than Credit Suisse AG, or its affiliates, that financial institution is solely responsible for distribution. Clients of that institution should contact that institution to effect a transaction in the securities mentioned in this report or require further information. This report does not constitute investment advice by Credit Suisse to the clients of the distributing financial institution, and neither Credit Suisse AG, its affiliates, and their respective officers, directors and employees accept any liability whatsoever for any direct or consequential loss arising from their use of this report or its content. Principal is not guaranteed. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that. Copyright © 2013 CREDIT SUISSE AG and/or its affiliates. All rights reserved. Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments. When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only.

Page 30 of 30