Japan Research Pack A Summary of Select Global Markets Research Tuesday 31 January 2017 KEY FORECAST CHANGES RATING TARGET PRICE CUR YEAR EPS NEXT YEAR EPS SECURITY / SECTOR TICKER CURR CURR OLD NEW OLD NEW U/D% OLD NEW OLD NEW TARGET PRICE CHANGES Canon Marketing 8060 JP Buy - JPY 2,828 2,979 +53.3 JPY 148.1 159.6 157.3 161.2 Japan Daiwa Securities Group 8601 JP Neutral - JPY 680.0 830.0 +13.2 JPY 46.4 62.0 50.1 60.7 Kinden 1944 JP Buy - JPY 1,645 1,704 +16.5 JPY 110.6 - 117.5 - Kyocera 6971 JP Neutral - JPY 5,000 5,700 -4.6 JPY 207.2 223.5 214.0 250.8 Mabuchi Motor 6592 JP Neutral - JPY 5,800 6,000 -0.7 JPY 210.7 223.9 270.3 288.1 Murata Manufacturing 6981 JP Buy - JPY 17,500 18,000 +16.2 JPY 731.5 738.0 861.9 913.2 Sekisui Chemical 4204 JP Neutral - JPY 1,600 1,800 -4.9 JPY 122.5 122.2 126.4 138.3 TDK 6762 JP Buy - JPY 9,200 10,300 +25.0 JPY 475.7 487.6 559.8 647.8 Tokai Tokyo Financial 8616 JP Neutral - JPY 510 610 -3.6 JPY 33.2 37.4 34.4 35.1 Holdings NGK Spark Plug 5334 JP Buy - JPY 3,000 3,100 +23.0 JPY 154.7 189.9 207.9 213.6 Sankyu 9065 JP Buy - JPY 850 900 +28.9 JPY 57.8 - 59.8 - Nihon M&A Center 2127 JP Buy - JPY 4,300 4,100 +14.7 JPY 92.4 78.8 107.0 99.2 East Japan Railway 9020 JP Buy - JPY 12,000 13,000 +23.4 JPY 696.7 - 732.9 - Oriental Land 4661 JP Neutral - JPY 6,900 6,700 +4.8 JPY 242.8 232.6 247.4 235.3 Central Japan Railway 9022 JP Neutral - JPY 19,200 20,000 +6.3 JPY 1,884.7 1,899.4 1,923.8 1,893.8 NEC 6701 JP Neutral - JPY 310 295 -6.6 JPY 25.0 7.7 27.7 19.2 Acom 8572 JP Buy - JPY 680 600 +26.6 JPY 45.4 3.3 49.8 - Misumi Group 9962 JP Buy - JPY 2,250 2,400 +17.6 JPY 71.3 69.6 80.5 85.6 West Japan Railway 9021 JP Buy - JPY 8,500 9,100 +24.7 JPY 537.2 - 569.2 - ESTIMATE CHANGES Hulic 3003 JP Neutral - JPY 1,060 - +3.7 JPY 53.9 57.7 61.5 62.3 Sumitomo Dainippon 4506 JP Neutral - JPY 1,950 - -0.2 JPY 59.6 86.2 70.0 72.5 Pharma Nisshin Seifun Group 2002 JP Buy - JPY 2,000 - +14.9 JPY 70.9 69.6 75.3 73.9 MonotaRO 3064 JP Neutral - JPY 3,200 - +9.9 JPY 62.4 61.3 81.0 78.3 *U/D % = Potential Up/Downside % Highlights for Today Japan electronic parts - Earnings update summary Manabu Akizuki - NSC We expect sales, profits to turn to growth in 17/3 Q4, forecast OP growth of 25% for 18/3 Japan electronic parts: earnings update - Equipment for smartphones and IoT Manabu Akizuki - NSC Raising assumptions for OLED iPhone in 18/3 NGK Spark Plug (5334 JP) (Buy) 17/3 Q3 results (TP JPY 3,000→JPY 3,100, PRICE as of 1/30/2017 JPY 2,521) Manabu Akizuki - NSC We raise forecasts on steady earnings improvement for ceramic packages Production Complete: 2017-01-30 22:01 UTC See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts. Nomura | Japan Research Pack 31 January 2017 Canon Marketing Japan (8060 JP) (Buy) 16/12 results (TP JPY 2,828→JPY 2,979, PRICE as of 1/30/2017 JPY 1,943) Tetsuya Wadaki - NSC Preparing for move into new era NEC (6701 JP) (Neutral) Q3 results: full-year guidance sharply lowered (TP JPY 310→JPY 295, PRICE as of 1/30/2017 JPY 316) Masaya Yamasaki, CFA - NSC All segments but enterprise fall short of plan First Look - Koei Tecmo Holdings (3635 JP) (Buy) - 17/3 Q3 results: some titles underperform (TP JPY 2,400, PRICE as of 1/30/2017 JPY 1,967) Junko Yamamura - NSC Oriental Land (4661 JP) (Neutral) Q3 results: slightly lower than our estimates (TP JPY 6,900→JPY 6,700, PRICE as of 1/30/2017 JPY 6,391) Junko Yamamura - NSC Visitor numbers likely to continue being affected by theme park events in near term Results at two elastomer companies, Sumitomo Chemical - JSR results not as bad as meets the eye Shigeki Okazaki - NSC / Kaori Iwasaki - NSC Zeon results show strong demand for large-screen TV film and battery materials Steel sector: impact of President Trump's executive orders - Pipelines will have to use steel made in US Yuji Matsumoto - NSC Construction of Mexican wall could boost demand for steel East Japan Railway (9020 JP) (Buy) Operating profits in line with our expectations (TP JPY 12,000→JPY 13,000, PRICE as of 1/30/2017 JPY 10,535) Masaharu Hirokane - NSC Deterioration on Hokuriku Shinkansen fading, sales of commuter passes strong West Japan Railway (9021 JP) (Buy) 18/3 outlook: record OP, higher shareholder returns (TP JPY 8,500→JPY 9,100, PRICE as of 1/30/2017 JPY 7,297) Masaharu Hirokane - NSC Q3 earnings in line with plan, company aims for further operating profit growth in 18/3 Central Japan Railway (9022 JP) (Neutral) Shinkansen solid, but high profit growth unlikely (TP JPY 19,200→JPY 20,000, PRICE as of 1/30/2017 JPY 18,820) Masaharu Hirokane - NSC Interest to start on maglev Shinkansen loans, rail car manufacturing subsidiary is a risk factor Misumi Group (9962 JP) (Buy) Forex-neutral overseas sales up 27% in Dec (TP JPY 2,250→JPY 2,400, PRICE as of 1/30/2017 JPY 2,040) Katsushi Saito - NSC High sales growth in China, Asia; we view as growth stock with prospects for 10% OP growth Acom (8572 JP) (Buy) Q3: revising our forecast, reaffirming Buy (TP JPY 680→JPY 600, PRICE as of 1/30/2017 JPY 474) Wataru Otsuka - NSC We think high interest repayment losses only temporary Nihon M&A Center (2127 JP) (Buy) Less share price upside, but we retain Buy rating (TP JPY 4,300→JPY 4,100, PRICE as of 1/30/2017 JPY 3,575) Naruhiko Sakamaki - NSC We lower our forecasts based on 17/3 Q3 results Sekisui Chemical (4204 JP) (Neutral) 17/3 Q3 results: forecasts raised on weak yen (TP JPY 1,600→JPY 1,800, PRICE as of 1/30/2017 JPY 1,892) Daisuke Fukushima - NSC Strengthening presence in built-for-sale housing MonotaRO (3064 JP) (Neutral) We lower our forecasts slightly, remain Neutral (TP JPY 3,200, PRICE as of 1/30/2017 JPY 2,913) Kosuke Narikiyo - NSC / Masafumi Shoda - NSC 2 Nomura | Japan Research Pack 31 January 2017 Automated logistics center likely to generate cost efficiencies in 17/12 Japanese Equity Research Nisshin Seifun Group (2002 JP) (Buy) Steady rise in underlying profitability (TP JPY 2,000, PRICE as of 1/30/2017 JPY 1,741) Satoshi Fujiwara - NSC Prospect of double-digit profit growth in 18/3 on investment returns, EPA-E and bran recovery Japan REIT sector - Ichigo Hotel REIT raises guidance Tomohiro Araki - NSC No need for concern about hotel REITs missing guidance, depending on assumptions Mitsubishi Estate (8802 JP) (Buy) Quarterly data: weak condo releases (TP JPY 2,780.0, PRICE as of 1/30/2017 JPY 2,182.0) Daisuke Fukushima - NSC Slightly weak contract signings for condos to be posted as sales from 19/3 onwards Sankyu (9065 JP) (Buy) Solid Japanese infrastructure upgrade demand (TP JPY 850→JPY 900, PRICE as of 1/30/2017 JPY 698) Ryo Tazaki - NSC Improved margins at plant engineering/installation segment Japan REIT sector - Kenedix Office: credit rating raised to AA- Tomohiro Araki - NSC Poised to meet BOJ purchase criteria 10 months after last upgrade Sumitomo Dainippon Pharma (4506 JP) (Neutral) We revise forecasts, retain target price (TP JPY 1,950, PRICE as of 1/27/2017 JPY 1,954) Motoya Kohtani - NSC Acquisitions, in-licensing to make up for poorer prospects for pipeline drug Kinden (1944 JP) (Buy) 17/3 Q3 results: guidance raised (TP JPY 1,645→JPY 1,704, PRICE as of 1/30/2017 JPY 1,463) Kentaro Maekawa - NSC We retain profit forecasts despite lowering outlook for power distribution line engineering work Daiwa Securities Group (8601 JP) (Neutral) 17/3 Q3 results: fair showing at retail segment (TP JPY 680.0→JPY 830.0, PRICE as of 1/30/2017 JPY 732.9) Wataru Otsuka - NSC Announcement of second share buyback in 17/3 Hulic (3003 JP) (Neutral) 16/12 results (TP JPY 1,060, PRICE as of 1/27/2017 JPY 1,022) Daisuke Fukushima - NSC Looking for profits from real estate sales to generate one-third of real estate segment profits MTI [9438] - 17/9 Q1 results Yoshitaka Nagao - NSC Can management grow the healthcare business? Tokai Tokyo Financial Holdings (8616 JP) (Neutral) 17/3 Q3 results: earnings driven by trading income (TP JPY 510→JPY 610, PRICE as of 1/27/2017 JPY 633) Wataru Otsuka - NSC Large q-q improvement in profit levels in Q3 TDK (6762 JP) (Buy) Earnings update (TP JPY 9,200→JPY 10,300, PRICE as of 1/27/2017 JPY 8,240) Manabu Akizuki - NSC Portfolio rebuilding likely to start yielding results from 18/3 Mabuchi Motor (6592 JP) (Neutral) Earnings update (TP JPY 5,800→JPY 6,000, PRICE as of 1/27/2017 JPY 6,040) Manabu Akizuki - NSC Raising forecasts to factor in new forex outlook: we anticipate continued stable earnings improvement Murata Manufacturing (6981 JP) (Buy) Earnings update (TP JPY 17,500→JPY 18,000, PRICE as of 1/27/2017 3 Nomura | Japan Research Pack 31 January 2017 JPY 15,485) Manabu Akizuki - NSC 18/3: expecting recovery in RF module market share, improvement in MLCC conditions Kyocera (6971 JP) (Neutral) Earnings update (ADR:KYO US) (TP JPY 5,000→JPY 5,700, PRICE as of 1/27/2017 JPY 5,976) Manabu Akizuki - NSC We adjust forex assumptions, change forecasts, retain stance towards key businesses Pharmaceuticals industry - Results released by US companies through 27 Jan Motoya Kohtani - NSC Future threats: bb2121 CAR-T therapy, risankizumab Nuclear reactor court cases - Takahama, Genkai, and Ikata: rulings in 2017 H1? Shigeki Matsumoto - NSC We see risk of impact on other electric power stocks if even one company loses a case Proposed revisions to financial information disclosure system - Points from Council on Investments for the Future Yoshihiro Nomura - NSC Eliminating redundant disclosure in business reports and securities filings Japan major banks - Media report on assistance for Toshiba Ken Takamiya - NSC Report on Mizuho Bank