Analyst Note
| Abhinav Davuluri, CFA |Tokyo Electron recorded fiscal first-quarter revenue slightly below our expectations, which we attribute to supply chain disruptions and component shortages. Nonetheless, the firm maintained its full-year growth outlook at about 17%. Similar to peers, management lowered calendar 2022 wafer fab equipment, or WFE, growth from 20% to a range of 5%-15%. We believe any WFE demand not fulfilled this year because of supply chain issues will be shipped in calendar 2023. By application, industry logic and foundry spending is expected to be up 10%-20% year over year thanks to investments by the likes of TSMC and Intel. In contrast, DRAM spending is expected to be down 5% year over year versus up 15% last quarter. NAND is expected to grow 10% year over year as customers move to 200-layer-plus 3D NAND. We think memory spending will fall in calendar 2023 as macro conditions worsen. We are maintaining our fair value estimate for narrow-moat Tokyo Electron at JPY 50,000. Shares look fairly valued at current levels.