Towa: Strong HBM Equipment Demand, Robust China Orders

Overview

This report summarizes a management meeting held on June 18, 2026, between Morgan Stanley and Towa (Towa, 6315.T), President Shigemichi Miura. The core view of the report is that due to continued investment in China's semiconductor self-sufficiency and growing global demand for HBM (High Bandwidth Memory) and advanced packaging equipment, Towa's current business situation is good, with order backlog at high levels. The institution maintains an 'Equal-weight' rating on the stock, with a target price of ¥3,200, based on a 23x P/E valuation.

Core views

Demand Side: China market demand performance is strong, with main drivers coming from storage-related applications. As customers pursue higher yield stability, Towa's advantages in HBM liquid packaging technology are recognized, and stable mass production yields in NCF (Non-Conductive Film) processes also improved customer evaluations. Additionally, yield evaluation for the inference ASIC packaging CPM1080 system is underway; if progress goes smoothly, it is expected to begin full-scale mass production next year. Supply and Operations: Due to large order backlog, facility utilization rates at Towa's large-scale production bases in China and Malaysia remain high. Affected by this, the lead time for high-end equipment has extended from the previous 6 months to approximately 10 months, showing a tight supply-demand situation. New Products and Strategy: The company plans to launch the compression molding system named INNOMS in August. Compared with traditional transfer molding, compression molding relies less on molds. The main selling point of INNOMS is economic efficiency, with a smaller footprint and expected to reduce mass production costs by about 50%. Initial market strategy mainly targets replacing old equipment used for more than 10 years. In the long term, Towa has set a sales vision of 100 billion yen and seeks to expand into new areas beyond molding and cutting equipment. At the same time, the company expects the growth rate of future Selling, General, and Administrative Expenses (SG&A) to slow down.

Analysis framework

The institution obtained first-hand operating data through management interviews, focusing on regional demand structure (especially the Chinese market), product replacement logic brought by technological iteration (such as INNOMS replacing old equipment), and the impact of capacity bottlenecks on delivery times. In terms of valuation, relative valuation method was used, referencing the industry average forward P/E ratio for Semiconductor Equipment (SPE) to price.

Methodology notes

• Valuation MethodologyPE/PEG valuation

  Relative P/E Valuation

  The research report uses a 23x P/E ratio as the valuation anchor, which is taken from the industry average forward P/E ratio level of Semiconductor Equipment (SPE) companies in FY27, to judge the rationality of individual stock valuation.

• Industry/Industrial Analysis FrameworkSupply-demand framework

  Supply/Demand Balance and Delivery Analysis

  By observing the indicator of equipment delivery cycle extending from 6 months to 10 months, infer that the current high-end equipment market is in a state of insufficient supply and excessive demand, side verifying the strength of demand.

• Competition and Strategy FrameworkProduct life cycle

  Existing Stock Replacement Demand

  Analysis points out that the initial target customers for the new equipment INNOMS are users whose equipment usage years exceed 10 years, reflecting stimulation of replacement demand in the existing market by leveraging the economic advantages of new technology (low cost, small footprint).

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Towa (6315.T)

  Direct beneficiary target, HBM and storage packaging equipment core supplier

  Strengths

  Liquid packaging technology advantage, NCF yield stability, full China orders, new product INNOMS has cost advantage

  Weaknesses

  High-end equipment delivery delay may limit short-term revenue recognition speed, high dependency on single market (China)

  Risks

  Geopolitical risk, weakening China demand, technological stagnation

Key data

• High-end Equipment Delivery Period~10 MonthsExtended from previous 6 months, reflecting strong demand
• INNOMS Cost Reduction Magnitude~50%Expected mass production cost reduction ratio
• Long-term Sales Target100 Billion YenCompany long-term vision
• Valuation Multiple23x P/EBased on FY27e industry average forward P/E
• Target Price3,200 YenBased on 23x P/E and F3/28 EPS estimation

Impact & implications

The research report believes that Towa benefits significantly from the wave of China semiconductor self-sufficiency, and order visibility is high. HBM and advanced packaging technical barriers provide the company with differentiated competitive advantages. The launch of new products is expected to further consolidate its position in the packaging equipment field and bring new growth points. However, geopolitical risks and potential fluctuations in China demand are the main uncertainty factors.

Risks

• Stagnation of chip and semiconductor equipment market
• Escalation of geopolitical risks
• Reduction in China market demand
• Stagnation of technological progress
• Slow expansion of advanced packaging/HBM equipment sales
• Losing technical advantage due to market changes
• Profit margin decline

What to watch

• Progress of CPM1080 system yield evaluation and mass production situation next year
• Market acceptance of new INNOMS system and pace of replacement demand release
• Continuity of China semiconductor investment policies
• Continuity of growth in HBM and advanced packaging equipment demand
• Whether Selling, General, and Administrative Expenses (SG&A) growth slows as scheduled