Maintain Overweight: Semiconductor Materials Earnings Outlook Continues to Rise, but Valuation Adjustment Lowers Target Price

Overview

JPMorgan has updated its earnings model for JX Advanced Metals, further raising expectations for semiconductor-related businesses while lowering the target price due to adjustments in industry valuation multiples. The report believes that demand, product price increases, and capacity expansion in the semiconductor materials business will improve the company’s medium- to long-term earnings mix; the metals and recycling business will remain affected by copper prices, mine operations, and changes in one-off asset-disposal gains.

Core views

The core investment thesis is accelerating growth in semiconductor materials and the transition of the metals and recycling business toward a lighter-asset model. The report expects improved demand and pricing for semiconductor targets, high-purity tin, and rolled copper foil, while InP substrate capacity expansion will become a subsequent growth driver. Meanwhile, asset divestitures in metals and recycling should reduce earnings volatility and improve asset efficiency; how proceeds from asset sales are returned to shareholders also merits attention.

Analysis framework

Uses a sum-of-the-parts valuation approach and determines P/E multiples for each business using comparable-company valuations; updates the earnings model based on segment profit forecasts, semiconductor material demand and pricing assumptions, InP capacity expansion plans, and assumptions for copper, gold, molybdenum prices and exchange rates.

Methodology notes

• Valuation FrameworkSum-of-the-Parts Valuation

  Assigns valuation multiples separately to the semiconductor materials, ICT materials, and metals and recycling businesses, then aggregates them into target value.

  The target price is based on forecast earnings per share for the fiscal year ending March 2028 and a 26x P/E multiple; target P/E multiples by segment are 29x for semiconductor materials, 29x for ICT materials, and 23x for metals and recycling.

• Relative ValuationComparable-Company P/E

  Uses one-year forward P/E multiples of comparable companies to determine valuation anchors.

  The overall target P/E multiple was reduced from 30x to 26x, mainly reflecting a pullback in industry valuation multiples rather than a weaker view of the company’s medium- to long-term growth thesis.

• Operating ForecastSegment Earnings Forecast

  Forecasts operating profit for each segment based on assumptions for demand, selling prices, capacity, exchange rates, and commodity prices.

  Semiconductor-related segments are driven by demand, price increases, and capacity expansion; the metals and recycling segment incorporates factors including copper, gold, and molybdenum prices, mine output, and the expiration of asset-disposal gains.

Asset mapping & comparison

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

• 5016.T

  Report coverage target

  Strengths

  Global leader in sputtering targets; demand growth for semiconductor materials, product price increases, and InP substrate capacity expansion support medium- to long-term earnings; a lighter-asset metals and recycling business may reduce volatility.

  Weaknesses

  The metals and recycling business remains affected by mine output, inventory valuation adjustments, and the expiration of one-off asset-disposal gains.

  Comparison

  Semiconductor materials and ICT materials are each assigned a 29x P/E multiple, above the 23x multiple for metals and recycling, reflecting differences in growth potential and earnings quality.

  Risks

  Semiconductor downcycle, slower growth in InP market share, falling copper prices, weather disruptions at mines, and lower valuations for the basic materials business.

Key data

• Rating and Target PriceMaintain Overweight; target price ¥4,800The target price is valid through December 2027; the previous target price was ¥5,700.
• Share Price and Potential Upside¥3,785; approximately 26.8%Share price as of August 14, 2026, calculated against the target price.
• FY2027 Operating Profit Forecast¥258.9 billion, up 48% year on yearThe prior forecast was ¥243.0 billion.
• FY2028 Operating Profit Forecast¥267.7 billion, up 3% year on yearThe prior forecast was ¥268.4 billion.
• FY2029 Operating Profit Forecast¥309.0 billion, up 15% year on yearThe prior forecast was ¥306.6 billion.
• Key Businesses FY2027 Operating Profit¥100.7 billion, up 42% year on yearThe prior forecast was ¥86.8 billion.
• Key Businesses FY2028 Operating Profit¥135.7 billion, up 35% year on yearThe prior forecast was ¥113.1 billion.
• Competitive Position in Semiconductor MaterialsApproximately 65% global market share in sputtering targetsData cited in the report are as of FY2025.
• InP Substrate Capacity Assumption2.5x the level at the end of FY March 2025 by the end of FY March 20284.5x by the end of FY March 2029 and 8.5x by the end of FY March 2030.

Impact & implications

The earnings mix is expected to continue shifting toward semiconductor materials. If demand, price increases, and InP capacity expansion progress as expected, the company’s medium- to long-term profit growth and asset efficiency should improve. From a valuation perspective, although earnings forecasts have been raised, contraction in industry multiples limits target-price upside; therefore, subsequent share-price performance will depend more on earnings delivery, the semiconductor cycle, and the valuation environment.

Risks

• Delays in increasing semiconductor complexity and miniaturization, weakening demand growth for advanced materials.
• A semiconductor market downcycle causing demand for targets, high-purity tin, and copper foil to fall below expectations.
• Slower progress in InP substrate market-share gains or capacity expansion, affecting long-term growth expectations.
• Declines in copper and other metal prices, reducing profits and valuations in the metals and recycling business.
• Mine weather disruptions, lower output, and inventory valuation adjustments that may weigh on near-term earnings.
• The expiration of gains from the sale of the Caserones mine interest, which may pressure year-on-year profit.

What to watch

• Orders, sales volumes, and implementation of price increases for semiconductor targets, high-purity tin, and rolled copper foil.
• Progress in InP substrate capacity expansion, long-term customer agreements, and product price increases.
• The semiconductor materials business’s share of company profit and changes in operating margins.
• The degree of deviation of copper, gold, molybdenum prices and the yen exchange rate from report assumptions.
• Mine operations, weather impacts, and the recovery of metals recycling business output.
• Capital allocation and shareholder-return arrangements for proceeds from asset divestitures.
• Changes in valuation multiples of industry comparable companies and their impact on the target P/E multiple.