DISCO maintains Outperform: Q1 shipment guidance beats expectations, with AI packaging and HBM demand continuing

Overview

This report is Bernstein's review of Disco Corp (6146.JP)'s 4Q FY26/3 results and Q1 guidance. The core conclusion is that despite DISCO facing capacity constraints, shipment performance was strong, and Q1 shipment guidance was clearly above market consensus expectations, with demand mainly coming from OSAT, memory, HBM, CoWoS, and other generative AI-related applications. Bernstein maintains its Outperform rating and raises the target price from ¥70,800 to ¥85,000.

Core views

Bernstein believes DISCO's near-term fundamentals remain strong: first, Q1 shipment guidance reached ¥132bn, above market consensus expectations; second, memory and OSAT demand continues, while HBM and 2.5D packaging investment provide structural incremental growth; third, 4Q gross margin and operating margin were better than guidance, and the company judges the impact of geopolitics on margins to be limited; fourth, if more capacity is released in FY28, revenue and earnings forecasts still have room for further upward revision.

Analysis framework

The report uses earnings review, comparison against company guidance, shipment analysis by application, margin analysis, and a valuation multiples approach. Bernstein incorporates actual 4Q results and Q1 guidance into its model, raises FY27/FY28 revenue and earnings forecasts based on assumptions of greater capacity release, and maintains 40x P/E as the target-price valuation multiple.

Methodology notes

• Valuation methodsP/E multiple valuation

  Price-to-earnings valuation

  Bernstein uses a 40x P/E multiple to estimate DISCO's target price of ¥85,000 based on forward Q5-Q8 EPS.

• Earnings analysisearnings review

  Review of earnings and guidance

  The report compares 4Q FY26/3 shipments, revenue, gross margin, operating margin, and Q1 shipment guidance, focusing on whether they exceeded company guidance and market consensus expectations.

• Demand breakdownend-market shipment analysis

  Shipment breakdown by application and customer type

  The report assesses shipment strength and sustainability by demand sources such as memory, OSAT, logic, HBM, CoWoS, and 2.5D packaging.

Asset mapping & comparison

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

• Disco Corp (6146.JP)

  The covered company in the report, benefiting from demand for advanced semiconductor packaging, HBM, and OSAT capacity expansion.

  Strengths

  Q1 shipment guidance is stronger than market expectations, 4Q gross margin and operating margin are above guidance, and full-year generative AI-related shipments increased from ¥55bn in the prior year to ¥75bn.

  Weaknesses

  The company still faces capacity constraints and needs to extend manufacturing support by at least 3 months; Q1 operating margin guidance is 39.6%, below consensus expectations of 43.4%.

  Comparison

  Relative to market consensus, Q1 shipment guidance of ¥132bn is above ¥124.0bn; relative to the old target price of ¥70,800, the new target price of ¥85,000 reflects higher FY27/FY28 earnings expectations.

  Risks

  Excess capacity in AI-related GPUs and HBM, changes in the competitive environment, adverse FX movements, and valuation multiple compression.

Key data

• Target price¥85,000Raised from the previous target price of ¥70,800, based on 40x P/E.
• Closing price¥74,830The closing price of 6146.JP on April 22, 2026, as disclosed in the report.
• Implied upside14%Based on Bernstein's target price versus the closing price.
• 4Q FY26/3 shipments¥121.7bnUp 7% QoQ, in line with the pre-announced result.
• Q1 shipment guidance¥132bnUp 8% QoQ, above consensus of ¥124.0bn.
• 4Q gross margin / operating margin70.9% / 44.2%Above company guidance of about 69% and about 40%, respectively.
• 4Q revenue¥133bnUp 10% YoY.
• 4Q total shipments¥122bnUp 31% YoY.
• Dicer 4Q shipments¥39bnUp 28% YoY.
• Grinder 4Q shipments¥30bnUp 22% YoY.
• OSAT 4Q shipments¥23bnUp 77% YoY.
• China sales¥41bnUp 11% QoQ in 4Q.
• Taiwan sales¥35bnUp 13% QoQ in 4Q.
• FY27/FY28 revenue forecast revision+3.9% / +9.3%Reflecting 4Q results, Q1 guidance, and the assumption of greater capacity release in FY28.
• FY27/FY28 net profit forecast revision+6.0% / +17.3%Magnitude of the upward revision to bottom-line earnings forecasts.

Impact & implications

The investment implication is that DISCO remains in a high-growth segment of the AI compute capex chain, with HBM, CoWoS, 2.5D packaging, and OSAT capacity expansion supporting demand for its dicing and grinding equipment. If capacity release proceeds faster than expected, FY28 revenue and earnings could continue to be revised upward; however, the current valuation depends on sustained delivery of high growth and high margins.

Risks

• Excess capacity in AI-related GPUs and HBM could lead to valuation multiple compression and weaker profitability.
• Changes in the competitive environment could weaken DISCO's market position or pricing power.
• Adverse FX movements could create downside risk to revenue.
• If capacity release falls short of expectations, strong demand may not fully convert into revenue.
• If the conservative factors embedded in Q1 margin guidance turn into actual pressure, the market may cut its margin expectations.

What to watch

• Whether actual Q1 FY26/3 shipments meet or exceed the ¥132bn guidance.
• Whether the capacity bottleneck can be eased after extending manufacturing support by at least 3 months.
• Whether HBM, CoWoS, and 2.5D packaging-related orders continue to expand.
• Whether China OSAT investment remains stable and whether global OSAT contributes additional upside.
• Whether gross margin can remain at a high level and whether Q1 operating margin comes in better than the 39.6% guidance.
• Whether the assumption of greater capacity release in FY28 materializes.