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Technology Stocks : Cymer (CYMI)
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From: mopgcw1/7/2010 11:20:45 AM
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CS: Cymer Inc. (CYMI) OUTPERFORM S. Kumar
CP: US$ 38.47 TP: US$ 49 CAP: US$ 1.1b
UPGRADING to OUTPERFORM (from Neutral), Raising Target Price to $49 (from $41)

! Upgrading to Outperform. In conjunction with our ASML initiation note (please refer to the ASML note for details), we are
upgrading CYMI from Neutral to Outperform, and bumping up our PT from $41 to $49. Key reasons for the upgrade are
upside to units and potentially higher spares revenues. Our CY11 Rev/EPS changes from $523mm/$2.98 to
$551mm/$3.26.

! Upside to units. As detailed in our ASML note, we believe lithography will outgrow semicap as productivity of litho tools is
not keeping pace with rate of ASP increases. CYMI with its leading market share position in immersion litho is a direct
beneficiary from this. We are bumping up total laser units in CY11 from 84 to 104. (From 76 to 87 for ArF and from 8 to 17
for KrF).

! Higher spares revenues. CYMI has steadily increased its non system revenues from ~$105mm in CY03 (40% of total
revenues) to a peak of $307.5mm in CY08 (67% of total revs). Given the increase in ArF immersion install base, we are
modeling spare revs in the next cycle to increase to ~$349mm in CY11 (63% of revs) due to a higher value system upgrade
business.

! Valuation. We are bumping up our CY11 EPS from $2.98 to $3.26, primarily on potential increase in laser units. Cons CY11
expectations at $3.12. We are also raising our PT from $41 to $49, representing ~15x CY11 EPS, adjusted for cash.
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