Hamamatsu Photonics 6965 JP BNP PARIBAS Masahiro Wakas ugi JPY3,500 JPY2,805 JPY3,700

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1 Hamamatsu Photonics 6965 JP BNP PARIBAS Masahiro Wakas ugi 23 FEBRUARY 2016 JAPAN / TECHNOLOGY HARDWARE & EQUIPMENT HAMAMATSU PHOTONICS 6965 JP BUY UNCHANGED TARGET PRICE JPY3,500 CLOSE JPY2,805 UP/DOWNSIDE +24.8% PRIOR TP JPY3,700 CHANGE IN TP -5.41% HOW WE DIFFER FROM CONSENSUS MARKET RECS TARGET PRICE (%) (0.6) POSITIVE 6 EPS 2017 (%) (5.0) NEUTRAL 2 EPS 2018 (%) (7.7) NEGATIVE 0 Broadening optical sensors applications Semiconductor failure analysers to join the megatrend ranks Hamamatsu Photonics (HPK) imaging & measurement instruments segment, which includes semiconductor failure analysers, had a strong 1Q FY9/16. Semiconductor migration and the trend towards lower drive voltages to cut power consumption are boosting demand for HPK s InGaAs cameras and failure analysers. Reducing power consumption is an urgent matter for not only mobile devices, but also automobiles as car electrification increases. We see it as a medium/longer-term megatrend. Pursuing the essence of light and broader application scope HPK has a goal of solving many of the world s problems by identifying the essence of light. Semiconductor failure analysers apply the company s key technology to detection of tiny amounts of light. Medical, dental, academic areas use roughly the same principle of optical sensing. We think HPK can continue to expand business by utilizing the properties of light. Our OP forecasts: JPY22.3b in FY9/16, JPY24.5b in FY9/17 We lower our FY9/16 OP forecast by JPY1.5b and our FY9/17 forecast by JPY2.5b to reflect a revised FX assumption from March 2016 of JPY110/USD (previously JPY120/USD) and JPY125/EUR (JPY135/EUR). Our other assumptions are unchanged. In FY9/16, we expect a stronger JPY and higher depreciation costs to erode earnings by 5.5% y-y. In FY9/17, when depreciation costs will rise only mildly, we think 10% y-y earnings growth is possible through stronger sales for environmental analysis, non-destructive testing, semiconductor failure analysers and medical-related products. We cut our target price to JPY3,500 from JPY3,700 On our revised earnings forecasts, we cut our target price to JPY3,500 from JPY3,700. This remains based on 13x our FY9/17E EV/EBITDA, roughly the midpoint between the historical Bloomberg consensus for the last year of 13.6x and last two years of 12.4x, which we see as fair value. We maintain our BUY rating as we think HPK s medium-longer term growth story is intact. KEY STOCK DATA YE Sep (JPY b) 2016E 2016C 2017E 2018E Revenue Op profit Prior op profit Recurring profit Net profit EPS (JPY) P/E (x) Dividend yield (%) EV/EBITDA (x) Price/book (x) Net debt/equity (%) (46.0) - (46.8) (47.7) ROE (%) Feb-15 4,000 May-15 Aug-15 Nov-15 Feb , , ,800 (10) 2,400 (20) (JPY) (%) Hamamatsu Photonics Rel to TOPIX Index Share price performance 1 Month 3 Month 12 Month Absolute (%) (3.5) (9.4) (16.5) Relative to country (%) (0.6) Next Results Mkt cap (USD m) May ,154 3m avg daily turnover (USD m) 20.3 Free float (%) 75 Major shareholder Capital Group Companies Inc (15%) 12m high/low (JPY) 3,900/2,472 3m historic vol. (%) 42.8 ADR ticker HPHTF US ADR closing price (USD; 19 Feb 2016) Issued shares (m) 161 Sources: Bloomberg consensus; FactSet; BNP Paribas estimates Masahiro Wakasugi masahiro.wakasugi@japan.bnpparibas.com Our research is available on Thomson One, Bloomberg, TheMarkets.com, FactSet and on Please contact your salesperson for authorisation. Please see the important notice on the back page. PREPARED AND PUBLISHED BY NON-US BROKER-DEALER(S): BNP PARIBAS SECURITIES (JAPAN) LTD. THIS MATERIAL HAS BEEN APPROVED FOR U.S DISTRIBUTION. ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES CAN BE FOUND AT APPENDIX ON PAGE 14

2 Investment thesis IVD and haematology-related products, in particular PMT, look poised for strong growth, driven by medical infrastructure development in emerging countries. We anticipate growth in PMT and silicon photodiodes (SiPD), as the need for early detection and preventive treatment increases, especially given the rapidly ageing populations in industrialised countries. Scintillators, flat-panel sensors and CCD/NMOS sensors are enjoying strong growth, thanks to the expansion of digital dentistry. We also anticipate growth in products for analysis equipment, as countries around the globe implement tougher environmental standards to reduce the environmental impact from vehicle and factory emissions. Scientific research into neutrinos and dark matter is active throughout the world, and this should continue in the long term. HPK s PMT and opto-semiconductor products should benefit from this trend. Optical sensors and light sources are also enjoying growth through a broad range of applications. In our view, HPK will be a key beneficiary of these trends and we reiterate our BUY rating. Catalyst HPK s quarterly results. Introduction and strengthening of environmental controls. New discoveries in particle physics. Risk to our call Governments slashing their medical and dentistry budgets, particularly in the US and Europe, due to struggling economies. Abrupt changes to healthcare systems. Changes in customer procurement policies. Sharp JPY appreciation (we estimate each JPY1 movement vs the USD would have a JPY200m impact on our FY9/16 OP, and vs the EUR would have a JPY50m impact, all else being equal). Company background HPK is a global leading supplier of ultra-sensitive light sensors that have potential uses in a wide range of fields including medical, dental, chemical analysis, scientific research, and transportation. HPK boasts a competitive lead in light sources & sensors. With its core philosophy of searching out the truth, HPK not only enters untrodden territory, but also raises awareness of optical technology and seeks to create new industries with wide ranging beneficiaries. Key executives Age Joined Title Teruo Hiruma Chairman of the Board Akira Hiruma President and CEO Haruji Ohtsuka Vice President Principal activities (revenue, 2015) Key assumptions (sales breakdown) Medical eqpmt Industrial eqpmt (JPY m) Analytical eqpmt Measurement equpmt 150,000 Academic research Transportation eqpmt Other 100,000 50,000 0 FY9/14 FY9/15 FY9/16E FY9/17E FY9/18E Sources: Hamamatsu Photonics; BNP Paribas estimates Earnings sensitivity Academic research 5% Measurement equpmt 6% Analytical eqpmt 13% Transportation eqpmt 4% Other 10% Medical eqpmt 37% Industrial eqpmt 25% FY9/16E Bull case Base case Bear case Sales (JPY m) 128, , ,000 Diff (%) 3 0 (4) OP (JPY m) 24,000 22,310 20,000 Diff (%) 8 0 (10) EPS (JPY) Diff (%) 6 0 (12) Source: BNP Paribas estimates Event calendar Sources: Hamamatsu Photonics; BNP Paribas estimates Date Event Company name End-Apr - early May 2016 Announcement of GPS results Undetermined As relevant As relevant As relevant Changes in domestic and overseas healthcare systems/regulations GE, Philips, Siemens Ground-breaking news in the field of particle physics Tightening of regulations on automobile and factory exhaust gases and other environment-related rules Updates on information regarding major orders, including Hyper Kamiokande We estimate medical equipment sales, including dentistry, will grow 7-8% annually over the next few years. We estimate analysis equipment will grow 6-8% annually over the next few years, reflecting the increasing demand for environmental-related equipment. Our forex assumptions for FY9/16 are JPY110/USD and JPY125/EUR. Rapid JPY appreciation would have a negative impact on profits. 2 BNP PARIBAS 23 FEBRUARY 2016

3 Hamamatsu Photonics = light = a megatrend Power saving is a megatrend Voltage reduction, semiconductor failure analysis systems HPK s 1Q FY9/16 results were distinguished by sharp growth in the sales and OP of the imaging & measurement instruments segment. This segment s sales climbed 17% y-y, driving total company sales up by 4% y-y, while its OP rose 9% y-y, helping to shore up total-company OP, which declined 13% y-y. According to HPK s summary financial statement, the reason for the segment s strong showing was higher domestic and overseas sales of its semiconductor failure analysers, which have won acclaim because of the wide-field high resolution and high sensitivity they deliver. Ongoing process migration in the semiconductor industry appears to be making it harder to analyse the performance of semiconductors and to analyse failures, in our view. There is ever-increasing demand to reduce power consumption in the latest electronic equipment, especially mobile devices, and a steady shift to lower drive voltages. Increases in power consumption are proportional to the square of drive voltage, so reducing drive voltage is a highly effective way of cutting power consumption. The impact of the shift to lower voltage (higher current) is showing up in various ways, such as, growing demand for Taiyo Yuden s M-COIL and for the DFE-series metal coils produced by Murata Manufacturing (Toko). At the same time, there is growing demand to analyse failures associated with lower voltages. In order to detect defects in semiconductor micro-circuitry, it is necessary to detect the minute amount of light emitted by things like transistors with a high degree of sensitivity and resolution. Reducing drive voltage in semiconductor devices also reduces the light-emitting strength of transistor components while the light shifts to longer wavelengths. This is where the high-performance sensors and failure analysers of HPK should play an important role, in our view. According to information provided by the company, LSI structures are becoming ever more complex due not only to process migration, but also to growth in the number of embedded functions. For example, there is increasing multilayering of wiring to eight or nine layers and packaging technology is also changing. The use of multilayered wiring and changes in packaging pose problems for conventional performance testing and failure analysis, boosting the need for the type of solution proposed by HPK to detect very weak light. The PHEMOS series is the mainstay in HPKs line of semiconductor failure analysis products. The key components are an InGaAs camera and sensors capable of detecting the very weak light emitted by transistors with a line width in the nanometre class. This InGaAs camera represents bringing all the technologies at HPK together for sensing very weak light, an area in which it excels. Exhibit 1: PHEMOS-1000 emission microscope and failure location Exhibit 2: InGaAs camera Source: Hamamatsu Photonics Source: Hamamatsu Photonics 3 BNP PARIBAS 23 FEBRUARY 2016

4 Also dovetails with auto megatrends Power-saving demand is growing not only for mobile equipment, but also in the automotive field, where car electrification is increasing. Process migration is steadily progressing in automotive microcomputers, which we understand is making it harder to analyse the performance of semiconductors and to analyse failures. In automobiles, electricity efficiency has become as important as fuel efficiency, and we believe the shift to low power consumption and therefore lower voltage is likely to increase demand for PHEMOS and become a medium/longer-term megatrend. HPK s catchphrase is Photon is our business In PET equipment, the device that converts the minute gamma rays emitted in the vicinity of cancer cells into light with a scintillator to detect them as light is an ultrasensitive sensor, or to be more precise, a photomultiplier tube (PMT). In X-ray CT equipment, the device that converts X-rays (minimised to reduce exposure to radiation) to visible light and to detect that very weak light is HPK s ultrasensitive silicon photodiode. In the detection of neutrinos, the extremely weak light called Cherenkov light given off by electrons and other particles that collide with neutrinos is picked up using PMTs. (For details, see our initiation report Record FY9/14E NP, 13% CAGR to follow issued on 23 January 2014.) In a semiconductor failure analyser, an InGaAs camera detects the very weak light emitted by semiconductors with a nanometre-class line width to measure inconsistencies in semiconductor properties and defect levels. HPK is expanding its business by developing a variety of applications in the light domain. The company motto is Photon is our business. This and its statement We believe light holds the key to industrial creativity point to a conviction that light holds many more possibilities. Significance of absolute truth, essence of light and exploring the unknown field Discussion of short-term earnings and related changes by the company s share price are obviously important. However, we also focus on HPK s medium to longer-term growth potential given its corporate stance. Topics it addresses, such as healing diseases, health restoration, discovery of universe origins, and improvement of the global environment, have extremely meaningful implications for society. As such, we see positives from HPK s corporate philosophy of seeking absolute truth, pursuing essence of light and exploring unknown fields. 4 BNP PARIBAS 23 FEBRUARY 2016

5 GPS update PMTs, one of HPK s core products, are very high-sensitivity sensors that are one of the most important parts in PET equipment. Silicon photodiodes similarly are very high-sensitivity sensors used in X-ray CT equipment. HPK holds top global market shares for PET PMTs and X-ray CT silicon photodiodes, as already explained in our initiation report. We review implications for results at HPK from the financial results of GE, Philips, and Siemens, the leading global suppliers of PET and X-ray CT equipment (we believe these systems use products from HPK and these companies are HPK customers). However, we only present the data as reference because the scale of business related to HPK from the respective medical and healthcare segments of these companies is unknown. October-December 2015 results for GE, Philips, and Siemens GE: The healthcare segment posted USD4,973m in sales (down 3% y-y), USD938m in OP (down 8% y-y), and 18.09% OPM for October-December USD strength affects GE s results, and sales rose 3% y-y excluding the forex impact. While orders, a leading indicator for sales, fell 4% y-y to USD5.2b in October- December, GE disclosed a 1% y-y increase on an organic basis. US orders were down by 1% y-y, European orders slipped 8% y-y (though rose 4% y-y excluding the forex effect), and Chinese orders dropped 6% y-y (but only fell 3% y-y without the forex effect). Orders nominally declined y-y, but their recent results show they improved on a real basis and the healthcare business is making slight gains. Philips: The healthcare segment recorded EUR3,270m in sales (up 15% y-y), EUR374m in EBIT (up 7% y-y), and 11.4% EBIT margin for October-December Sales reportedly rose 3% y-y on a comparable basis. Philips disclosed a 15% y-y increase in orders (on a comparable basis excluding forex impact), a leading indicator of sales, in October-December It commented on the conference call that a double-digit gain by Imaging Systems led the order growth. Their recent results show that orders climbed by double digits in North America, Western Europe, and China. Management has a positive view of doubledigit orders growth for China in October-December, despite negative impacts such as the anti-corruption campaign. Siemens: The healthcare segment booked EUR3.3b in sales, an 11% y-y gain excluding forex impact, in October-December Segment profit reached EUR541m, a 31% y-y gain from the previous year s EUR414m, and profit margin was 16.5%. Orders for the same period totalled EUR3.4b, an 8% y-y gain excluding forex impact. Diagnostic imaging performed well in light of the comment in briefing materials that Diagnostic imaging business drives volume and profitability. On the conference call, management explained that We are very pleased with what we saw in the first quarter exceptionally strong order growth across all regions with a sharp rebound in China albeit, of course, on easy comps. We saw record double-digit revenue growth, which was driven by the diagnostics imaging business, which also dropped nicely into the bottom line. While Siemens acknowledges a lift by the easy comparison from the previous year for China, the impact from China s anti-corruption campaign is shrinking. These are generally positive trends for HPK as a parts supplier. 5 BNP PARIBAS 23 FEBRUARY 2016

6 Exhibit 3: Healthcare orders Positive growth at Philips and Siemens in October-December GE Philips Siemens (%) Healthcare orders y/y (5) (10) (15) (20) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q CY09 CY10 CY11 CY12 CY13 CY14 CY15 Note: Forex-adjusted values for Philips; values prior to forex adjustment at GE and Siemens Sources: GE; Philips; Siemens; BNP Paribas 6 BNP PARIBAS 23 FEBRUARY 2016

7 Forecast revisions Cut FY9/16 OP estimate to JPY22.3b from JPY23.8b Our updated FY9/16 forecasts are for sales of JPY123.8b (up 3% y-y), OP of JPY22.3b (down 5.5% y-y) and net income (NI) of JPY16.4b (down 1% y-y). Our FX assumptions from February are JPY110/USD and JPY125/EUR (previously JPY120/USD and JPY135/EUR). The company has left its FY9/16 guidance unchanged at sales of JPY126.9b (up 5% y-y), OP of JPY23.2b (down 2% y-y) and NI of JPY17.2b (up 4% y-y), based on JPY120/USD and JPY130/EUR. Revised FX assumption main reason for OP revision Our revised OP estimate is JPY1.5b lower than our previous number (JPY23.8b). Most of this is due to revised FX assumptions. Every JPY1/USD change has a JPY200m impact on OP, while every JPY1/EUR change has a JPY50m impact. A stronger JPY erodes earnings. In effect, we leave our forecasts unchanged. Quarterly forecasts: JPY6.7b OP in 2Q The company posted 1Q FY9/16 OP of JPY5.0b and our OP forecasts for the rest of the year are JPY6.7b in 2Q (down 16% y-y), JPY 4.6b in 3Q (up 3% y-y), and JPY6.0b in 4Q (up 11% y-y). Higher costs from major upfront investment have reduced margins slightly in 1Q and 2Q, and we forecast a y-y earnings decline in those quarters. However, we expect investment in electron tubes and semiconductors to start bearing fruit in 3Q and 4Q, and, with fixed costs beginning to moderate, we think HPK is likely to achieve y-y earnings growth in 3Q and 4Q. Exhibit 4: Earnings forecasts (FY basis) FY9/ FY9/16E FY9/ FY9/ FY9/16 (JPY m) A Old New Old New Old New Guidance Sales 120, , , , , , , ,900 Change (y-y %) OP 23,596 23,797 22,310 27,000 24,470 29,700 27,060 23,200 Change (y-y %) 9 1 (5.5) (2) OPM (%) RP 24,658 24,100 22,600 27,400 24,900 30,100 27,500 23,600 Change (y-y %) 9 (2) (8) (4) NI 16,598 17,500 16,400 19,900 18,000 21,800 19,900 17,200 Change (y-y %) 10 5 (1) EPS (JPY) EPS growth (%) 10 5 (1) Fx (JPY/USD) Sources: Hamamatsu Photonics; BNP Paribas estimates Lowering our FY9/17 OP estimate to JPY24.5b from JPY27b For FY9/17, we expect JPY131.8b in sales (up 6% y-y), JPY24.5b in OP (up 10% y- y), and JPY18b in NI (up 10% y-y), using forex assumptions of JPY110/USD and JPY125/EUR (from JPY120/USD and JPY135/EUR previously). We lower our OP estimate by JPY2.5b, from JPY27b previously. Forex changes are responsible for the OP revision, just as in our FY9/16 outlook, and we retain our existing view of real earnings. The economic environment has become less certain, and we think it is necessary to closely monitor business conditions at HPK. However, we believe HPK can deliver a 10% y-y increase by OP in FY9/17, fuelled by: higher sales of environment-related measurement instruments and nondestructive testing products in China; higher sales of defect analysis systems accompanying the low-voltage shift for semiconductors; and stable sales growth in medical and dental products. 7 BNP PARIBAS 23 FEBRUARY 2016

8 Additionally, we expect depreciation costs to rise less in FY9/17 (by JPY1.1b) than in FY9/16 (by JPY1.7b). We think forex impact should be very small if yen appreciation halts at around JPY110/USD. FY9/17 OP outlook by segments We project a JPY2.16b (up 10%) y-y rise by OP in FY9/17. Anticipated major segment OP changes include: 1) a JPY1.11b rise in electron tube business, 2) a JPY1.26b rise in opto-semiconductor business, 3) a JPY70m rise in imaging & measurement instruments business, and 4) a JPY280m decline in others and eliminations. We expect steady profit growth driven by reinforcement of medical infrastructure, wider adoption of digital dentistry, increased demand for environmental analysis, advances by DNA analysis, higher investments in particle physics, and other trends. Exhibit 5: Earnings forecasts (FY basis) FY9/ FY9/16E FY9/16E FY9/17E A 1QA 2QE 3QE 4QE Old New y-y Old New y-y (JPY m) (JPY m) (JPY m) (JPY m) (JPY m) (JPY m) (JPY m) (JPY m) (%) (JPY m) (JPY m) (JPY m) (%) Sales 1 Electron Tube 48,706 11,624 12,700 11,700 12,200 51,250 48,224 (482) (1.0) 55,155 51,403 3, Opto-Semiconductor 51,944 13,446 13,800 13,000 13,700 53,900 53,946 2, ,404 57,452 3, Imaging & Measurement Instruments 16,201 3,817 4,800 3,800 5,100 18,200 17,517 1, ,292 18,568 1, Others 3, ,050 1,150 1,000 4,400 4, ,620 4, Total Sales 120,691 29,822 32,350 29,650 32, , ,820 3, , ,770 7, Change (y-y %) 8 4 (4) Change (q-q %) (2) 8 (8) 8 OP 1 Electron Tube 17,861 4,026 4,498 3,930 4,052 16,793 16,506 (1,355) (7.6) 18,114 17,623 1, Opto-Semiconductor 16,114 4,095 4,278 3,900 4,247 17,190 16, ,813 17,778 1, Imaging & Measurement Instruments 3, , ,224 4,045 3, ,384 3, Others Elimination (14,345) (3,939) (3,550) (3,750) (3,600) (14,550) (14,839) (494) - (14,841) (15,136) (297) - Total OP 23,596 5,023 6,715 4,580 5,993 23,797 22,310 (1,286) (5.5) 27,000 24,470 2, Change (y-y %) 9 (13) (16) (5.5) Change (q-q %) (7) 34 (32) 31 OPM (%) (%) (%) (%) (%) (%) (%) (% pt) (%) (%) (%pt) 1 Electron Tube (2.4) Opto-Semiconductor (0.4) Imaging & Measurement Instruments (1.6) (0.9) 4 Others Total OPM (1.5) Sources: Hamamatsu Photonics; BNP Paribas estimates Exhibit 6: Consensus comparison BNPP Consensus % Diff FY9/16E FY9/17E FY9/16E FY9/17E FY9/16E FY9/17E OP (JPY b) (5.7) (8.1) EPS (JPY) (5.0) (7.7) Sources: Bloomberg consensus; BNP Paribas estimates 8 BNP PARIBAS 23 FEBRUARY 2016

9 Price target update Lowering our price target to JPY3,500 from JPY3,700 We lower our price target to JPY3,500 (from JPY3,700) set at 13x EV/EBITDA based on our FY9/17 forecasts (as previously). We think 13x is a very reasonable multiple as roughly the midpoint between 13.6x using Bloomberg consensus estimates for the past year and the 12.4x average for the past two years. Furthermore, the average EV/EBITDA multiple for medical equipment manufacturers is 12.2x (FY1). We believe this is a fair level as the price target valuation. Our JPY3,500 price target equates to P/Es of 34x our FY9/16 estimate, 31x our FY9/17 estimate, and 28x our FY9/18 estimate. The average P/E based on the Bloomberg consensus estimate over the past year is 29x and the average plus one standard deviation is 32x. For share-price formation in 12 months, we expect emphasis on FY9/17 (or FY9/18) profits because the medium to longer-term growth story for medical, academic and other applications is a key point for the company s shares and there is almost no impact from short-term fluctuations in smartphones and TVs. The price target is fair, in our view. Expecting a return to the growth trajectory from FY9/17 We anticipate a profit decline y-y in FY9/16 because of large fluctuations in JPY/USD and JPY/EUR rates and a heavy investment burden. However, we believe the emergence of a new growth driver is positive amid recent heightened geopolitical risks, such as micro-focus X-ray sources for non-destructive tests (carry-on item tests and others) and compound semiconductors for surveillance cameras. We also expect exhaustion of the forex-volatility impact and settling down of the upward trend for depreciation costs from FY9/17. The company has a major deal worth about JPY20b for the Hyper-Kamiokande project thereafter. We think HPK shares continue to offer significant medium to longer-term investment appeal due to the prospect of sustainable dividend growth with management s commitment to a 30% dividend payout ratio. We reiterate our BUY rating. Risks Main downside risks are 1) cutbacks to medial and dentistry budgets because of weaker economic activity mainly in the US and Europe, 2) sudden changes in the healthcare system, 3) changes in customer purchasing policies, and 4) sharp JPY appreciation. HPK benefits from yen depreciation, and we estimate FY9/16 OP impacts from a one yen shift of JPY200m vs the USD and JPY50m vs the EUR. Exhibit 7: Consensus EV/EBITDA average (FY1) (x) 1Y 2Y 3Y 4Y 5Y Avg Std Dev Avg + 1 Std Dev Avg - 1 Std Dev Z-score (2.3) (1.4) (1.2) (0.8) (0.8) Sources: Bloomberg consensus; BNP Paribas Exhibit 8: HPK s consensus P/E average (FY1) (x) 1Y 2Y 3Y 4Y 5Y Avg Std Dev Avg + 1 Std Dev Avg - 1 Std Dev Z-score (1.2) (0.8) (0.4) Sources: Bloomberg consensus; BNP Paribas 9 BNP PARIBAS 23 FEBRUARY 2016

10 Exhibit 9: Consensus EV/EBITDA (FY1) (x) Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jan-12 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 May-15 Oct-15 Sources: Bloomberg consensus; BNP Paribas Exhibit 10: Consensus P/E (FY1) (x) Jan-05 Aug-05 Mar-06 Oct-06 May-07 Dec-07 Jul-08 Feb-09 Sep-09 Apr-10 Nov-10 Jun-11 Jan-12 Aug-12 Mar-13 Oct-13 May-14 Dec-14 Jul-15 Sources: Bloomberg consensus; BNP Paribas Exhibit 11: Consensus P/E (FY2) (x) Jan-05 Aug-05 Mar-06 Oct-06 May-07 Dec-07 Jul-08 Feb-09 Sep-09 Sources: Bloomberg consensus; BNP Paribas Apr-10 Nov-10 Jun-11 Jan-12 Aug-12 Mar-13 Oct-13 May-14 Dec-14 Jul-15 Exhibit 12: Consensus P/BV and ROE (x) P/BV (LHS) ROE (RHS) Jan-06 Aug-06 Mar-07 Oct-07 May-08 Dec-08 Jul-09 Feb-10 Sep-10 Apr-11 Nov-11 Jun-12 Jan-13 Aug-13 Mar-14 Oct-14 May-15 Dec-15 Sources: Bloomberg consensus; BNP Paribas (%) Exhibit 13: Consensus ROE and P/BV (x) y = x R² = (%) Sources: Bloomberg consensus; BNP Paribas 10 BNP PARIBAS 23 FEBRUARY 2016

11 Exhibit 14: Valuation comparison Company BBG code Cur. Price Mkt cap Performances P/E P/BV EV/EBITDA ROE Div.yld 1M 3M 6M 1Y 1FYE 2FYE 1FYE 2FYE 1FYE 2FYE 1FYE 2FYE 1FYE 22 Feb 16 (USD m) (%) (%) (%) (%) (x) (x) (x) (x) (x) (x) (%) (%) (%) Medical GE GE US USD , (5.3) Siemens SIE GY EUR , (11.8) (4.4) (13.7) Philips PHIA NA EUR ,546 (1.2) (11.4) (2.6) (14.2) Danaher DHR US USD , (11.0) (0.3) (1.2) Mindray MR US USD , (2.0) Boston Scientific BSX US USD ,218 (3.9) (4.0) Medtronic (Covidien) MDT US USD ,824 (0.7) (0.9) 1.5 (4.3) Abbott ABT US USD ,692 (3.7) (16.3) (18.2) (18.9) Olympus 7733 JP JPY 4,100 12,429 (4.4) (17.1) (8.9) (6.4) Terumo 4543 JP JPY 3,885 13, (4.2) Sysmex 6869 JP JPY 6,660 12,273 (5.9) (14.2) (16.5) Shimadzu 7701 JP JPY 1,787 4, (6.4) (2.5) Horiba 6856 JP JPY 3,655 1,375 (12.2) (22.5) (14.4) (17.3) Average Sources: Bloomberg consensus; BNP Paribas estimates 11 BNP PARIBAS 23 FEBRUARY 2016

12 Financial statements Hamamatsu Photonics Profit and Loss (JPY b) Year Ending Sep 2014A 2015A 2016E 2017E 2018E Revenue Cost of sales (incl depreciation) (53.5) (57.6) (59.8) (62.9) (66.0) Gross profit SG&A (37.0) (39.5) (41.7) (44.4) (47.3) R&D Operating profit Interest and dividends received Associates Other non-operating income Interest paid (0.1) (0.1) (0.1) (0.1) (0.1) Other non-operating expenses (0.0) Recurring profit Extraordinary gains Extraordinary losses (0.1) (0.7) (0.0) Pre-tax profit Tax (7.3) (8.0) (6.2) (6.8) (7.6) Minorities* Net profit EBITDA (operating profit + depreciation) Per share (JPY) Reported EPS DPS Growth Revenue (%) EBITDA (%) Operating profit (%) (5.5) Recurring profit (%) (8.3) EPS (%) (1.2) Operating performance Gross margin inc depreciation (%) EBITDA margin (%) Operating profit margin (%) Net margin (%) Effective tax rate (%) Dividend payout on net profit (%) Interest cover (x) n/a n/a n/a n/a n/a Inventory days Debtor days Creditor days Operating ROIC (%) ROIC (%) ROE (%) ROA (%) *Pre exceptional pre-goodwill and fully diluted Sources: Hamamatsu Photonics; BNP Paribas estimates 12 BNP PARIBAS 23 FEBRUARY 2016

13 Financial statements Hamamatsu Photonics Cash Flow (JPY b) Year Ending Sep 2014A 2015A 2016E 2017E 2018E Pre-tax profit* Tax paid Depreciation Working capital Other (8.7) (19.3) (12.4) (13.7) (15.2) Operating cash flow Capital expenditure (15.8) (15.0) (14.0) (14.0) (15.0) Other 2.1 (2.1) Investing cash flow (13.7) (17.1) (14.0) (14.0) (15.0) Free cash flow 9.5 (1.0) Change in debt Dividends paid (4.2) (4.8) (7.9) (4.9) (5.4) Net buybacks Equity issued Other 0.1 (0.1) Financing cash flow (4.1) (4.9) (7.9) (4.9) (5.4) Gross change in cash 6.4 (3.7) Other adjustments (1.3) Change in cash 5.2 (2.2) Per share (JPY) Operating cash flow per share FCF per share 58.8 (6.3) Balance Sheet (JPY b) 2014A 2015A 2016E 2017E 2018E Cash & equivalents A/c receivable Inventories Other Current assets Tangible fixed assets Intangible fixed assets Investments and other assets Total assets A/c payable Short term debt Other (26.1) (26.1) (26.1) (26.1) (26.1) Current liabilities Long term debt Other Long-term liabilities Total liabilities Common equity Preferred equity Minorities etc Net Assets Liabilities & net assets *includes convertibles and preferred stock which is being treated as debt Per share (JPY) Book value per share 1,047 1,124 1,177 1,259 1,349 Tangible book value per share 1,036 1,113 1,166 1,248 1,338 Financial strength Net debt/equity (%) (44.4) (40.1) (46.0) (46.8) (47.7) Net debt/total assets (%) (34.8) (32.1) (35.4) (36.4) (37.5) Current ratio (x) CF interest cover (x) n/a 2.6 n/a n/a n/a Valuation 2014A 2015A 2016E 2017E 2018E P/E (x) * target price (x) * Reported P/E (x) Dividend yield (%) P/CF (x) P/FCF (x) 47.7 (446.1) Price/book (x) Price/tangible book (x) EV/EBITDA (x) ** target price (x) ** EV/invested capital (x) ** Pre exceptional & pre-goodwill and fully diluted **EBITDA includes associate income and recurring non-operating income Sources: Hamamatsu Photonics; BNP Paribas estimates 13 BNP PARIBAS 23 FEBRUARY 2016

14 Disclaimers and Disclosures APPENDIX DISCLAIMERS AND DISCLOSURES APPLICABLE TO NON-US BROKER-DEALER(S): BNP PARIBAS SECURITIES (JAPAN) LTD ANALYST(S) CERTIFICATION Masahiro Wakasugi, BNP Paribas Securities (Japan) Ltd, , The BNP Paribas Securities (Japan) Ltd Analysts mentioned in this disclaimer are employed by a non-us affiliate of BNP Paribas Securities Corp., and are not registered/ qualified pursuant to NYSE and/or FINRA regulations The individual(s) identified above certify(ies) that (i) all views expressed in this report accurately reflect the personal view of the analyst(s) with regard to any and all of the subject securities, companies or issuers mentioned in this report; and (ii) no part of the compensation of the analyst(s) was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed herein. IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONS "BNP Paribas is the marketing name for the global banking and markets business of BNP Paribas Group. No portion of this report was prepared by BNP Paribas Securities Corp (US) personnel, and it is considered Third-Party Affiliate research under NASD Rule The following disclosures relate to relationships between companies covered in this research report and the BNP entity identified on the cover of this report, BNP Securities Corp., and other entities within the BNP Paribas Group (collectively, "BNP Paribas"). The disclosure column in the following table lists the important disclosures applicable to each company that has been rated and/or recommended in this report: Company Ticker Disclosure (as applicable) N/A N/A N/A BNP Paribas represents that: 1. Within the past year, it has managed or co-managed a public offering for this company, for which it received fees. 2. It had an investment banking relationship with this company in the last 12 months. 3. It received compensation for investment banking services from this company in the last 12 months. 4. It expects to receive or intends to seek compensation for investment banking services from the subject company/ies in the next 3 months. 5. It beneficially owns 1% or more of any class of common equity securities of the subject company. 6. It makes a market in securities in respect of this company. 7. The analyst(s) or an individual who assisted in the preparation of this report (or a member of his/her household) has a financial interest position in securities issued by this company. The financial interest is in the common stock of the subject company, unless otherwise noted. 8. The analyst (or a member of his/her household) is an officer, director, or advisory board member of this company or has received compensation from the company. 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BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the transaction does not exceed 5/100 of the total asset of the Company or the total number of outstanding shares. 5. BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year. 6. With regards to the tender offer initiated by the Company based on Item 2, Article 133 of the Financial Investment Services and Capital Market Act, BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company, provided that this provision shall apply only where tender offer has not expired. 7. The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of entering into arrangement for public offering or underwriting-related agreement for issuance of stocks 8. The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation. 9. The Company is recognized as having considerable interests with BNPPSK in relation to No.1 to No The analyst or his/her spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc. contracts) the following securities or rights (hereinafter referred to as Securities, etc. in this Article) regardless of whose name is used in the trading. 1) Stocks, bond with stock certificate, and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited. 2) Stock options of the Company whose securities dealings are being solicited. 3) Individual stock future, stock option, and warrants that use the stocks specified in Item 1) as underlying. 14 BNP PARIBAS 23 FEBRUARY 2016

15 History of change in investment rating and/or target price Hamamatsu Photonics (6965 JP) Feb-13 Aug-13 Feb-14 Aug-14 Feb-15 Aug-15 5,400 4,800 4,200 3,600 3,000 2,400 1,800 1,200 (JPY) Hamamatsu Photonics Target Price Date Rating Target price Date Rating Target price Date Rating Target price 22-Feb-13 Buy 1, Jun-14 Buy 3, Jul-15 Buy 4, Jan-14 Buy 2, Nov-14 Buy 3, Sep-15 Buy 4, Feb-14 Buy 2, Feb-15 Buy 4, Nov-15 Buy 3, Masahiro Wakasugi started covering this stock from 23 Jan 2014 Price and TP are in local currency Valuation and risks: Our JPY3,500 TP is based on an EV/EBITDA multiple of 13x FY9/17E. Downside risks are: (1) a reduction in healthcare and dental budgets owing to economic turndown, mainly in Europe and US, (2) sudden changes to healthcare systems, (3) a change in procurement policy at the main customers and (4) sudden strength in the yen. 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