Sharp Corp.

The stable outlook reflects our view that key financial ratios for Sharp are likely to recover moderately in the next one to two years against the backdrop of a mild improvement in profitability, backed by operating cash flow from its businesses and streamlined capital expenditures achieved through use of Hon Hai's production facilities. We might consider an upgrade if Sharp acquires ¥200 billion in preferred shares and significantly reduces its debt on an S&P Global Ratings-adjusted basis while continuing to improve its ability to generate earnings through a better product mix in its LCD business and an expansion of non-LCD businesses. Specifically, we could consider upgrading Sharp if we determine that its debt to EBITDA will fall to and stay

...Japan-based electronics maker Sharp Corp.'s core LCD business is generating more stable earnings but remains exposed to potential volatility and substitution risk as a result of technological innovation. S&P Global Ratings believes Sharp, as a major producer of liquid crystal display (LCD) panels and LCD TVs, maintains a level of competitiveness in these highly competitive industry segments by retaining and enhancing its technological capabilities and by making good use of the supply chain of its parent, Taiwan-based Hon Hai Precision Industry Co. Ltd. (A-/Stable/--). In its LCD panel business, Sharp has strategically shifted its product mix from small panels for smartphones to midsize panels that are more versatile and in which the company can use its technological advantages, such as high-definition displays and low power consumption. As a result, its product mix has improved and its factory operating ratios have become increasingly stable. However, Sharp's LCD business faces a risk of...

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