Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<ul>
<li>Tokyo Electron (TEL) has cut sales guidance for 2H of FY Mar-23 by more than 25% and operating profit guidance by more than 50%. </li>
<li>Half of the reduction in sales guidance is due U.S. sanctions on China. Management does not expect demand to pick up until the second half of next year. </li>
<li>The share price has risen by more than 30% in the past five weeks after a slight decline in U.S. inflation. Projected valuations are not particularly attractive.</li>
</ul>


Tokyo Electron (TEL) has cut sales guidance for 2H of FY Mar-23 by more than 25% and operating profit guidance by more than 50%. 
Half of the reduction in sales guidance is due U.S. sanctions on China. Management does not expect demand to pick up until the second half of next year. 
The share price has risen by more than 30% in the past five weeks after a slight decline in U.S. inflation. Projected valuations are not particularly attractive.


Tokyo Electron (8035 JP): Sell into the Bear Market Bounce

Japan Specialist

Mark Chadwick

<ul>
<li>We expect strong Q2 results from TEL but full year earnings guidance is a risk</li>
<li>WFE demand is deteriorating rapidly. Will TEL provide any thoughts on the 2023 outlook?</li>
<li>We provide a scenario analysis for different WFE scenarios...the stock may have bottomed</li>
</ul>


We expect strong Q2 results from TEL but full year earnings guidance is a risk
WFE demand is deteriorating rapidly. Will TEL provide any thoughts on the 2023 outlook?
We provide a scenario analysis for different WFE scenarios...the stock may have bottomed


Tokyo Electron (8035) | WFE Scenarios Suggest Stock May Have Hit Bottom

<ul>
<li>Share price down 50% from its peak, discounting a downturn of historical magnitude.</li>
<li>But history also suggests that the downturn might last two years, in which case it would be too early to buy. </li>
<li>Impact of COVID lockdown fading. No impact from U.S. sanctions yet. Weaker guidance ahead, in our estimation. </li>
</ul>


Share price down 50% from its peak, discounting a downturn of historical magnitude.
But history also suggests that the downturn might last two years, in which case it would be too early to buy. 
Impact of COVID lockdown fading. No impact from U.S. sanctions yet. Weaker guidance ahead, in our estimation. 


Tokyo Electron (8035 JP): Downturn Discounted but Maybe Not Its Duration

<ul>
<li>We are Bullish on Rorze, a global leader in ultra-clean wafer substrate handling solutions.</li>
<li>We believe that Rorze is well placed to monetise the long-term growth in semiconductor demand and WFE spend</li>
<li>The stock has recently underperformed its peer group and valuations collapsed. We see almost 100% upside potential based on a 14x target multiple</li>
</ul>


We are Bullish on Rorze, a global leader in ultra-clean wafer substrate handling solutions.
We believe that Rorze is well placed to monetise the long-term growth in semiconductor demand and WFE spend
The stock has recently underperformed its peer group and valuations collapsed. We see almost 100% upside potential based on a 14x target multiple


<ul>
<li>A sudden decline in sales led to a 30% sequential decline in operating profit in the three months to June. Year-on-year, operating profit was down 17%.</li>
<li>Nevertheless, management left sales and profit guidance unchanged - despite cutting their semiconductor equipment demand forecast - and R&amp;D and capital spending continue to rise. </li>
<li>FY Mar-23 EPS guidance puts the shares on 13x earnings, but potential downside risk is considerable. Stand back while the economic recession unfolds.</li>
</ul>


A sudden decline in sales led to a 30% sequential decline in operating profit in the three months to June. Year-on-year, operating profit was down 17%.
Nevertheless, management left sales and profit guidance unchanged - despite cutting their semiconductor equipment demand forecast - and R&amp;D and capital spending continue to rise. 
FY Mar-23 EPS guidance puts the shares on 13x earnings, but potential downside risk is considerable. Stand back while the economic recession unfolds.


Tokyo Electron (8035 JP): Caught Out by a Decline in Sales

Japan

Tokyo Electron Limited manufactures and sells industrial electronics products, such as semiconductor manufacturing machines, computer system, and electronic components.  The Company products are sold in US, Taiwan, and others as well as in Japan.

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Tokyo Electron Ltd Unsp Adr (TOELY US)

Tokyo Electron (8035 JP): Sell into the Bear Market Bounce

Guidance has been slashed as China sanctions aggravate the downturn in the semiconductor cycle. The shares are up more than 30% over the past five...

Scott Foster

Tokyo Electron (8035) | WFE Scenarios Suggest Stock May Have Hit Bottom

IF WFE spend comes in at around $70 billion, we believe that TEL's stock could be worth around 33,000 yen. Given that the stock hit a recent low of...

Mark Chadwick

Tokyo Electron (8035 JP): Downturn Discounted but Maybe Not Its Duration

Share price down 50% from its peak, largely discounting the likely size of the downturn in semiconductor capex, but perhaps not its duration....

Scott Foster

Rorze (6323) | Japan Small Cap Winner

Rorze is a stock for small-cap Japan growth investors. The company is well placed to monetise the long-term growth in semiconductor demand and WFE...

Mark Chadwick

Tokyo Electron (8035 JP): Caught Out by a Decline in Sales

A sudden drop in sales led to sharp QoQ and YoY profit declines in 1Q. But management left guidance unchanged, even while cutting its SPE demand...

Scott Foster

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