Independent Insight Provider, Japanese equities, LightStream Research

Scott Foster

Independent Insight Provider, 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

Hamamatsu Photonics Kk / Equity Bottom-Up

<ul>
<li>The shares are down 27% from their May high, largely discounting excessive inventory and a decline in profits that is likely to continue through next March or June.</li>
<li>Inventory adjustment, the revival of semiconductor, factory automation and medical related demand, plus the leveling off of depreciation, should enable a return to growth after that. </li>
<li>Projected valuations are at the low end of their 10-year ranges. Buy into the current weakness, keeping in mind that 1Q results are likely to be weak.</li>
</ul>


The shares are down 27% from their May high, largely discounting excessive inventory and a decline in profits that is likely to continue through next March or June.
Inventory adjustment, the revival of semiconductor, factory automation and medical related demand, plus the leveling off of depreciation, should enable a return to growth after that. 
Projected valuations are at the low end of their 10-year ranges. Buy into the current weakness, keeping in mind that 1Q results are likely to be weak.


Hamamatsu Photonics (6965 JP): Buy into Current Weakness

<ul>
<li>FY Sep-22 results are likely to beat management's guidance, but this should be in the price. Recession and rising interest rates are probably not in the price.</li>
<li>Growth rates slowed in 3Q and are likely to decline further in 4Q. In the year ahead, we expect both sales and profits to decline.</li>
<li>The shares have rebounded by 21% since the 1st of July to 30x our EPS estimate for FY Sep-23. This does not look sustainable. Sell into current strength. </li>
</ul>


FY Sep-22 results are likely to beat management's guidance, but this should be in the price. Recession and rising interest rates are probably not in the price.
Growth rates slowed in 3Q and are likely to decline further in 4Q. In the year ahead, we expect both sales and profits to decline.
The shares have rebounded by 21% since the 1st of July to 30x our EPS estimate for FY Sep-23. This does not look sustainable. Sell into current strength. 


Hamamatsu Photonics (6965 JP): Difficult Year Ahead

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Event-Driven

<ul>
<li>With <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota (7203 JP)</a> having sold some of its stake in <a href="https://www.smartkarma.com/entities/denso-corp" target="_blank" data-smartkarma-citation="entities:18703:1" rel="noopener">Denso</a>, <a href="https://www.smartkarma.com/entities/kddi-corp" target="_blank" data-smartkarma-citation="entities:639:1" rel="noopener">KDDI</a> and <a href="https://www.smartkarma.com/entities/harmonic-drive-systems-inc" target="_blank" data-smartkarma-citation="entities:10238:1" rel="noopener">Harmonic Drive</a> this year, it has firmly set the ball rolling for unwinding some of its cross-shareholding.</li>
<li>Toyota has a shareholding in around 60 listed companies, with its combined disposable stake worth over US$26bn.</li>
<li>In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.</li>
</ul>


With Toyota (7203 JP) having sold some of its stake in Denso, KDDI and Harmonic Drive this year, it has firmly set the ball rolling for unwinding some of its cross-shareholding.
Toyota has a shareholding in around 60 listed companies, with its combined disposable stake worth over US$26bn.
In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.


Toyota Cross-Shareholding - To Say a Whole Lot Is Left Would Be a US$26bn Understatement

<ul>
<li>At 25x management's earnings guidance for next fiscal year and 24x guidance for FY Sep-25, the company's medium-term growth potential appears to have been discounted.</li>
<li>Capex is set to double, taking depreciation from 5.9% to 8.4% of sales, but projected price/cash flow multiples for the same two years are fairly high at 17x and 16x.</li>
<li>FY Sep-23 guidance has been cut. Profits are likely to be down YoY in 2H. Take profits and wait.</li>
</ul>


At 25x management's earnings guidance for next fiscal year and 24x guidance for FY Sep-25, the company's medium-term growth potential appears to have been discounted.
Capex is set to double, taking depreciation from 5.9% to 8.4% of sales, but projected price/cash flow multiples for the same two years are fairly high at 17x and 16x.
FY Sep-23 guidance has been cut. Profits are likely to be down YoY in 2H. Take profits and wait.


Hamamatsu Photonics (6965 JP): Next Three Years in the Price

<ul>
<li>As expected, FY Sep-22 results were ahead of guidance. Management is forecasting further growth this fiscal year, but guiding for a YoY decline in operating profit in 2H.</li>
<li>In addition, the depreciation of the yen, which added 5% to sales at 17% to operating profit last fiscal year, has reversed, economies have weakened and interest rates are up.</li>
<li>We continue to recommend profit taking. We would like to buy the shares at ¥6,000 - 15% down from the Dec. 9 close. </li>
</ul>


As expected, FY Sep-22 results were ahead of guidance. Management is forecasting further growth this fiscal year, but guiding for a YoY decline in operating profit in 2H.
In addition, the depreciation of the yen, which added 5% to sales at 17% to operating profit last fiscal year, has reversed, economies have weakened and interest rates are up.
We continue to recommend profit taking. We would like to buy the shares at ¥6,000 - 15% down from the Dec. 9 close. 


Hamamatsu Photonics (6965 JP): Earning Momentum Fading

Japan

HAMAMATSU PHOTONICS K.K. manufactures electron tubes, semiconductors, and image processors.  The Company's products include photosensitive electronic tubes, optical/image sensors, X-ray related products, laser related products, photodiodes, light-emitting diodes (LED) and video camera used for measuring equipment.

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Hamamatsu Photonics Kk (6965 JP)

Hamamatsu Photonics (6965 JP): Buy into Current Weakness

Shares down 27%, largely discounting excessive inventory and falling profits. Profits should rebound with semiconductor and other demand as...

Scott Foster

Hamamatsu Photonics (6965 JP): Difficult Year Ahead

Shares up 21% since July, but sales and profits likely to decline in FY Sep-23. Impact of recession and semiconductor downturn unavoidable. Rising...

Scott Foster

Toyota Cross-Shareholding - To Say a Whole Lot Is Left Would Be a US$26bn Understatement

KDDI has just announced that it will conduct a buyback at JPY3,896/share in which Toyota Motors plans to tender 49.8m shares or just around 2.3% of...

Sumeet Singh

Hamamatsu Photonics (6965 JP): Next Three Years in the Price

After hitting a new high and forming a double top, the shares are dropping back. Profit forecast through Sep-25 looks discounted. Capex doubling,...

Scott Foster

Hamamatsu Photonics (6965 JP): Earning Momentum Fading

Earning momentum is fading as the yen strengthens, economies weaken, interest rates rise and company outlays grow. The share price has started to...

Scott Foster

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