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

Hamamatsu Photonics Kk / Equity Bottom-Up

<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

<ul>
<li>Every so often, sudden shocks reduce Hamamatsu Photonics' usually high valuations. This is one of those times. </li>
<li>Valuations are starting to look attractive compared with their 5-year ranges. But not compared with their 10-year ranges.</li>
<li>Strong 1Q results support FY Sep-22 guidance. Management's 3-year sales and profit forecast would be reasonable in a normal operating environment. But the environment is not normal. </li>
</ul>


Every so often, sudden shocks reduce Hamamatsu Photonics' usually high valuations. This is one of those times. 
Valuations are starting to look attractive compared with their 5-year ranges. But not compared with their 10-year ranges.
Strong 1Q results support FY Sep-22 guidance. Management's 3-year sales and profit forecast would be reasonable in a normal operating environment. But the environment is not normal. 


Hamamatsu Photonics (6965 JP): Choose an Entry Point Carefully

Hamamatsu Photonics hit a new high of ¥7,050 last February, but hasn't regained the ¥7,000 level since then despite raising FY Sep-21 profit guidance by more than 20% after strong 1H results. In a positive scenario, profits could continue to rise at double-digit annual rates for another two years, but this, too, appears to be in the price.At 50x management's EPS guidance for FY Sep-21 and 39x our EPS estimate for FY Sep-23, the larger risk appears to be on the downside.Potential negatives include the diversion of record profits into higher than usual R&amp;D spending, a downturn in sales to the semiconductor industry when the current investment boom comes to an end, and a slowdown in demand for PCR testing equipment.

Hamamatsu Photonics hit a new high of ¥7,050 last February, but hasn't regained the ¥7,000 level since then despite raising FY Sep-21 profit guidance by more than 20% after strong 1H results. In a positive scenario, profits could continue to rise at double-digit annual rates for another two years, but this, too, appears to be in the price.At 50x management's EPS guidance for FY Sep-21 and 39x our EPS estimate for FY Sep-23, the larger risk appears to be on the downside.Potential negatives include the diversion of record profits into higher than usual R&amp;D spending, a downturn in sales to the semiconductor industry when the current investment boom comes to an end, and a slowdown in demand for PCR testing equipment.

Hamamatsu Photonics (6965 JP): Fully Valued, Take Profits

Hamamatsu Photonics has dropped back 11% from the ¥7,050 reached on February 15, but remains expensive at 52.5x our EPS estimate for FY Sep-21 and 39x our estimate for FY Sep-23, both of which are above management's guidance.Operating profit was up 3.4% year-on-year and net profit down slightly on a 5.6% increase in sales in the three months to December - much better than management's COVID-conservative forecast for 1H, but obviously not indicating an improvement in profitability.The expansion of valuation multiples over the past year has been excessive, in our estimation, removing incentive to buy the shares. Take profits or hold on a 5-year view.

Hamamatsu Photonics has dropped back 11% from the ¥7,050 reached on February 15, but remains expensive at 52.5x our EPS estimate for FY Sep-21 and 39x our estimate for FY Sep-23, both of which are above management's guidance.Operating profit was up 3.4% year-on-year and net profit down slightly on a 5.6% increase in sales in the three months to December - much better than management's COVID-conservative forecast for 1H, but obviously not indicating an improvement in profitability.The expansion of valuation multiples over the past year has been excessive, in our estimation, removing incentive to buy the shares. Take profits or hold on a 5-year view.

Hamamatsu Photonics (6965 JP): Likely to Consolidate Recent Gains

Hamamatsu Photonics is fully valued but not overvalued, in our estimation. If sales and earnings go to new highs over the next three years as expected, upside potential for the share price could be more than 20%.FY Sep-20 results were above guidance. FY Sep-21 guidance - which is based on conservative foreign exchange rate assumptions and includes a weak 1H - looks conservative. Medical and factory automation related sales should start to recover over the coming year, while semiconductor-related sales continue to grow. On a three-year view, sales and profits should set new highs.Sales in China and other Asian countries outside Japan grew by more than 10% in FY Sep-20 while total sales declined by 3.9%. They should continue to grow while other regions recover.Major investments are nearly complete. Depreciation should peak out and then decline as a percentage of sales over the next three years. So should R&amp;D.  Quarterly gross and operating profit margins appear to have bottomed out.With an operating margin of 12.8% in the three months to June (the COVID bottom) and a good chance of recovery to 20%, ROE headed back toward 10%, positive free cash flow and a sound balance sheet, Hamamatsu remains an attractive long-term investment. Traders should watch for infection points. 1H guidance looks like an easy target.

Hamamatsu Photonics is fully valued but not overvalued, in our estimation. If sales and earnings go to new highs over the next three years as expected, upside potential for the share price could be more than 20%.FY Sep-20 results were above guidance. FY Sep-21 guidance - which is based on conservative foreign exchange rate assumptions and includes a weak 1H - looks conservative. Medical and factory automation related sales should start to recover over the coming year, while semiconductor-related sales continue to grow. On a three-year view, sales and profits should set new highs.Sales in China and other Asian countries outside Japan grew by more than 10% in FY Sep-20 while total sales declined by 3.9%. They should continue to grow while other regions recover.Major investments are nearly complete. Depreciation should peak out and then decline as a percentage of sales over the next three years. So should R&amp;D.  Quarterly gross and operating profit margins appear to have bottomed out.With an operating margin of 12.8% in the three months to June (the COVID bottom) and a good chance of recovery to 20%, ROE headed back toward 10%, positive free cash flow and a sound balance sheet, Hamamatsu remains an attractive long-term investment. Traders should watch for infection points. 1H guidance looks like an easy target.

Hamamatsu Photonics (6965 JP): Fully Valued but Not Over-Valued

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.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Hamamatsu Photonics Kk (6965 JP)

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

Hamamatsu Photonics (6965 JP): Choose an Entry Point Carefully

Share price down 27% since January, bringing valuations down to acceptable levels. But guidance may be optimistic and multiple compression would...

Scott Foster

Hamamatsu Photonics (6965 JP): Fully Valued, Take Profits

The shares have not regained the ¥7,000 level reached last February despite a large upward revision to FY Sep-21 guidance. Valuations would still...

Scott Foster

Hamamatsu Photonics (6965 JP): Likely to Consolidate Recent Gains

The shares have dropped back 11% since mid-February, but remain expensive in comparison with historical valuations ranges. Multiple expansion...

Scott Foster

Hamamatsu Photonics (6965 JP): Fully Valued but Not Over-Valued

The shares look fully valued, but not over-valued. Anticipated sales and profit growth over the next three years indicates upside potential for the...

Scott Foster

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)