Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

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>In 2020 and 2021 we had nine conviction calls, four of which returned over 50% within just over a year.</li>
<li>Three more returned close to 40%, one returned 15% and just one was an abject failure returning -39%. </li>
<li>On average, alpha generation was 24.3% and our 2022 names are off to a good start putting up 14.7% in alpha in just over a month and a half.</li>
</ul>


In 2020 and 2021 we had nine conviction calls, four of which returned over 50% within just over a year.
Three more returned close to 40%, one returned 15% and just one was an abject failure returning -39%. 
On average, alpha generation was 24.3% and our 2022 names are off to a good start putting up 14.7% in alpha in just over a month and a half.


A Belated Look Back at Our 2020 and 2021 Conviction Calls and a Look Ahead to 2022

Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

Concern over the potential impact of the COVID surge in Southeast Asia on back-end assembly operations proved unfounded as results for the six months for September came in well above guidance, with profits and profit margins rising substantially in 2Q.2Q sales were up 28% year-on-year led by 50% growth in Automotive and 46% growth in other Industrial applications. FY Mar-22 guidance was raised, with management now expecting a 64% increase in operating profit on a 22% increase in sales.On a medium-term view, Rohm's leading position in SiC (silicon carbide) power devices used in electric vehicle inverters should support continued sales growth and margin expansion. At 17x our EPS estimate for FY Mar-24, we see 30% potential upside to a ¥13,500 price target.

Concern over the potential impact of the COVID surge in Southeast Asia on back-end assembly operations proved unfounded as results for the six months for September came in well above guidance, with profits and profit margins rising substantially in 2Q.2Q sales were up 28% year-on-year led by 50% growth in Automotive and 46% growth in other Industrial applications. FY Mar-22 guidance was raised, with management now expecting a 64% increase in operating profit on a 22% increase in sales.On a medium-term view, Rohm's leading position in SiC (silicon carbide) power devices used in electric vehicle inverters should support continued sales growth and margin expansion. At 17x our EPS estimate for FY Mar-24, we see 30% potential upside to a ¥13,500 price target.

Rohm (6963 JP): Strong 2Q Led by Automotive

Rohm has dropped to the bottom of its recent trading range, presumably on concerns over the impact of COVID-19 on semiconductor assembly &amp; test in Southeast Asia and the ongoing disruption of auto production. However,<ol>
<li>Guidance looks conservative. 1Q operating and net profit were 31% and 34% of FY Mar-22 full-year guidance, respectively.</li>
<li>COVID infections in Southeast Asia have dropped back from recent peaks. </li>
<li>Rohm is a leading producer of Silicon Carbide wafers and power devices for Electric Vehicles. It is geared to both the recovery and technological advance of the auto industry.</li>
</ol>With 38% upside to our ¥13,500 price target, we regard Rohm as a Buy both on a trading basis and as a longer-term investment.

Rohm has dropped to the bottom of its recent trading range, presumably on concerns over the impact of COVID-19 on semiconductor assembly &amp; test in Southeast Asia and the ongoing disruption of auto production. However,
Guidance looks conservative. 1Q operating and net profit were 31% and 34% of FY Mar-22 full-year guidance, respectively.
COVID infections in Southeast Asia have dropped back from recent peaks. 
Rohm is a leading producer of Silicon Carbide wafers and power devices for Electric Vehicles. It is geared to both the recovery and technological advance of the auto industry.
With 38% upside to our ¥13,500 price target, we regard Rohm as a Buy both on a trading basis and as a longer-term investment. 

Rohm (6963): Buy for Auto & COVID Recovery

Rohm has dropped by 15% in the recent market sell-off, while FY Mar-21 profits were far above guidance and FY Mar-22 guidance calls for a further 27% increase in operating profit.Unless you believe that economic recovery from COVID-19 will not continue or, in Rohm's case, that the auto industry will not recover from the current semiconductor shortage, this looks like a buying opportunity.Up-front investment in power devices for electric vehicles should pay off as demand rises and economies of scale are realized. This should support record sales and additional margin expansion  in FY Mar-23.There is now 35% potential upside to our ¥13,500 share price target.

Rohm has dropped by 15% in the recent market sell-off, while FY Mar-21 profits were far above guidance and FY Mar-22 guidance calls for a further 27% increase in operating profit.Unless you believe that economic recovery from COVID-19 will not continue or, in Rohm's case, that the auto industry will not recover from the current semiconductor shortage, this looks like a buying opportunity.Up-front investment in power devices for electric vehicles should pay off as demand rises and economies of scale are realized. This should support record sales and additional margin expansion  in FY Mar-23.There is now 35% potential upside to our ¥13,500 share price target.

Lexus announced its new LF-Z EV concept yesterday, laying out broad plans for its electrification strategy and future development outlook. The brand has seen less news flow than the main Toyota brand in terms of technological progress but this appears to now be changing. This has implications for a variety of suppliers.

Lexus announced its new LF-Z EV concept yesterday, laying out broad plans for its electrification strategy and future development outlook. The brand has seen less news flow than the main Toyota brand in terms of technological progress but this appears to now be changing. This has implications for a variety of suppliers.

Japan

ROHM COMPANY LIMITED manufactures custom linear integrated circuits and semiconductor devices for use primarily in consumer electronics.  The Company has plants and sales offices worldwide.  Rohm's subsidiaries include Wako Electric and Apollo Electronics.

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ROHM Co Ltd (6963 JP)

A Belated Look Back at Our 2020 and 2021 Conviction Calls and a Look Ahead to 2022

We take a look back at our conviction calls from 2020 and 2021 to assess performance and put the strong start to our 2022 names in context.

Mio Kato

Rohm (6963 JP): Strong 2Q Led by Automotive

1H results ahead of guidance despite COVID concerns and FY Mar-22 guidance raised. Automotive to lead medium-term growth with Rohm a leader in SiC...

Scott Foster

Rohm (6963): Buy for Auto & COVID Recovery

Shares down to bottom of trading range, but guidance looks conservative, COVID and auto supply chain disruption easing, and company strong in SiC...

Scott Foster

Rohm (6963 JP): Buy on Current Weakness

Rohm has dropped 15% in the recent sell-off, while FY Mar-21 profits were above guidance and FY Mar-22 guidance is for 27% OP growth. 35% upside to...

Scott Foster

Toyota – Electrifying Lexus

Lexus has seen less EV related news flow than the main Toyota brand in terms of technological progress but this appears to now be changing and has...

Mio Kato

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