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>The share price was up 4.4% on Friday - and up 2.3x since the end of October - raising forward valuations to the high side of their usual range.</li>
<li>Management raised FY Mar-24 operating profit guidance slightly after 3Q results that were strong YoY but flat QoQ. 4Q should be better as finished goods inventory is shipped.</li>
<li>Operating efficiency has improved and a new semiconductor up-cycle has begun, but the numbers suggest caution. Take profits and reassess.</li>
</ul>


The share price was up 4.4% on Friday - and up 2.3x since the end of October - raising forward valuations to the high side of their usual range.
Management raised FY Mar-24 operating profit guidance slightly after 3Q results that were strong YoY but flat QoQ. 4Q should be better as finished goods inventory is shipped.
Operating efficiency has improved and a new semiconductor up-cycle has begun, but the numbers suggest caution. Take profits and reassess.


Screen Holdings (7735): Share Price Straight Up, Financials Not so Simple

<ul>
<li>FY Mar-25 guidance has been raised again after strong 3Q results. Growth should continue next fiscal year with rising demand from TSMC. </li>
<li>Sales to Chinese customers bounced back strongly last quarter, defying predictions. Capacity adds and process upgrades should continue to drive demand from China.</li>
<li>FPD, PCB and printing equipment are now profitable and should remain so. More efficient production and slower growth in depreciation should also support the operating margin.</li>
</ul>


FY Mar-25 guidance has been raised again after strong 3Q results. Growth should continue next fiscal year with rising demand from TSMC. 
Sales to Chinese customers bounced back strongly last quarter, defying predictions. Capacity adds and process upgrades should continue to drive demand from China.
FPD, PCB and printing equipment are now profitable and should remain so. More efficient production and slower growth in depreciation should also support the operating margin.


Screen Holdings (7735 JP): 25%+ Upside Potential

Technology / Semiconductor / Internet Research

Nicolas Baratte

<ul>
<li>Big Dec-24 due to China. Mar-25 will be weaker. FY26 growth will come only from TSMC and HBM. After a strong FY25 (~30% growth), FY26 should see growth at 10-15%.</li>
<li>Accounting concerns  should be over after the publication of the audit report on Jan 14 2025. The stock has started appreciating since early Jan 2025.</li>
<li>Valuations are low. The stock is trading at ~11x FY26 EPS. A muted Mar-25 could limit the upside short-term, let’s wait.</li>
</ul>


Big Dec-24 due to China. Mar-25 will be weaker. FY26 growth will come only from TSMC and HBM. After a strong FY25 (~30% growth), FY26 should see growth at 10-15%.
Accounting concerns  should be over after the publication of the audit report on Jan 14 2025. The stock has started appreciating since early Jan 2025.
Valuations are low. The stock is trading at ~11x FY26 EPS. A muted Mar-25 could limit the upside short-term, let’s wait.


SCREEN: Moderate ~teens Growth Outlook but the Stock Is Cheap

<ul>
<li>AMAT mentions “tremendous architecture inflections” in Logic and Memory (GAA, BSPD, HBM), this is true. But reviewed yesterday, how much, how fast versus declining Mature Logic and China declining?</li>
<li>2025 China to decline -25%, RoW to increase +25% on AI. This should continue in 2026. Post China’s elevated capex in 2023-24, the SPE sector is a play on AI. </li>
<li>ASML and KLA are 1) quasi monopoly 2) in segments that outgrow the total market. ASML is cheapish, KAL at average valuations. Best 2 stocks: ASML, KLA</li>
</ul>


AMAT mentions “tremendous architecture inflections” in Logic and Memory (GAA, BSPD, HBM), this is true. But reviewed yesterday, how much, how fast versus declining Mature Logic and China declining?
2025 China to decline -25%, RoW to increase +25% on AI. This should continue in 2026. Post China’s elevated capex in 2023-24, the SPE sector is a play on AI. 
ASML and KLA are 1) quasi monopoly 2) in segments that outgrow the total market. ASML is cheapish, KAL at average valuations. Best 2 stocks: ASML, KLA


SPE Part 2: Growth in 2025-26 from AI Segment Only (Logic, HBM, Packaging). Best 2 Stocks: ASML, KLA

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Hua Hong Semiconductor / Equity Bottom-Up

<ul>
<li>Hong Kong's secular bull market continues this year with record buying from mainland investors through the Southbound Connect platform.</li>
<li>
<a href="https://www.smartkarma.com/entities/aac-technologies-holdings-inc" target="_blank" data-smartkarma-citation="entities:6544:1" rel="noopener">AAC Technologies Holdings (2018 HK)</a> announced a positive profit alert of of 150% increase in profit for 2024.  The AI, phone and auto segments saw value content increases.
</li>
<li>
<a href="https://www.smartkarma.com/entities/hua-hong-semiconductor-ltd" target="_blank" data-smartkarma-citation="entities:7201:1" rel="noopener">Hua Hong Semiconductor (1347 HK)</a> is well-positioned to cater to China's increasing demand for locally designed and produced chips, especially in the EV, smart home appliances and wearables industries.
</li>
</ul>


Hong Kong's secular bull market continues this year with record buying from mainland investors through the Southbound Connect platform.

AAC Technologies Holdings (2018 HK) announced a positive profit alert of of 150% increase in profit for 2024.  The AI, phone and auto segments saw value content increases.


Hua Hong Semiconductor (1347 HK) is well-positioned to cater to China's increasing demand for locally designed and produced chips, especially in the EV, smart home appliances and wearables industries.



BUY/SELL/HOLD: Hong Kong Stock Update (February 20)

Japan

SCREEN Holdings Co Ltd.  manufactures and sell semiconductors, FPD devices, commercial printing and printed circuit boards(PCB). The company also provides additional services for its products.

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SCREEN Holdings (7735 JP)