Equity Analyst, LightStream Research

Chacko Jacob

Equity Analyst

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

<a href="https://www.smartkarma.com/entities/4130" target="_blank" data-smartkarma-citation="entities:4130:1">Ntn Corp (6472 JP)</a> is a leading manufacturer of precision mechanical parts and components, especially hub bearings for which the company is a global market leader. The company’s overseas business accounted for 72% of its total sales in FY2016.  This year marks the beginning of the company’s second century of existence. To remain relevant for the next 100 years, the company has forayed into four new businesses namely, green energy, EV, robotics and service and solutions. By shifting its focus to new areas, NTN aims to double its revenues by 2025 to about JPY 1.3tn while increasing its operating margin to 10-15% from the current 5.1%.In April 2018, NTN<a href="https://asia.nikkei.com/Business/Companies/Japan-s-NTN-to-supply-in-wheel-motor-tech-to-Chinese-startup" target="_blank"> concluded</a> a licensing contract with Chinese EV startup Changchun Fawsn Auto Tech (FSAT) to provide air cooled in-wheel motors and vehicle motion control systems. This partnership marks the first time that EVs with in-wheel motors will be mass produced. While the deal is still on paper, it is likely to serve as a significant growth trigger in the next 2-3 years. However, in the short to medium-term we are sceptical on the company's growth prospects, largely due to its exposure to business cycles in regions that it operates in:<ul><li>FY2017 could mark the growth peak of its latest cycle and we expect revenue to remain flat in the coming two years.</li><li>Bottlenecks in its industrial machinery segment have prevented the company from keeping up with demand.</li><li>Japanese PMI has hit its highest point in four years and FY2018 could see a period of cooling.</li><li>The stronger yen, which has already pared export growth in March-April, could make the company’s products more expensive to end-users, mainly in Asia.</li><li>Lastly, the company has blamed the shrinking market in Japan for its falling aftermarket revenue. The company’s plan to increase market share in other regions could take time to materialise.</li></ul>

Ntn Corp (6472 JP) is a leading manufacturer of precision mechanical parts and components, especially hub bearings for which the company is a global market leader. The company’s overseas business accounted for 72% of its total sales in FY2016.  This year marks the beginning of the company’s second century of existence. To remain relevant for the next 100 years, the company has forayed into four new businesses namely, green energy, EV, robotics and service and solutions. By shifting its focus to new areas, NTN aims to double its revenues by 2025 to about JPY 1.3tn while increasing its operating margin to 10-15% from the current 5.1%.In April 2018, NTN concluded a licensing contract with Chinese EV startup Changchun Fawsn Auto Tech (FSAT) to provide air cooled in-wheel motors and vehicle motion control systems. This partnership marks the first time that EVs with in-wheel motors will be mass produced. While the deal is still on paper, it is likely to serve as a significant growth trigger in the next 2-3 years. However, in the short to medium-term we are sceptical on the company's growth prospects, largely due to its exposure to business cycles in regions that it operates in:FY2017 could mark the growth peak of its latest cycle and we expect revenue to remain flat in the coming two years.Bottlenecks in its industrial machinery segment have prevented the company from keeping up with demand.Japanese PMI has hit its highest point in four years and FY2018 could see a period of cooling.The stronger yen, which has already pared export growth in March-April, could make the company’s products more expensive to end-users, mainly in Asia.Lastly, the company has blamed the shrinking market in Japan for its falling aftermarket revenue. The company’s plan to increase market share in other regions could take time to materialise.

NTN's FY2018 Forecast Likely to Be Muted; Plays First-Mover Card with In-Wheel Motors for EVs

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Japanese and Asian equity long/short strategies

Uzabase

Specialising in Japanese and Asian equity long/short strategies with a focus on rigorous, but targeted quantitative analysis to temper evaluations of company strategy, potential and vision. At Uzabase, our team of analysts provides coverage of industry dynamics with a local Asian flavour on Speeda, our financial information platform. Going forward we are aiming to channel our focus toward thematic research on emerging industries and company research.

Being reliant on transport industries, especially the domestic railways, <a href="https://www.smartkarma.com/entities/5540" target="_blank" data-smartkarma-citation="entities:5540:1">Timken India Ltd (TMKN IN)</a>’s stock has surged 52.5% to-date from the announcement of the Rail Budget on 25th February 2016. The company is one of the leading manufacturers of tapered roller bearings and components used in medium and heavy trucks, off-highway equipment and rolling stock. With 22% of its revenue from the rail sector and 20-25% from CV/M&amp;HCV, the company is poised to benefit from the auction of coal mines, revival of stalled infrastructure projects and most importantly the expansion and modernisation of the Indian Railways.

Being reliant on transport industries, especially the domestic railways, Timken India Ltd (TMKN IN)’s stock has surged 52.5% to-date from the announcement of the Rail Budget on 25th February 2016. The company is one of the leading manufacturers of tapered roller bearings and components used in medium and heavy trucks, off-highway equipment and rolling stock. With 22% of its revenue from the rail sector and 20-25% from CV/M&amp;HCV, the company is poised to benefit from the auction of coal mines, revival of stalled infrastructure projects and most importantly the expansion and modernisation of the Indian Railways.

India Small Cap Tour: Timken Riding the Growth in Railways

United States

The Timken Company manufactures and distributes tapered roller bearings as well as cylindrical, spherical, and precision ball bearings. The Company also manufactures power transmission components and assemblies, as well as systems such as helicopter transmissions.

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Timken Co (TKR US)

NTN's FY2018 Forecast Likely to Be Muted; Plays First-Mover Card with In-Wheel Motors for EVs

Ntn Corp (6472 JP) is a leading manufacturer of precision mechanical parts and components, especially hub bearings for which the company is a...

Chacko Jacob

India Small Cap Tour: Timken Riding the Growth in Railways

Being reliant on transport industries, especially the domestic railways, Timken India Ltd (TMKN IN)’s stock has surged 52.5% to-date from the...

Mio Kato

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