Daily Brief Japan: Ebara Corp, Tekscend Photomask, Nikkei 225, Iyogin Holdings , Aeon Fantasy, TSE Tokyo Price Index TOPIX, Satori Electric, Shift Inc, Meito Sangyo and more

• After the recent rally, Ebara Corp (6361 JP)‘s increased market cap and free float market cap should result in inclusion in a global index in November.
• Ebara Corp (6361 JP) has underperformed its larger peers, and the stock is trading cheaper than the average of its peers on most metrics.
• There has been a large increase in cumulative excess volume for Ebara Corp (6361 JP) since July and we do not see a similar increase in its peers.

• Tekscend Photomask (429A JP) is a global leader in semiconductor photomasks. At the IPO price, Tekscend will raise JPY138 billion (US$910 million). The shares will be listed on 16 October.
• I previously discussed the IPO in Tekscend Photomask (429A JP) IPO: The Bull Case, Tekscend Photomask (429A JP) IPO: The Bear Case and Tekscend Photomask (429A JP) IPO: Valuation Insights. 
• The peers have re-rated since the release of the prospectus. My analysis suggests that Tekscend is attractively valued at the IPO price.

• The Nikkei 225 (NKY INDEX) dived to 46544 on Tuesday, after peaking at 48.5k last week. It was ultra-overbought.
• This correction offers an opportunity to re-enter the rally (or enter the rally, if you missed it), but don’t be too eager to enter early.
• The Nikkei could correct easily for 2,3 or even 4 weeks when this pattern is encountered, according to our TIME MODEL. 43.5k may be the right area, details in insight.

• Along with political turbulence, expectations of a near term BoJ rate hike may be diminishing; nonetheless, we believe that these rate hikes will, at worst, be delayed and not derailed
• We take profits on Mizuho in big caps and on Hirogin Holdings in mid-caps, downgrading these names from buy to neutral whilst generally retaining banks with higher levels of cross-holdings
• We maintain the following Japanese banks on buy ratings; in the big-caps, we keep Resona and Shizuoka and in the mid-caps we stick with Iyogin Holdings, Hokuhoku and Hachijuni

• Tekscend Photomask (429A JP), a manufacturer and distributor of semiconductor photomasks, raised around US$900m in its Japan IPO.
• TP is a global provider of photomasks and related support services. It has been the leader in the merchant photomask market in terms of sales since 2016.
• In our previous note, we looked at its past performance and valuations. In this note, we will talk about the trading dynamics.

• Sales reached JPY46.6bn (+6.2% YoY), with operating profit at JPY3.6bn (+26.5% YoY) and EBITDA at JPY8.9bn (+10.1% YoY).
• Domestic business sales were JPY37.8bn (+8.6% YoY), driven by a 6.7% YoY increase in comparable store sales.
• China business sales declined to JPY1.7bn (-40.5% YoY), with operating loss narrowing due to structural reforms and facility closures.

• While more companies are now undertaking English-language disclosures compared to the past, many have merely implemented them without achieving level that truly helps overseas investors deepen understanding of management strategies.
• Overseas investors seek qualitative explanations and information regarding long-term strategies, yet many companies are reluctant to proactively disclose such information in English, including “corporate governance information” and “long-term/growth strategies.”
• Only a limited number of companies provide opportunities for top management to directly explain business strategies to overseas investors in English or for outside directors to meet with overseas investors.

• Satori Electric is a well-established Japanese distributor of electronic components, semiconductors, and factory automation systems, with a history dating back to 1947. The company is navigating the cyclical nature of the semiconductor industry by focusing on value-added services like design and development.
• Financially, the company exhibits strong growth in net income and dividends, supported by a high dividend yield. However, its profitability and ability to meet debt obligations show weakness, as indicated by a low resilience score. Cash flow has also shown significant volatility.
• A key strategic development is the planned business integration with Hagiwara Electric Holdings Co., Ltd., effective April 1, 2026. This merger is anticipated to create operational synergies and strengthen market positioning, representing a significant potential catalyst for future value creation.

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• In FY08/25, the company reported JPY129.8bn sales, JPY45.0bn gross profit, JPY15.6bn operating profit, and JPY8.9bn net income.
• Software Testing Services segment achieved JPY84.3bn sales, JPY31.1bn gross profit, and JPY21.5bn operating profit in FY08/25.
• FY08/26 forecasts JPY150.0bn sales, JPY20.0bn operating profit, and JPY13.5bn net profit, on an adjusted basis.

• Diversified Business Model Mitigates Risk: Meito Sangyo operates across three distinct segments: Food, Chemicals, and Real Estate, providing resilience against downturns in any single sector. The Food division offers a wide range of confectioneries and beverages, while the Chemicals segment produces specialized, high-margin products like enzymes and dextran for pharmaceutical and cosmetic applications.
• Exceptional Earnings Growth and Turnaround: The company has demonstrated a remarkable recovery, swinging from a net loss of JPY -703 million in FY2024 to a substantial net profit of JPY 4,719 million in FY2025. This is supported by a 3-year net income compound annual growth rate (CAGR) of 37.48%.
• Attractive Valuation with a Shareholder-Friendly Strategy: The company trades at a low Price-to-Book ratio of 0.62 and a Price-to-Earnings ratio of 7.15. Management is focused on enhancing shareholder value through its ‘MEITO CHALLENGE 2026’ plan, which includes progressive dividends, share buybacks, and a target dividend of JPY 50 per share by FY2027.

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