Independent Insight Provider, Japanese equities, LightStream Research

Scott Foster

Securities analyst covering electronics, precision equipment & robotics, engineering, construction, transport and other sectors for more than 25 years in Japan and 3 years in Korea. Permanent resident of Japan.

Independent Insight Provider, Japanese equities

Disco (6146 JP): Valuation Reasonable but Not Compelling

Disco (6146 JP): Orders Peaking, Blade Dicer Shipments Forecast to Decline

Disco (6146 JP): YoY Growth Headed Toward Zero

Disco (6146 JP): 5-To-8 Month Lead Times in the Price

Disco (6146 JP): 2Q Growth Unsustainable, Shares Overbought

Gravity Works As WeWork Doesn't; Now Plan B

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

Disco's share price has rebounded by 10% since October 5 in conjunction with the announcement of record quarterly sales and profits on October 21 (results for 2Q of FY Mar-22).But new orders received peaked six months earlier (in 4Q of FY Mar-21) and management is guiding for declines in sales, operating profit and the operating margin in the three months to December.Even assuming a tendency to low-ball and a conservative forex assumption (¥105/$), further sustainable growth looks unlikely.The shares are now selling at 20x management's EPS guidance for the nine months to December, extrapolated out to Mar-22 on the assumption that 4Q EPS will be the average of 1Q, 2Q and 3Q. However, operating profit gearing to changes in sales is nearly 50%, leaving substantial risk on the downside as the semiconductor shortage eases and orders for silicon wafer dicing and grinding equipment plateaus and then retreats.

Disco's share price has rebounded by 10% since October 5 in conjunction with the announcement of record quarterly sales and profits on October 21 (results for 2Q of FY Mar-22).But new orders received peaked six months earlier (in 4Q of FY Mar-21) and management is guiding for declines in sales, operating profit and the operating margin in the three months to December.Even assuming a tendency to low-ball and a conservative forex assumption (¥105/$), further sustainable growth looks unlikely.The shares are now selling at 20x management's EPS guidance for the nine months to December, extrapolated out to Mar-22 on the assumption that 4Q EPS will be the average of 1Q, 2Q and 3Q. However, operating profit gearing to changes in sales is nearly 50%, leaving substantial risk on the downside as the semiconductor shortage eases and orders for silicon wafer dicing and grinding equipment plateaus and then retreats. 

DISCO Corp

Disco (6146 JP): Sell into the Rebound