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

TEL – Great Results but Some Warning Signs

Tokyo Electron (8035 JP): Delays and Uncertainty

Tokyo Electron (8035 JP): Getting Ahead of Itself

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

Sales and profits hit record highs in the three months to June, but were inflated by a change in the timing of revenue recognition. On the other hand, strong underlying demand for semiconductor production equipment led to a large upward revision to FY Mar-22 guidance. Management is now forecasting a 32% increase in sales, a 58% increase in operating profit and a 52% increase in net profit in the year to next March. This is consistent with SEMI's forecast of 34% growth in semiconductor production equipment (SPE) sales in calendar 2021.The new, higher guidance for 1H of FY Mar-22 also implies lower profits in 2Q. This, according to management, is due to the fact that most of the one-off gains attributable to the accounting change were recorded in 1Q. Room for another upward revision to guidance appears to be limited.For 2022, SEMI is forecasting a 5% increase in SPE demand to exactly $100 billion. The round number indicates that some additional growth may be needed to overcome the worldwide shortage of semiconductors, but that supply and demand are likely to come back into balance sometime next year.Tokyo Electron's sales and profits are likely to peak at the same time, in our estimation, while support for share prices from central bank QE fades away. Reduce holdings.

Sales and profits hit record highs in the three months to June, but were inflated by a change in the timing of revenue recognition. On the other hand, strong underlying demand for semiconductor production equipment led to a large upward revision to FY Mar-22 guidance. Management is now forecasting a 32% increase in sales, a 58% increase in operating profit and a 52% increase in net profit in the year to next March. This is consistent with SEMI's forecast of 34% growth in semiconductor production equipment (SPE) sales in calendar 2021.The new, higher guidance for 1H of FY Mar-22 also implies lower profits in 2Q. This, according to management, is due to the fact that most of the one-off gains attributable to the accounting change were recorded in 1Q. Room for another upward revision to guidance appears to be limited.For 2022, SEMI is forecasting a 5% increase in SPE demand to exactly $100 billion. The round number indicates that some additional growth may be needed to overcome the worldwide shortage of semiconductors, but that supply and demand are likely to come back into balance sometime next year.Tokyo Electron's sales and profits are likely to peak at the same time, in our estimation, while support for share prices from central bank QE fades away. Reduce holdings.

Tokyo Electron (8035 JP): As Good as It Gets