A Failing 1H From the Lighting Players; US-China Trade Tension Being the Key Reason

Stanley Acquires Hexa Tech: AIN Substrates Might Allow Stanley to Compete on ADAS

Stanley’s Turn to Disappoint This Time; FY03/20E Guidance Remains Weak for Both Stanley And Koito

Koito Acquires Stake in BrightWay Vision (BWV): BWV’s AGIT to Support ADAS Aims

Equity Analyst, LightStream Research

Aqila Ali

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

On the 25th of July, <a href="https://www.smartkarma.com/entities/koito-manufacturing-co-ltd" target="_blank" data-smartkarma-citation="entities:15841:1" rel="noopener">Koito Manufacturing (7276 JP)</a> posted FY03/19 results that did not look particularly attractive falling below market expectations. <a href="https://www.smartkarma.com/entities/stanley-electric-co-ltd" target="_blank" data-smartkarma-citation="entities:1330:1" rel="noopener">Stanley Electric (6923 JP)</a>, on the other hand, posted results yesterday, that saw both revenue and OP decrease YoY, but managed to surpass consensus estimates on OP. On the whole, 1Q has been a weak quarter for both lighting companies. However, Koito looked quite steady in its revenue performance, while Stanley managed to maintain a relatively higher profit margin. Stanley registered a decline in revenue by -6.0% YoY, while Koito saw revenue increase by +2.7% YoY. On profitability, Stanley registered a lower decline in OP at -7.8% YoY, compared to Koito’s -9.9% YoY, reaching an OPM of 12.6% higher than the 9.9% OPM made by Koito. Our earnings estimates appeared quite optimistic for Koito, while they were almost in line for Stanley. The two companies are on track to achieve their 1H revenue target. Stanley’s 1H OP target looks conservative, based purely on 1Q results while Koito’s 1H OP target looks relatively challenging. However, the two lighting players kept their guidance unchanged. Following the 1Q FY03/20 earnings release Stanley opened +4.4% up, while Koito closed -9.4% down following its earnings on 25 July.

On the 25th of July, Koito Manufacturing (7276 JP) posted FY03/19 results that did not look particularly attractive falling below market expectations. Stanley Electric (6923 JP), on the other hand, posted results yesterday, that saw both revenue and OP decrease YoY, but managed to surpass consensus estimates on OP. On the whole, 1Q has been a weak quarter for both lighting companies. However, Koito looked quite steady in its revenue performance, while Stanley managed to maintain a relatively higher profit margin. Stanley registered a decline in revenue by -6.0% YoY, while Koito saw revenue increase by +2.7% YoY. On profitability, Stanley registered a lower decline in OP at -7.8% YoY, compared to Koito’s -9.9% YoY, reaching an OPM of 12.6% higher than the 9.9% OPM made by Koito. Our earnings estimates appeared quite optimistic for Koito, while they were almost in line for Stanley. The two companies are on track to achieve their 1H revenue target. Stanley’s 1H OP target looks conservative, based purely on 1Q results while Koito’s 1H OP target looks relatively challenging. However, the two lighting players kept their guidance unchanged. Following the 1Q FY03/20 earnings release Stanley opened +4.4% up, while Koito closed -9.4% down following its earnings on 25 July.

照明メーカーにとって第1四半期は低調：小糸製作所とスタンレーは業績予想を据え置き