Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

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

IHI Corporation manufactures heavy machinery. The Company produces aircraft jet engines, rocket propulsion systems, and ships for military and commercial use. Ishikawajima-Harima also constructs petroleum refineries and nuclear power plants.

<ul>
<li>Sales and operating profit declined YoY in 1H, but new orders were up 17.5% and the book-to-bill ratio rose from 1.00 to 1.25. anagement has raised full-year guidance.</li>
<li>Aerospace &amp; Defense continue to lead growth, with nuclear energy and Asian EPC making significant contributions to new orders and the restructuring of Industrial Systems &amp; Machinery boosting operating profit.</li>
<li>Share price down 15% in two weeks to 23x FY Mar-26 EPS guidance. Once again a reasonably valued investment in Japan's rising defense budget and corporate restructuring.</li>
</ul>


Sales and operating profit declined YoY in 1H, but new orders were up 17.5% and the book-to-bill ratio rose from 1.00 to 1.25. anagement has raised full-year guidance.
Aerospace &amp; Defense continue to lead growth, with nuclear energy and Asian EPC making significant contributions to new orders and the restructuring of Industrial Systems &amp; Machinery boosting operating profit.
Share price down 15% in two weeks to 23x FY Mar-26 EPS guidance. Once again a reasonably valued investment in Japan's rising defense budget and corporate restructuring.


IHI (7013 JP): Orders and Profits Headed Up, Share Price Down

Hamamatsu Photonics Kk / Equity Bottom-Up

HAMAMATSU PHOTONICS K.K. manufactures electron tubes, semiconductors, and image processors.  The Company's products include photosensitive electronic tubes, optical/image sensors, X-ray related products, laser related products, photodiodes, light-emitting diodes (LED) and video camera used for measuring equipment.

<ul>
<li>Announced last Friday, FY Sep-25 sales and net profit were in line with guidance, but operating profit fell short. On Monday, the shares dropped 4.5%, wiping out a month's gains.</li>
<li>Looking ahead, management expects three years of sales and profit growth as capex declines, depreciation and R&amp;D level off, and the NKT Photonics acquisition approaches breakeven.</li>
<li>In this scenario, semiconductor, bio-medical, defense and quantum computing applications should drive 3-year sales growth of 24% and a 71% increase in net profit, bringing the P/E down to 20X.</li>
</ul>


Announced last Friday, FY Sep-25 sales and net profit were in line with guidance, but operating profit fell short. On Monday, the shares dropped 4.5%, wiping out a month's gains.
Looking ahead, management expects three years of sales and profit growth as capex declines, depreciation and R&amp;D level off, and the NKT Photonics acquisition approaches breakeven.
In this scenario, semiconductor, bio-medical, defense and quantum computing applications should drive 3-year sales growth of 24% and a 71% increase in net profit, bringing the P/E down to 20X.


Hamamatsu Photonics (6965 JP): Capex Peaking, Profits to Rebound

NEC Corporation manufactures and markets computers, telecommunication equipment, electronic devices, semiconductors, and software.  The Company's products include printers, modems, cellular phones, plasma display panels (PDP), network systems, memory, integrated circuits (IC), thin film transistor-liquid crystal display (TFT-LCD), and printed circuit boards (PCB). NEC operates worldwide.

<ul>
<li>NEC and Siemens plan to develop an automated robot teaching system for faster set-up and more efficient operation of production lines incorporating multiple robots.</li>
<li>NEC's FY Mar-26 guidance raised on strong 1H results. BluStellar, which includes digital twins for robot teaching, grew faster than expected.  </li>
<li>Aerospace/Defense led sales growth and followed BluStellar in operating profit. Improving product mix and rising Japanese defense budget point to growing long-term potential.</li>
</ul>


NEC and Siemens plan to develop an automated robot teaching system for faster set-up and more efficient operation of production lines incorporating multiple robots.
NEC's FY Mar-26 guidance raised on strong 1H results. BluStellar, which includes digital twins for robot teaching, grew faster than expected.  
Aerospace/Defense led sales growth and followed BluStellar in operating profit. Improving product mix and rising Japanese defense budget point to growing long-term potential.


NEC (6701 JP): Tie-Up with Siemens Adds to Growth Potential

<ul>
<li>New Japanese Prime Minister Sanae Takaichi aims to raise defense spending to 2% of GDP this fiscal year, two years ahead of the original schedule.</li>
<li>Takaichi also wants to accelerate investment in advanced defense technologies. IHI, which recently signed an agreement with ICEYE to build earth observations satellites, should be among the beneficiaries.</li>
<li>IHI's sales and profit comparisons should turn positive during FY Mar-26. A 7-for-1 stock split effective October 1, 2025, makes the shares more attractive to retail investors. </li>
</ul>


New Japanese Prime Minister Sanae Takaichi aims to raise defense spending to 2% of GDP this fiscal year, two years ahead of the original schedule.
Takaichi also wants to accelerate investment in advanced defense technologies. IHI, which recently signed an agreement with ICEYE to build earth observations satellites, should be among the beneficiaries.
IHI's sales and profit comparisons should turn positive during FY Mar-26. A 7-for-1 stock split effective October 1, 2025, makes the shares more attractive to retail investors. 


IHI (7013 JP): SAR Satellite Deal Adds to Takaichi Trade

Pharma Foods International / Equity Bottom-Up

Pharma Foods International Co.,Ltd. produces and sells bioengineered foods for commercial use.  The Company researches and develops physiologically functional foods.

<ul>
<li>Recent gains wiped out as large advertising budget cuts operating and net profit, diverting attention from unique technology and long-term potential.  Gross margin steady at about 80%.</li>
<li>M&amp;A could add 50% to sales, but details won't be available until a deal is made.  Sales of functional food ingredients, supplements, personal care products and textiles continue to rise.  </li>
<li>Pharmaceuticals and agricultural bio-stimulants should make significant contributions to the company's business in the next several years. Buy into current weakness for long-term growth.</li>
</ul>


Recent gains wiped out as large advertising budget cuts operating and net profit, diverting attention from unique technology and long-term potential.  Gross margin steady at about 80%.
M&amp;A could add 50% to sales, but details won't be available until a deal is made.  Sales of functional food ingredients, supplements, personal care products and textiles continue to rise.  
Pharmaceuticals and agricultural bio-stimulants should make significant contributions to the company's business in the next several years. Buy into current weakness for long-term growth.


Pharma Foods International (2929 JP): Unique Bio-Tech Drives Long-Term Growth

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.