Japan Specialist

Mark Chadwick

Equity Bottom-Up

<ul>
<li>Denso started the fiscal year with an overly optimistic view of Toyota production – it is now too bearish </li>
<li>Chip shortages and supply disruptions are starting to ease, making it easier for automakers to meet end demand </li>
<li>We are bullish on the stock as we believe that Denso’s earnings will beat lowered guidance and valuations are at the bottom of the range </li>
</ul>


Denso started the fiscal year with an overly optimistic view of Toyota production – it is now too bearish 
Chip shortages and supply disruptions are starting to ease, making it easier for automakers to meet end demand 
We are bullish on the stock as we believe that Denso’s earnings will beat lowered guidance and valuations are at the bottom of the range 


Denso (6902) | No Reason to Be Uber-Bearish

Global Automotive Stocks/EV Focus/Event Driven, SC Capital

SC Capital

Global Automotive Stocks/EV Focus/Event Driven

Over 22 years covering Japanese equities on both the sell side and the buy side. 

Bottom-up Japan Equities Research

<ul>
<li>Toyota announces June quarter results at 13:25 JST on Thursday, August 4th JST. <strong>We think any dip is a buying opportunity</strong>. </li>
<li>Contrary to consensus, Q1's constraints were due to supplier lockdowns in Shanghai, not the chip shortage. In fact, Toyota is seeing larger than expected chip supplies. </li>
<li>Toyota's full-year guidance is the most low-balled in the industry, which is why it's underperformed peers. Better Q2 chip supply should lead to a sharp upward revision after 1H FY3/23. </li>
</ul>


Toyota announces June quarter results at 13:25 JST on Thursday, August 4th JST. We think any dip is a buying opportunity. 
Contrary to consensus, Q1's constraints were due to supplier lockdowns in Shanghai, not the chip shortage. In fact, Toyota is seeing larger than expected chip supplies. 
Toyota's full-year guidance is the most low-balled in the industry, which is why it's underperformed peers. Better Q2 chip supply should lead to a sharp upward revision after 1H FY3/23. 


Toyota Motor's Bad Q1 Is a Buying Opportunity

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.

<ul>
<li>Aided by the weak yen, Imaging &amp; Sensing Solutions should return as a major profit driver in FY Mar-23.</li>
<li>Capacity expansion should help SONY regain image sensor market share over the next 3-4 years.</li>
<li>Participation in TSMC's foundry project in Kyushu should add to the division's long-term potential.</li>
</ul>


Aided by the weak yen, Imaging &amp; Sensing Solutions should return as a major profit driver in FY Mar-23.
Capacity expansion should help SONY regain image sensor market share over the next 3-4 years.
Participation in TSMC's foundry project in Kyushu should add to the division's long-term potential.


Sony (6758 JP): Image Sensors Set for Rebound & Long-Term Expansion

Taiwan Tech Focused Senior Analyst

Patrick Liao

United Microelectronics Corp / Equity Bottom-Up

<ul>
<li>We believe UMC's 3Q22 order is full, but the growth could be within 3% QoQ.</li>
<li>Asian clients are turning weak, and US clients are getting stronger.</li>
<li>The mainland China demand could be making an impact because of the COVID-19 pandemic.</li>
</ul>


We believe UMC's 3Q22 order is full, but the growth could be within 3% QoQ.
Asian clients are turning weak, and US clients are getting stronger.
The mainland China demand could be making an impact because of the COVID-19 pandemic.


UMC (UMC.US; 2303.TT): 3Q22 Order Is Full- The Demand from Asia Is Turning Weak, but US Is Stronger

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

<ul>
<li>Denso 4QFY22 revenue was strong at ¥1,506bn (+4.8% vs. consensus) but increases in raw material prices resulted in OP of just ¥85bn (-31.8% vs. consensus). </li>
<li>The company’s FY23 guidance was conservative projecting just ¥6,350bn (+2.2% vs. consensus at +15.1% YoY) but OP guidance was for ¥560bn (+5.3% vs. consensus).  </li>
<li>We expect volume to grow further and the depreciating Yen should favourably impact ASPs next year.</li>
</ul>


Denso 4QFY22 revenue was strong at ¥1,506bn (+4.8% vs. consensus) but increases in raw material prices resulted in OP of just ¥85bn (-31.8% vs. consensus). 
The company’s FY23 guidance was conservative projecting just ¥6,350bn (+2.2% vs. consensus at +15.1% YoY) but OP guidance was for ¥560bn (+5.3% vs. consensus).  
We expect volume to grow further and the depreciating Yen should favourably impact ASPs next year.


Denso – Strong Overshoot Potential And Only Modest Execution Risk

Japan

DENSO CORPORATION manufactures electronic parts for automobiles.  The Company's products include automobile air conditioners, air bags, ignition systems, generators, power steering systems, and spark plugs with iridium electrode. The Company also produces communication equipment for mobile navigation system.

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Denso Corp (6902 JP)

Denso (6902) | No Reason to Be Uber-Bearish

Denso became too conservative on auto production volumes just as things were starting to get better. Toyota kept its full year guidance for...

Mark Chadwick

Toyota Motor's Bad Q1 Is a Buying Opportunity

Toyota Motor announces quarterly results today. Expectations are super low. We expect dip buying even if results undershoot estimates & recommend...

SC Capital

Sony (6758 JP): Image Sensors Set for Rebound & Long-Term Expansion

Image sensors should return as a major profit driver this year. Capacity expansion should help the company regain market share. The weak yen and...

Scott Foster

UMC (UMC.US; 2303.TT): 3Q22 Order Is Full- The Demand from Asia Is Turning Weak, but US Is Stronger

We believe UMC's 3Q22 order is full, but the growth could be within 3% QoQ. Asian clients are turning weak, and US clients are getting stronger.

Patrick Liao

Denso – Strong Overshoot Potential And Only Modest Execution Risk

We expect a volume recovery to shed light on rising content per vehicle for Denso and for margins to noticeably overshoot excessively conservative...

Mio Kato

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