Research Coverage of Japanese Listed Companies, Shared Research Inc

Shared Research

Research Coverage of Japanese Listed Companies

Shared Research Inc

Pioneering research coverage of Japanese listed companies. Now customizable and interactive for global institutional investors. Corporate access reimagined.

Equity Bottom-Up

<ul><li>In Q1 FY03/25, Organo reported orders received of JPY52.7bn (+56.9% YoY) and net income of JPY2.7bn (+67.6% YoY).</li><li>The Water Treatment Engineering business saw orders received of JPY46.5bn (+69.0% YoY) and revenue of JPY25.5bn (+6.8% YoY).</li><li>Organo revised its FY03/25 full-year forecast, increasing orders received to JPY165.0bn and net income to JPY17.6bn.</li></ul>

In Q1 FY03/25, Organo reported orders received of JPY52.7bn (+56.9% YoY) and net income of JPY2.7bn (+67.6% YoY).The Water Treatment Engineering business saw orders received of JPY46.5bn (+69.0% YoY) and revenue of JPY25.5bn (+6.8% YoY).Organo revised its FY03/25 full-year forecast, increasing orders received to JPY165.0bn and net income to JPY17.6bn.

Organo Corp (6368 JP): Q1 FY03/25 flash update

<ul>
<li>As a comprehensive water treatment engineering company, <a href="https://www.smartkarma.com/entities/organo-corp" target="_blank" data-smartkarma-citation="entities:1972:1" rel="noopener">Organo Corp (6368 JP)</a> engages in the planning, design, procurement, construction, operational management, and maintenance of water treatment plants.</li>
<li>In FY03/23, orders received were JPY173.5bn, revenue was JPY132.4bn, operating profit was JPY15.2bn, recurring profit was JPY16.0bn, and net income attributable to owners of the parent was JPY11.7bn.</li>
<li>Organo Corporation announced revisions to its full-year forecast for FY03/24.</li>
</ul>


As a comprehensive water treatment engineering company, Organo Corp (6368 JP) engages in the planning, design, procurement, construction, operational management, and maintenance of water treatment plants.
In FY03/23, orders received were JPY173.5bn, revenue was JPY132.4bn, operating profit was JPY15.2bn, recurring profit was JPY16.0bn, and net income attributable to owners of the parent was JPY11.7bn.
Organo Corporation announced revisions to its full-year forecast for FY03/24.


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>New orders are running ahead of sales as semiconductor capital spending continues to rise and the company follows TSMC to Arizona.</li>
<li>Water treatment for the semiconductor industry is of growing importance as more emphasis is put on recycling.</li>
<li>Share price up, but still reasonably valued. 3Q results should be out the first week of February.</li>
</ul>


New orders are running ahead of sales as semiconductor capital spending continues to rise and the company follows TSMC to Arizona.
Water treatment for the semiconductor industry is of growing importance as more emphasis is put on recycling.
Share price up, but still reasonably valued. 3Q results should be out the first week of February.


Organo (6368 JP): From Taiwan to the U.S.

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Thematic (Sector/Industry)

• RESULTS - 29th MARCH •<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/197/979/original/image_20691903021617048798901.png?1617048799" class="editor-image img-responsive" data-smartkarma-image-id="197979"></figure>RESULTS -  Of Monday's three results, <a href="https://www.smartkarma.com/entities/arcland-sakamoto-co-ltd" target="_blank" data-smartkarma-citation="entities:10395:1" rel="noopener">Arcland Sakamoto (9842 JP)</a> stands out but is driven by the LIXIL VIVA acquisition. The FY22 forecasts are conservative and leave ample room for an upward revision. Arcland is our preferred Home Centre holding and is back into an attractive buying zone following last year's COVID-driven spike into OverBought territory.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/197/985/original/image_58825059031617049684417.png?1617049685" class="editor-image img-responsive" data-smartkarma-image-id="197985"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/197/986/original/image_44235549241617050056401.png?1617050057" class="editor-image img-responsive" data-smartkarma-image-id="197986"></figure>• FORECASTS/REVISIONS - 29th MARCH •<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/197/987/original/image_83881428151617050520638.png?1617050521" class="editor-image img-responsive" data-smartkarma-image-id="197987"></figure>FORECASTS/REVISIONS - Of the 14 annual forecasts and revisions, 57% scored positively. The DETAIL Section below focuses on <a href="https://www.smartkarma.com/entities/organo-corp" target="_blank" data-smartkarma-citation="entities:1972:1" rel="noopener">Organo (6368 JP)</a> and <a href="https://www.smartkarma.com/entities/keihan-electric-railway-co" target="_blank" data-smartkarma-citation="entities:6120:1" rel="noopener">Keihan Electric Railway (9045 JP)</a>. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/197/988/original/image_80065899161617052150856.png?1617052151" class="editor-image img-responsive" data-smartkarma-image-id="197988"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/197/989/original/image_62815698771617052194528.png?1617052195" class="editor-image img-responsive" data-smartkarma-image-id="197989"></figure>

• RESULTS - 29th MARCH •RESULTS -  Of Monday's three results, Arcland Sakamoto (9842 JP) stands out but is driven by the LIXIL VIVA acquisition. The FY22 forecasts are conservative and leave ample room for an upward revision. Arcland is our preferred Home Centre holding and is back into an attractive buying zone following last year's COVID-driven spike into OverBought territory.• FORECASTS/REVISIONS - 29th MARCH •FORECASTS/REVISIONS - Of the 14 annual forecasts and revisions, 57% scored positively. The DETAIL Section below focuses on Organo (6368 JP) and Keihan Electric Railway (9045 JP). 

🇯🇵 JAPAN • Results & Revisions 03/​​​​​​​​29 - Arcland, Organo & Keihan

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

<ul>
<li>Organo has rebounded from December's sharp sell-off, but remains attractively valued on a long-term view, in our estimation. </li>
<li>New orders for water treatment systems from the semiconductor and other industries were up 22% year-on-year and exceeded sales by 33% in the nine months to December.</li>
<li>According to management, orders continued to exceed sales in the three months to March, but are likely to drop below sales in 1H of FY Mar-20 due to the downturn in memory ICs.</li>
<li>But the situation is not dire, as overall silicon wafer shipments and demand for image sensors both continue to rise, while foundry is doing better than memory.</li>
<li>Longer term, management expects growth driven by IIoT, power devices,  electric vehicles, and a cyclical recovery in memory. The biggest uncertainty is Chinese domestic demand.</li>
<li>Some orders have been deferred by one or two quarters, but the company has so far not suffered any cancellations. With a one-year lag from order to revenue recognition for larger projects, management believes it has sufficient visibility to predict improvement in 2H.</li>
<li>Management has no plans to revise FY Mar-19 guidance, which is for a 14.9% increase in sales, a 43.9% increase in operating profit and a 33.1% increase in net profit to ¥322.5 per share. At ¥3,200 (Friday, April 5 closing price), this translates into a P/E ratio of 9.9x.</li>
<li>In our estimation, this is cheap enough to be of interest to long-term investors. In the meantime, the calculations of Japan Analytics show upside to a no-growth valuation. Little or no growth appears to be the most likely scenario for FY Mar-20.</li>
<li class="content-highlight">Organo is Japan's second-ranking industrial water treatment company after Kurita Water Industries (6370). Both provide ultra-pure water processing equipment and related products and services to the semiconductor industry. Kurita ranks first in Japan and Korea, Organo ranks first in Taiwan, and both companies compete in China.</li>
</ul>


Organo has rebounded from December's sharp sell-off, but remains attractively valued on a long-term view, in our estimation. 
New orders for water treatment systems from the semiconductor and other industries were up 22% year-on-year and exceeded sales by 33% in the nine months to December.
According to management, orders continued to exceed sales in the three months to March, but are likely to drop below sales in 1H of FY Mar-20 due to the downturn in memory ICs.
But the situation is not dire, as overall silicon wafer shipments and demand for image sensors both continue to rise, while foundry is doing better than memory.
Longer term, management expects growth driven by IIoT, power devices,  electric vehicles, and a cyclical recovery in memory. The biggest uncertainty is Chinese domestic demand.
Some orders have been deferred by one or two quarters, but the company has so far not suffered any cancellations. With a one-year lag from order to revenue recognition for larger projects, management believes it has sufficient visibility to predict improvement in 2H.
Management has no plans to revise FY Mar-19 guidance, which is for a 14.9% increase in sales, a 43.9% increase in operating profit and a 33.1% increase in net profit to ¥322.5 per share. At ¥3,200 (Friday, April 5 closing price), this translates into a P/E ratio of 9.9x.
In our estimation, this is cheap enough to be of interest to long-term investors. In the meantime, the calculations of Japan Analytics show upside to a no-growth valuation. Little or no growth appears to be the most likely scenario for FY Mar-20.
Organo is Japan's second-ranking industrial water treatment company after Kurita Water Industries (6370). Both provide ultra-pure water processing equipment and related products and services to the semiconductor industry. Kurita ranks first in Japan and Korea, Organo ranks first in Taiwan, and both companies compete in China.


Organo (6368 JP): Company Visit Notes and Conclusions

Japan

ORGANO CORPORATION manufactures water treatment equipment and other related peripherals and supplies.  The Company also produces industrial chemical products such as activated carbon and charcoal, water treatment compounds, and ion exchange resins.  Organo's water treatment systems are used for ultra-pure water production in nuclear power and semiconductor manufacturing processes.

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Organo Corp (6368 JP)