Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

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.

Event-Driven

<ul>
<li>We have made no secret of the fact that we consider Toshiba’s restructuring plans to be unspectacular. </li>
<li>Initially we saw no reason to separate the infrastructure business and saleable assets but with  that issue addressed it is the position of the devices business which concerns us. </li>
<li>This is because we feel it is rather undersized to stand on its own two feet… but we increasingly feel that Renesas could be the ideal home for the unit.</li>
</ul>


We have made no secret of the fact that we consider Toshiba’s restructuring plans to be unspectacular. 
Initially we saw no reason to separate the infrastructure business and saleable assets but with  that issue addressed it is the position of the devices business which concerns us. 
This is because we feel it is rather undersized to stand on its own two feet… but we increasingly feel that Renesas could be the ideal home for the unit.


Toshiba – Why Renesas Might Be a Better Option for the Devices Business than an IPO

Independent Insight Provider, Japanese equities, LightStream Research

Scott Foster

Independent Insight Provider, Japanese equities

Equity Bottom-Up

<ul>
<li>Sales, profits and profit margins continued to rise in 3Q, led by IC and discrete semiconductor sales for automotive and industrial applications.</li>
<li>FY Mar-22 guidance looks conservative, but management left it unchanged out of a sense of caution.</li>
<li>Having dropped 21% since November, the share price should now recover based on the fundamentals. </li>
</ul>


Sales, profits and profit margins continued to rise in 3Q, led by IC and discrete semiconductor sales for automotive and industrial applications.
FY Mar-22 guidance looks conservative, but management left it unchanged out of a sense of caution.
Having dropped 21% since November, the share price should now recover based on the fundamentals. 


Rohm (6963 JP): Buy into the Tech Sell-Off

Concern over the potential impact of the COVID surge in Southeast Asia on back-end assembly operations proved unfounded as results for the six months for September came in well above guidance, with profits and profit margins rising substantially in 2Q.2Q sales were up 28% year-on-year led by 50% growth in Automotive and 46% growth in other Industrial applications. FY Mar-22 guidance was raised, with management now expecting a 64% increase in operating profit on a 22% increase in sales.On a medium-term view, Rohm's leading position in SiC (silicon carbide) power devices used in electric vehicle inverters should support continued sales growth and margin expansion. At 17x our EPS estimate for FY Mar-24, we see 30% potential upside to a ¥13,500 price target.

Concern over the potential impact of the COVID surge in Southeast Asia on back-end assembly operations proved unfounded as results for the six months for September came in well above guidance, with profits and profit margins rising substantially in 2Q.2Q sales were up 28% year-on-year led by 50% growth in Automotive and 46% growth in other Industrial applications. FY Mar-22 guidance was raised, with management now expecting a 64% increase in operating profit on a 22% increase in sales.On a medium-term view, Rohm's leading position in SiC (silicon carbide) power devices used in electric vehicle inverters should support continued sales growth and margin expansion. At 17x our EPS estimate for FY Mar-24, we see 30% potential upside to a ¥13,500 price target.

Rohm (6963 JP): Strong 2Q Led by Automotive

Rohm has dropped to the bottom of its recent trading range, presumably on concerns over the impact of COVID-19 on semiconductor assembly &amp; test in Southeast Asia and the ongoing disruption of auto production. However,<ol>
<li>Guidance looks conservative. 1Q operating and net profit were 31% and 34% of FY Mar-22 full-year guidance, respectively.</li>
<li>COVID infections in Southeast Asia have dropped back from recent peaks. </li>
<li>Rohm is a leading producer of Silicon Carbide wafers and power devices for Electric Vehicles. It is geared to both the recovery and technological advance of the auto industry.</li>
</ol>With 38% upside to our ¥13,500 price target, we regard Rohm as a Buy both on a trading basis and as a longer-term investment.

Rohm has dropped to the bottom of its recent trading range, presumably on concerns over the impact of COVID-19 on semiconductor assembly &amp; test in Southeast Asia and the ongoing disruption of auto production. However,
Guidance looks conservative. 1Q operating and net profit were 31% and 34% of FY Mar-22 full-year guidance, respectively.
COVID infections in Southeast Asia have dropped back from recent peaks. 
Rohm is a leading producer of Silicon Carbide wafers and power devices for Electric Vehicles. It is geared to both the recovery and technological advance of the auto industry.
With 38% upside to our ¥13,500 price target, we regard Rohm as a Buy both on a trading basis and as a longer-term investment. 

Rohm (6963): Buy for Auto & COVID Recovery

Rohm has dropped by 15% in the recent market sell-off, while FY Mar-21 profits were far above guidance and FY Mar-22 guidance calls for a further 27% increase in operating profit.Unless you believe that economic recovery from COVID-19 will not continue or, in Rohm's case, that the auto industry will not recover from the current semiconductor shortage, this looks like a buying opportunity.Up-front investment in power devices for electric vehicles should pay off as demand rises and economies of scale are realized. This should support record sales and additional margin expansion  in FY Mar-23.There is now 35% potential upside to our ¥13,500 share price target.

Rohm has dropped by 15% in the recent market sell-off, while FY Mar-21 profits were far above guidance and FY Mar-22 guidance calls for a further 27% increase in operating profit.Unless you believe that economic recovery from COVID-19 will not continue or, in Rohm's case, that the auto industry will not recover from the current semiconductor shortage, this looks like a buying opportunity.Up-front investment in power devices for electric vehicles should pay off as demand rises and economies of scale are realized. This should support record sales and additional margin expansion  in FY Mar-23.There is now 35% potential upside to our ¥13,500 share price target.

Japan

SUMCO Corporation manufactures silicon wafers for the semiconductor industry. The Company produces silicon wafers used to produce solar batteries as well as ultra-high purity quartz used to produce vessels for silicon manufacturing process. SUMCO markets its products worldwide.

SHINKO ELECTRIC INDUSTRIES CO., LTD. designs, manufactures, and markets advanced electronic materials, such as semiconductor packages, including leadframes, and PLP(Plastics Laminated Packages).  The Company markets its products worldwide through a network of sales offices in such places as the Philippines, Germany, and Hong Kong.

SCREEN Holdings Co Ltd.  manufactures and sell semiconductors, FPD devices, commercial printing and printed circuit boards(PCB). The company also provides additional services for its products.

RORZE CORPORATION manufactures printed circuit board conveyers and wafer handlers for semiconductor manufacturing.  The Company also produces sorters and vacuum chamber robots, as well as controllers and stepping motor drivers used in various automation systems.  Rorze provides parts replacement and repair services for its products.

TOKYO SEIMITSU CO., LTD. manufactures and sells semiconductor manufacturing equipment and measuring instruments.  The Company produces wafer probing machines, wafer dicing machines, electron beam lithography systems, wafer inspection systems, and chemical mechanical planarizers (CMP) systems.

ULVAC, Inc. manufactures vacuum devices for industries such as semiconductor, electronics, chemical, pharmaceutical and food.  The Company's products include pumps, valves, gas analyzers, leak detectors, and surface profile measurement.

MICRONICS JAPAN CO., LTD. designs, manufactures, and markets probe cards, which are used to inspect semiconductors and integrated circuits (ICs).  The Company also makes wafer probers, probe card testers, IC handlers, and inspection devices used for liquid crystal display (LCD) manufacturing.

Mitsui High-tec, Inc. produces integrated circuit leadframes, assembly parts, and related equipment.  The Company also manufactures and sells precision machine tools, such as metal molds for presses and machine tools. Mitsui High-tec also operates a real estate business.

TOWA CORPORATION produces semiconductor manufacturing equipment including mold packaging, IC inspection units, precision molds and dies, and plastic molds. The Company also provides technical consultation.

Japan Material Co., Ltd. mainly provides gas management system services for semiconductor and liquid-crystal factories.  The Company also develops and makes application software products for CAD/CAM and three-dimensional data processing.

Flat Glass Group Co., Ltd is a PV glass manufacturer. The Company also markets float glass, household glass and architectural glass.

Axcelis Technologies, Inc. manufactures components for the semiconductor industry. The Company designs, manufactures and services ion implantation, dry strip, thermal processing and curing equipment used in the fabrication of semiconductor chips. Axcelis Technologies sells their products to semiconductor chip manufacturers worldwide.

eMemory Technology, Inc. develops and provides logic non-volatile memory (LogicNVM) technology. The company licenses its intellectual property to semiconductor foundries, integrated devices manufacturers (IDMs), and fabless design houses around the world.

Diodes Incorporated manufactures and supplies discrete, logic, and analog semiconductor devices to consumers in the electronics, computing, industrial, communications, and automotive markets. The Company's products include diodes, transistors, MOSFETs, single gate logic, LED drivers, and USB switches.

Nanya Technology Corp. manufactures and markets dynamic random access memories (DRAMs).  The Company sells its products in Taiwan and exports worldwide.

Sino-American Silicon Products Inc. supplies silicon-based products, including silicon lapped wafer, silicon diffusion wafer, silicon ingot, silicon diffused diode chip, and automobile rectifier.  The Company sells its products worldwide.

GCL-Poly Energy Holdings Ltd is a Chinese power company that produces solar grade polysilicon and operates cogeneration plants and in China.

Gcl Poly Energy Holdings Limited (3800 HK)

King Yuan Electronics Co., Ltd. provides integrated circuit (IC) testing services to semiconductor manufacturers.  The Company tests the logic, memory, and burn-in functions of ICs.  King Yuan also specializes in IC reeling, packaging, and wafer grinding.

Tianjin Zhonghuan Semiconductor Co., Ltd. manufactures discrete semiconductor devices. The Company's main products are High Voltage Diode, Silicon Rectifier Diode, Silicon Bridge Rectifier, MWO High Voltage Silicon Diode and special High Voltage Silicon Diode .

Tianjin Zhonghuan Semiconductor (002129 CH)

Hua Hong Semiconductor Limited manufactures semiconductors on 200mm wafers for specialty applications. The Company's products are used in the consumer electronic, communication, computing and industrial, and automotive industries.

ROHM COMPANY LIMITED manufactures custom linear integrated circuits and semiconductor devices for use primarily in consumer electronics.  The Company has plants and sales offices worldwide.  Rohm's subsidiaries include Wako Electric and Apollo Electronics.

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ROHM Co Ltd (6963 JP)

Toshiba – Why Renesas Might Be a Better Option for the Devices Business than an IPO

We believe a listing of Toshiba's device business would not create an especially attractive security for investors and that a sale to a domestic...

Mio Kato

Rohm (6963 JP): Buy into the Tech Sell-Off

The share price dropped 21% with the tech sell-off while sales rose, margins expanded and conservative guidance was left unchanged. Buy for long...

Scott Foster

Rohm (6963 JP): Strong 2Q Led by Automotive

1H results ahead of guidance despite COVID concerns and FY Mar-22 guidance raised. Automotive to lead medium-term growth with Rohm a leader in SiC...

Scott Foster

Rohm (6963): Buy for Auto & COVID Recovery

Shares down to bottom of trading range, but guidance looks conservative, COVID and auto supply chain disruption easing, and company strong in SiC...

Scott Foster

Rohm (6963 JP): Buy on Current Weakness

Rohm has dropped 15% in the recent sell-off, while FY Mar-21 profits were above guidance and FY Mar-22 guidance is for 27% OP growth. 35% upside to...

Scott Foster

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