Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

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.

Senior Technology Analyst, Japanese Equities

Disco (6146 JP): Valuation Reasonable but Not Compelling

Disco (6146 JP): Orders Peaking, Blade Dicer Shipments Forecast to Decline

Tokyo Electron (8035 JP): Getting Ahead of Itself

Disco (6146 JP): 2Q Growth Unsustainable, Shares Overbought

Battle Lines Drawn As BABA Builds Out First/Last-Mile Capacity; But Who Will Fund 75+ Bn CNY CapEx?

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

The Nikkei reports that order-to-delivery lead times for silicon wafer dicing machines, most of which are made by Disco, have expanded from 1 to 3 months to 5 to 8 months. And since Disco recognizes revenue on an acceptance basis, the order-to-sales lag could be even longer. Disco told the media, "We are making individual adjustments with clients and striving to meet the delivery time." (Nikkei Asia, April 15, 2021)This implies that the company is at full capacity, and that sales and profits are likely to remain strong for another two quarters. FY Mar-21 guidance looks conservative. FY Mar-22 guidance is likely to be front-loaded, 1H stronger than 2H due to lack of visibility more than six months out.Lead times for wire bonders and other equipment are reportedly as long as 12 months and there is widespread concern about double ordering in the semiconductor supply chain. With growth hitting physical limits and valuations having gone to new highs at what appears to be the top of the cycle, we continue to recommend selling into strength.

The Nikkei reports that order-to-delivery lead times for silicon wafer dicing machines, most of which are made by Disco, have expanded from 1 to 3 months to 5 to 8 months. And since Disco recognizes revenue on an acceptance basis, the order-to-sales lag could be even longer. Disco told the media, "We are making individual adjustments with clients and striving to meet the delivery time." (Nikkei Asia, April 15, 2021)This implies that the company is at full capacity, and that sales and profits are likely to remain strong for another two quarters. FY Mar-21 guidance looks conservative. FY Mar-22 guidance is likely to be front-loaded, 1H stronger than 2H due to lack of visibility more than six months out.Lead times for wire bonders and other equipment are reportedly as long as 12 months and there is widespread concern about double ordering in the semiconductor supply chain. With growth hitting physical limits and valuations having gone to new highs at what appears to be the top of the cycle, we continue to recommend selling into strength.

Disco (6146 JP): 5-To-8 Month Lead Times in the Price

DISCO Corp

Disco (6146 JP): 5-To-8 Month Lead Times in the Price