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

Horiba (6856 JP): IC Cycle Peak Discounted

Japanese Semiconductor-Related Stocks - Leaders & Laggards as We Go Deep Into the IC Cycle

Japan Earnings - Thumbnail Preview of Those Reporting Early

Equity Bottom-Up

Horiba announced 1H results last Friday, August 4. On Monday, its share price dropped 7.6% and as of today's (Wednesday's) close it is down 9.2%, from ¥6,970 to ¥6,330. The sharp decline comes after four brief forays above ¥7,000 since mid-May. The share price peaked at ¥7,440 on June 22.When we initiated coverage on May 2, we wrote: "Horiba's share price has risen by 65% over the past year to a new high of ¥6,570 - presumably on expectations for a recovery from last year's declines in sales and profits, supported by strong semiconductor capital spending - but this has lifted valuations to the top of their recent historical ranges ... We would sell into strength and recommend looking at laggards in the [semiconductor] sector instead." Presumably, investors were also optimistic about the company's automotive test business and overall consolidated performance. They appear to have been disappointed on all counts. On the face of it, 1H results were not bad: consolidated sales were up 9.2% year-on-year in the six months to June, operating profit up 24.7% and net profit up 56.5%. But sequential performance in 2Q was a different story: sales were down 8.8%, operating profit down 43.1% and net profit down 29.0%. By division, operating profit was down 97% sequentially for the Automotive division, down 5.7% for the Semiconductor division and down 74% for other businesses (Process &amp; Environment, Medical and Scientific). New semiconductor equipment orders were down 11.8% after a 21.9% sequential gain in Q1.That having been said, semiconductor equipment orders were up 32.1% year-on-year, and Q2 is seasonally weak for the company as a whole. On top of that, management raised full year FY Dec-17 guidance: sales guidance from ¥183 billion to ¥187 billion, operating profit guidance from ¥21 billion to ¥22 billion, and net profit guidance from ¥13.6 billion to ¥14.5 billion.In sum, the sell-off appears to have cleared away unwarranted optimism, setting the stage for consolidation with support around ¥6,000.

Horiba announced 1H results last Friday, August 4. On Monday, its share price dropped 7.6% and as of today's (Wednesday's) close it is down 9.2%, from ¥6,970 to ¥6,330. The sharp decline comes after four brief forays above ¥7,000 since mid-May. The share price peaked at ¥7,440 on June 22.When we initiated coverage on May 2, we wrote: "Horiba's share price has risen by 65% over the past year to a new high of ¥6,570 - presumably on expectations for a recovery from last year's declines in sales and profits, supported by strong semiconductor capital spending - but this has lifted valuations to the top of their recent historical ranges ... We would sell into strength and recommend looking at laggards in the [semiconductor] sector instead." Presumably, investors were also optimistic about the company's automotive test business and overall consolidated performance. They appear to have been disappointed on all counts. On the face of it, 1H results were not bad: consolidated sales were up 9.2% year-on-year in the six months to June, operating profit up 24.7% and net profit up 56.5%. But sequential performance in 2Q was a different story: sales were down 8.8%, operating profit down 43.1% and net profit down 29.0%. By division, operating profit was down 97% sequentially for the Automotive division, down 5.7% for the Semiconductor division and down 74% for other businesses (Process &amp; Environment, Medical and Scientific). New semiconductor equipment orders were down 11.8% after a 21.9% sequential gain in Q1.That having been said, semiconductor equipment orders were up 32.1% year-on-year, and Q2 is seasonally weak for the company as a whole. On top of that, management raised full year FY Dec-17 guidance: sales guidance from ¥183 billion to ¥187 billion, operating profit guidance from ¥21 billion to ¥22 billion, and net profit guidance from ¥13.6 billion to ¥14.5 billion.In sum, the sell-off appears to have cleared away unwarranted optimism, setting the stage for consolidation with support around ¥6,000. 

Horiba (6856 JP): Shares Tank on Weak 2Q Results

Horiba Ltd

Horiba (6856 JP): Shares Tank on Weak 2Q Results