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

Equity Bottom-Up

Hosokawa Micron is a worldwide supplier of Powder Processing equipment to the electronics, food, chemical and other industries, and thin Plastic Film production systems for makers of packaging materials. It is currently benefitting from increases in capital spending across diverse user industries and major regional markets. Operating profit was up 38% on an 11% increase in sales in FY Sep-17 and growth accelerated in 1Q of the new fiscal year.The share price has doubled over the past year, but valuations are still low relative to those of many other Japanese technology companies geared to capital spending. At ¥7,700 (March 16, 2018 closing price), the shares are selling at 15x our EPS estimate for this fiscal year and 14x our estimate for FY Sep-19. Targeting 20x earnings indicates 33% potential upside using our forecast for this fiscal year. The Japan Analytics model explained below generates 27% potential upside to a no-growth valuation and 37% upside using our profit forecast for FY Sep-19. Hosokawa Micron's fortunes rise and fall with the capital spending plans of its user industries, but the the long-term story is one of technological excellence, broad market penetration and efficiency gains.

Hosokawa Micron is a worldwide supplier of Powder Processing equipment to the electronics, food, chemical and other industries, and thin Plastic Film production systems for makers of packaging materials. It is currently benefitting from increases in capital spending across diverse user industries and major regional markets. Operating profit was up 38% on an 11% increase in sales in FY Sep-17 and growth accelerated in 1Q of the new fiscal year.The share price has doubled over the past year, but valuations are still low relative to those of many other Japanese technology companies geared to capital spending. At ¥7,700 (March 16, 2018 closing price), the shares are selling at 15x our EPS estimate for this fiscal year and 14x our estimate for FY Sep-19. Targeting 20x earnings indicates 33% potential upside using our forecast for this fiscal year. The Japan Analytics model explained below generates 27% potential upside to a no-growth valuation and 37% upside using our profit forecast for FY Sep-19. Hosokawa Micron's fortunes rise and fall with the capital spending plans of its user industries, but the the long-term story is one of technological excellence, broad market penetration and efficiency gains.

Hosokawa Micron (6277 JP): Benefitting from a Prolonged Tech & Machinery Cycle