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

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. 

Equity Bottom-Up

Shimadzu has dropped by 31% since hitting an all-time high of ¥3,670 on September 27. Meanwhile, 2Q results show sales and profit growth coming to a halt in the three months to September. Management has left FY Mar-19 guidance unchanged. We have reduced our own estimates.Year-on-year consolidated sales growth dropped from 13.0% in 1Q to 1.0% in 2Q, operating profit growth dropped from 47.8% to -1.4%, and net profit growth dropped from 79.2% to -3.7%. In the Industrial Machinery division, sales growth dropped from 27.6% to 2.2% and operating profit growth declined from 96.6% to -15.4% due to across-the-board weakness in pumps for the semiconductor industry, hydraulic equipment, and other products. In the company's core Analytical &amp; Measuring Instruments division, sales growth dropped from 12.0% to 2.6% and operating profit growth declined from 19.9% to 3.0%. Sales were up year-on-year in America, Europe and China, but declined in South and Southeast Asia due to the depreciation of local currencies.At ¥2,524 (Thursday, November 22 closing price), the shares are selling at 23x our EPS estimate for FY Mar-19 and 12x EV/EBITDA. The five-year historical P/E range is 13x - 30x, the EV/EBITDA range is 6x - 16x. Over the next several quarters, we expect continued weakness in Industrial Machinery to offset low single-digit growth in Instruments, making overall growth difficult if not impossible. <div class="content-highlight">Shimadzu manufactures analytical and measuring instruments, medical equipment, aircraft components and industrial machinery. It supplies universities, laboratories, hospitals and a wide range of industries including food, chemicals, pharmaceuticals, machinery, vehicles, military and civilian aircraft, semiconductors and flat panel displays. Roughly 80% of the company’s products are made in Japan, the rest in the USA, Europe and China. The geographic breakdown of sales is roughly Japan 50%, China 18%, Other Asia 9%, America 13%, Europe 7% and Other Regions 3%. Shimadzu is expanding in India, Russia, Brazil, South Africa and other developing country markets. </div>

Shimadzu has dropped by 31% since hitting an all-time high of ¥3,670 on September 27. Meanwhile, 2Q results show sales and profit growth coming to a halt in the three months to September. Management has left FY Mar-19 guidance unchanged. We have reduced our own estimates.Year-on-year consolidated sales growth dropped from 13.0% in 1Q to 1.0% in 2Q, operating profit growth dropped from 47.8% to -1.4%, and net profit growth dropped from 79.2% to -3.7%. In the Industrial Machinery division, sales growth dropped from 27.6% to 2.2% and operating profit growth declined from 96.6% to -15.4% due to across-the-board weakness in pumps for the semiconductor industry, hydraulic equipment, and other products. In the company's core Analytical &amp; Measuring Instruments division, sales growth dropped from 12.0% to 2.6% and operating profit growth declined from 19.9% to 3.0%. Sales were up year-on-year in America, Europe and China, but declined in South and Southeast Asia due to the depreciation of local currencies.At ¥2,524 (Thursday, November 22 closing price), the shares are selling at 23x our EPS estimate for FY Mar-19 and 12x EV/EBITDA. The five-year historical P/E range is 13x - 30x, the EV/EBITDA range is 6x - 16x. Over the next several quarters, we expect continued weakness in Industrial Machinery to offset low single-digit growth in Instruments, making overall growth difficult if not impossible. Shimadzu manufactures analytical and measuring instruments, medical equipment, aircraft components and industrial machinery. It supplies universities, laboratories, hospitals and a wide range of industries including food, chemicals, pharmaceuticals, machinery, vehicles, military and civilian aircraft, semiconductors and flat panel displays. Roughly 80% of the company’s products are made in Japan, the rest in the USA, Europe and China. The geographic breakdown of sales is roughly Japan 50%, China 18%, Other Asia 9%, America 13%, Europe 7% and Other Regions 3%. Shimadzu is expanding in India, Russia, Brazil, South Africa and other developing country markets. 

Shimadzu (7701 JP): Sales and Profits Stop Growing

Shimadzu Corp

Shimadzu (7701 JP): Sales and Profits Stop Growing