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

Shimadzu (7701 JP): Buy into the Sell-Off

Shimadzu (7701 JP): Conservative Guidance

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

After guiding for a 12% decline in sales and a 47% decline in operating profit in FY Mar-21 as a whole, Shimadzu delivered a 1% year-on-year decline in sales and a 36% increase in operating profit in the three months to June. Selling, general &amp; administrative expenses were reduced by 12.5%. The Analytical &amp; Measuring Instruments division, which generates most of the company's profit, reported a 9.7% increase in operating profit on a 4.0% decline in sales. The Medical Systems division turned profitable on a 2.1% decline in sales.On top of that, a 46% increase in sales of turbo-molecular pumps, primarily to makers of semiconductor production equipment, supported a 2.5x increase in operating profit on Industrial Systems. On the negative side, the collapse of demand from Boeing left the Aircraft Equipment division only marginally profitable despite a 43% increase in sales to Japanese defense contractors. Management left guidance unchanged, but even allowing for uneven sales over the next three quarters, profits should be up this fiscal year - and next, assuming economic recovery. The shares have risen on the 1Q results, but projected valuations are not excessive. Quarterly confirmation of profit growth should support further upside.

After guiding for a 12% decline in sales and a 47% decline in operating profit in FY Mar-21 as a whole, Shimadzu delivered a 1% year-on-year decline in sales and a 36% increase in operating profit in the three months to June. Selling, general &amp; administrative expenses were reduced by 12.5%. The Analytical &amp; Measuring Instruments division, which generates most of the company's profit, reported a 9.7% increase in operating profit on a 4.0% decline in sales. The Medical Systems division turned profitable on a 2.1% decline in sales.On top of that, a 46% increase in sales of turbo-molecular pumps, primarily to makers of semiconductor production equipment, supported a 2.5x increase in operating profit on Industrial Systems. On the negative side, the collapse of demand from Boeing left the Aircraft Equipment division only marginally profitable despite a 43% increase in sales to Japanese defense contractors. Management left guidance unchanged, but even allowing for uneven sales over the next three quarters, profits should be up this fiscal year - and next, assuming economic recovery. The shares have risen on the 1Q results, but projected valuations are not excessive. Quarterly confirmation of profit growth should support further upside.

Shimadzu Corp

Shimadzu (7701 JP): Virus Defeated in 1Q