Koito Outperforms in 3Q While Stanley Disappoints; Latter Still on Track to Achieve FY03/19E Target

Koito Acquires Stake in BrightWay Vision (BWV): BWV’s AGIT to Support ADAS Aims

A Weak 1Q for the Lighting Players: Koito and Stanley Keep Earnings Guidance Unchanged Regardless

Stanley’s Turn to Disappoint This Time; FY03/20E Guidance Remains Weak for Both Stanley And Koito

Equity Analyst, LightStream Research

Aqila Ali

Equity Analyst

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

<p>On Monday, <a href="https://www.smartkarma.com/entities/stanley-electric-co-ltd" target="_blank" data-smartkarma-citation="entities:1330:1" rel="noopener">Stanley Electric (6923 JP)</a> announced that it acquired shares of “HexaTech, Inc.”  for JPY4.2bn (USD 39m). The deal makes Hexa Tech one of Stanley’s subsidiaries. According to Stanley, Hexa Tech’s Aluminium nitride (AlN) semiconductor substrates (a semi-conductor to help produce next generation devices) facilitates manufacturing deep ultraviolet LEDs (UV LEDs) and is likely to help Stanley in the development process of its LED lights.</p><p>In our opinion, the deal might support Stanley’s development efforts in ADAS sensors and help produce lighting products that are needed for AD purposes. Semiconductors, as known, are the base for sensor related technology and hence Hexa Tech’s expertise in a semiconductor type specifically suited for LEDs could have made it an inviting target for Stanley. The two companies have been working together since the beginning of this year and thus, Stanley’s plan to acquire the company is probably a result of some successful development that the two companies have participated in. This investment reminds us of,  <a href="https://www.smartkarma.com/entities/koito-manufacturing-co-ltd" target="_blank" data-smartkarma-citation="entities:15841:1" rel="noopener">Koito Manufacturing (7276 JP)</a>’s investment in BWV, as we mentioned in <a href="https://www.smartkarma.com/insights/koito-acquires-stake-in-brightway-vision-bwv-bwv-s-agit-to-support-adas-aims" target="_blank" data-smartkarma-citation="insights:30787" rel="noopener">Koito Acquires Stake in BrightWay Vision (BWV): BWV’s AGIT to Support ADAS Aims</a>. We believe that lighting players, like other auto part makers, are also strengthening their technology portfolios in preparation for a CASE future.</p>

On Monday, Stanley Electric (6923 JP) announced that it acquired shares of “HexaTech, Inc.”  for JPY4.2bn (USD 39m). The deal makes Hexa Tech one of Stanley’s subsidiaries. According to Stanley, Hexa Tech’s Aluminium nitride (AlN) semiconductor substrates (a semi-conductor to help produce next generation devices) facilitates manufacturing deep ultraviolet LEDs (UV LEDs) and is likely to help Stanley in the development process of its LED lights.In our opinion, the deal might support Stanley’s development efforts in ADAS sensors and help produce lighting products that are needed for AD purposes. Semiconductors, as known, are the base for sensor related technology and hence Hexa Tech’s expertise in a semiconductor type specifically suited for LEDs could have made it an inviting target for Stanley. The two companies have been working together since the beginning of this year and thus, Stanley’s plan to acquire the company is probably a result of some successful development that the two companies have participated in. This investment reminds us of,  Koito Manufacturing (7276 JP)’s investment in BWV, as we mentioned in Koito Acquires Stake in BrightWay Vision (BWV): BWV’s AGIT to Support ADAS Aims. We believe that lighting players, like other auto part makers, are also strengthening their technology portfolios in preparation for a CASE future.

Stanley Acquires Hexa Tech: AIN Substrates Might Allow Stanley to Compete on ADAS