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

Topcon (7732 JP): New Acquisitions; Shares Rebounding

Topcon (7732 JP): Ready for the Fourth Industrial Revolution

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

<p>Sales were up 16.3% and operating profit up 41.1%% year-on-year in the nine months to December, bringing management's full-year guidance within reach. 3Q sales were up 14.0% year-on-year and operating profit up 2.5x due to rebounds in the Smart Infrastructure and Eye Care divisions and a weak performance the previous year. 3Q net profit was up 4.4x due to operating profit growth and a lower effective tax rate. Management has raised recurring and net profit guidance for FY Mar-18, but left sales and operating profit guidance unchanged.</p><p>Topcon's share price has risen by 48% since last September. At ¥2,716 (Friday, February 2 close), the shares are selling at 44x our EPS estimate for this fiscal year, 36x our estimate for next year and 33x our estimate for FY Mar-20. ProjectedEV/EBITDA ratios for the same three year are 18x, 16x and 15x. Projected price/book value ratios are 4.5x, 4.1x and 3.8x. </p><div class="content-highlight"><p>Topcon is a Japanese manufacturer of precision optical instruments. It has also invested in and tied-up with several companies and research institutes overseas in order to incorporate software, data analytics, mobile connectivity and cloud services into its business model, which should enable it to ride the wave of the Fourth Industrial Revolution rather than being left behind as a low margin supplier of basic hardware. It stands to benefit from rising demand for IT-enhanced infrastructure construction and agriculture, and the growing need for early identification and treatment of eye diseases in an aging population. </p></div>

Sales were up 16.3% and operating profit up 41.1%% year-on-year in the nine months to December, bringing management's full-year guidance within reach. 3Q sales were up 14.0% year-on-year and operating profit up 2.5x due to rebounds in the Smart Infrastructure and Eye Care divisions and a weak performance the previous year. 3Q net profit was up 4.4x due to operating profit growth and a lower effective tax rate. Management has raised recurring and net profit guidance for FY Mar-18, but left sales and operating profit guidance unchanged.Topcon's share price has risen by 48% since last September. At ¥2,716 (Friday, February 2 close), the shares are selling at 44x our EPS estimate for this fiscal year, 36x our estimate for next year and 33x our estimate for FY Mar-20. ProjectedEV/EBITDA ratios for the same three year are 18x, 16x and 15x. Projected price/book value ratios are 4.5x, 4.1x and 3.8x. Topcon is a Japanese manufacturer of precision optical instruments. It has also invested in and tied-up with several companies and research institutes overseas in order to incorporate software, data analytics, mobile connectivity and cloud services into its business model, which should enable it to ride the wave of the Fourth Industrial Revolution rather than being left behind as a low margin supplier of basic hardware. It stands to benefit from rising demand for IT-enhanced infrastructure construction and agriculture, and the growing need for early identification and treatment of eye diseases in an aging population. 

Topcon (7732 JP): Good 3Q Results, Not Cheap

Topcon Corp

Topcon (7732 JP): Good 3Q Results, Not Cheap