Independent Insight Provider, Japanese equities, LightStream Research

Scott Foster

Independent Insight Provider, Japanese equities

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

SCREEN Holdings Co Ltd.  manufactures and sell semiconductors, FPD devices, commercial printing and printed circuit boards(PCB). The company also provides additional services for its products.

<ul>
<li>FY Mar-24 results were ahead of guidance, but management's FY Mar-25 forecast has sales flat and profits down in the second half.</li>
<li>The shares have dropped back 24% from their all-time high, bringing the forward P/E ratio down to 22X.</li>
<li>China and foundry remain strong while North America and memory pick up. Guidance is probably conservative. Buy into the weakness.</li>
</ul>


FY Mar-24 results were ahead of guidance, but management's FY Mar-25 forecast has sales flat and profits down in the second half.
The shares have dropped back 24% from their all-time high, bringing the forward P/E ratio down to 22X.
China and foundry remain strong while North America and memory pick up. Guidance is probably conservative. Buy into the weakness.


Screen Holdings (7735 JP): Guiding for Lower Profits in H2

Mitsubishi Heavy Industries / Equity Bottom-Up

Mitsubishi Heavy Industries, Ltd. is a comprehensive heavy machinery maker. The Company manufactures machinery, ships, turbines and engines, prime movers, aircrafts, and machine parts for military and commercial use.  Mitsubishi Heavy Industries also researches and develops nuclear power plants.

<ul>
<li>MHI was sold off last week as FY Mar-24 operating profit fell short of guidance and management guided for a decline in new orders this fiscal year.</li>
<li>Orders momentum has peaked. Sales and profits will follow. But the latter are still rising and guidance could once again be conservative.</li>
<li>Consolidation of the share price is likely to continue until orders and profit trends are confirmed.</li>
</ul>


MHI was sold off last week as FY Mar-24 operating profit fell short of guidance and management guided for a decline in new orders this fiscal year.
Orders momentum has peaked. Sales and profits will follow. But the latter are still rising and guidance could once again be conservative.
Consolidation of the share price is likely to continue until orders and profit trends are confirmed.


Mitsubishi Heavy Industries (7011 JP): Orders Momentum Has Peaked

Lasertec Corporation develops, designs, manufactures and markets photomask inspection systems to make semiconductor devices, confocal scanning laser microscopes and liquid crystal display (LCD) inspection systems.

<ul>
<li>The share price has bounced back on strong 3Q orders and long-term optimism, but weak 4Q guidance calls the growth trajectory into question.</li>
<li>Guidance, which has sales dropping to about half what they were a year earlier, is based on the expected timing of customer acceptance of delivered equipment. It could be conservative.</li>
<li>At 75X EPS guidance for FY Jun-24, a rate of growth not visible in current trends has already been discounted. Current orders should translate into sales in 2026.</li>
</ul>


The share price has bounced back on strong 3Q orders and long-term optimism, but weak 4Q guidance calls the growth trajectory into question.
Guidance, which has sales dropping to about half what they were a year earlier, is based on the expected timing of customer acceptance of delivered equipment. It could be conservative.
At 75X EPS guidance for FY Jun-24, a rate of growth not visible in current trends has already been discounted. Current orders should translate into sales in 2026.


Lasertec (6920 JP): Orders Up, Guidance Down

FANUC CORPORATION manufactures factory automation (FA) systems and equipments, and robots. The Company's products include computerized numerically-controlled (CNC) equipment, servo motors, laser systems, industrial robots, wire-cut electric discharge machines, and CNC drill.  Fanuc participates in a joint venture with General Electric in the FA field.

<ul>
<li>Fanuc was up 4.7% this past week as the market reacted to a slight uptick in orders and transparently conservative guidance.</li>
<li>The book-to-bill ratio remained below 1.0 in 4Q of FY Mar-24, but was up from 3Q, which appears to have been the low point in the cycle.</li>
<li>Inflation and ongoing inventory adjustments indicate a slow recovery, but demand for automation  from traditional markets and new opportunities in aerospace and other industries should support long-term growth.</li>
</ul>


Fanuc was up 4.7% this past week as the market reacted to a slight uptick in orders and transparently conservative guidance.
The book-to-bill ratio remained below 1.0 in 4Q of FY Mar-24, but was up from 3Q, which appears to have been the low point in the cycle.
Inflation and ongoing inventory adjustments indicate a slow recovery, but demand for automation  from traditional markets and new opportunities in aerospace and other industries should support long-term growth.


Fanuc (6954 JP): Guidance Points Down, but the Market Sees Recovery

<ul>
<li>Lasertec has dropped more than 20% in the past week and a half, but is still selling at more than 60x EPS guidance for FY Jun-24.</li>
<li>Weak orders at ASML, disappointing guidance from TSMC and doubts about Intel's equipment purchases cast doubt on Lasertec's growth potential.</li>
<li>Between December 2021 and June 2022, Lasertec's share price dropped by more than 50%. Wait for Q3 results before reaching for a falling knife. </li>
</ul>


Lasertec has dropped more than 20% in the past week and a half, but is still selling at more than 60x EPS guidance for FY Jun-24.
Weak orders at ASML, disappointing guidance from TSMC and doubts about Intel's equipment purchases cast doubt on Lasertec's growth potential.
Between December 2021 and June 2022, Lasertec's share price dropped by more than 50%. Wait for Q3 results before reaching for a falling knife. 


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.

Scott Foster
Independent Insight Provider, Japanese equities
• LightStream Research

Screen Holdings (7735 JP): Guiding for Lower Profits in H2

Share price down 24% from March high. Guiding for YoY profit decline in H2 of this FY, but probably conservative due to strong AI related foundry...

Scott Foster

Mitsubishi Heavy Industries (7011 JP): Orders Momentum Has Peaked

Operating profit below guidance and anticipated decline in new orders point to continued consolidation of the share price. Japan's defense build-up...

Scott Foster

Lasertec (6920 JP): Orders Up, Guidance Down

Orders up in Q3 to a good but not outstanding level. Q4 guidance for a sharp decline in sales and profit based on expected timing of customer...

Scott Foster

Fanuc (6954 JP): Guidance Points Down, but the Market Sees Recovery

Fanuc's share price has risen on conservative guidance based on unrealistic exchange rates. Orders appear to have hit bottom while an aerospace...

Scott Foster

Lasertec (6920 JP): Further to Fall

Lasertec is down more than 20% but still looks overvalued as weak orders at ASML, disappointing guidance at TSMC and uncertain equipment demand at...

Scott Foster