The Must Read PSA Weekly Research Round-up (week to 15 Mar)

REPORTS: Examining a Battered Sumco (3436 JT) / Toyota (7203 JT): Back in Shape – Steady Earnings Growth on Volumes, Cost Cuts, Lower Selling Expenses / INDUSTRY INSIGHTS: Japan Inc and restructuring: Lessons from Hitachi group’s reorganisation / Time for M&A in the Japanese video game market? / China smartphone shipments remain weak / Changes to China’s e-commerce laws – read across to iStyle (3660 JT) / MACRO / MARKET: No change to QE from the BoJ / China data / COMPANY INSIGHTS: Sony, PS5 and Take Two / Shin-Etsu Chemical does a buyback / MMC’s new concept car and home charging system / Asahi Kasei’s FY18 guidance remains conservative / Feedback from Daikin’s meeting explaining its chemical business / Robust Q3 from Heroz, though valuations are extremely demanding / Higher dividends for Poletowin Pitcrew and buybacks at Solxyz

The Weekly Comment by Pelham Smithers

The Japanese economy is slowing and the data we’ve seen so far has fallen short of even PSA’s low expectations. Key figures for January were poor with industrial production -3.7% MoM, flat YoY, retail sales -2.3% MoM, +0.6% YoY, and machinery orders -5.4% MoM, -2.9% YoY. The February machine tool order figure of -29.3% YoY after -18.8% YoY in January is the real shocker; importantly, domestic orders (-28%) are almost as bad as foreign orders (-30%), so this is not an isolated and isolatable situation.
Why the Japanese economy is slowing so rapidly is an interesting question. Events in China mean that the direction of travel isn’t a surprise, but unless China is itself doing far worse than has been let on, it doesn’t explain the magnitude of Japan’s slowdown, which is already extending beyond exports, to consumption and investment………………..

Reports / Flash Notes Published This Week: Headlines at a Glance

1. Examining a Battered Sumco (3436 JT)
2. Toyota (7203 JT): Back in Shape – Steady Earnings Growth on Volumes, Cost Cuts, Lower Selling Expenses

Company / Sector / Thematic Comments at a Glance

Technology: Consumer Electronics / Gaming

1. China Smartphone Shipments Continue to be Poor
2. Sony (6758 JT), PS5 and Take-Two
3. Time for M&A in the Japanese Video Game Market?
4. Sony (6758 JT) in Low-cost TV Show Move
5. Strong Week for Monster Strike, Fate / Grand Order

Technology: Industrial Electronics / Precision / Components

6. Hitachi Chem (4217 JT) Sale a Reminder of the Work Hitachi (6501 JT) Still has to Do

Chemicals / Materials

7. Implications of the Shin-Etsu Chemical (4063 JT) Buyback
8. Asahi Kasei (3407 JT): Conservative Guidance and Lease Accounting Issues
9. Ohara’s (5218 JT) Guidance Shocks Markets a Second Time
10. JSR (4185 JT) Appoints Eric Johnson as CEO
11. Fujifilm’s (4901 JT) Growing CDMO Business


12. Mitsubishi Motors (7211 JT) Presents SUV PHEV Concept Car at Geneva Auto Show

Auto Parts / Machinery

13. Feedback from Daikin’s (6367 JT) Meeting on its Chemicals Division – A Positive Slant

Internet / eCommerce

14. Istyle (3660 JT) to Benefit from Recent Changes to China’s E-commerce Law
15. Mixi (2121 JT) to Hold an eSports Tournament with a Total Prize of ¥100mil

Enterprise Software

16. NRI (4307 JT) Unveils AI-Based Office Automation Tool
17. Heroz (4382 JT) Reported Robust Q3 Results
18. Poletowin Pitcrew (3657 JT) Raises Dividend to Investors’ Delight
19. Solxyz (4284 JT) Announces Hefty Share Buyback Programme

Macro / Market / Miscellaneous

20. The BoJ Leaves QE Unchanged
21. China Economic Data Update

PSA Company Visits, Tours and Interviews

• Visited: Tokyo Ohka Kogyo (4186 JT)
• Telephone interviews with Daikin (6367 JT), SMC (6273 JT), Ferrotec (6890 JT), Trend Micro (4704 JT)
• Attended earnings meeting for: Miraial (4238 JT), Ohara Inc. (5218 JT)
• Attended information meetings for: Sumitomo Chemical (4005 JT), Hitachi Chemical (4217 JT), Daikin (6367 JT)

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