Possess technical strength, but is not optimistic about the stock market
Editor’s note: This article is from “Nikkei Chinese Net”, reprinted with authorization.
“Zeon in Japan has excellent technology, is the stock price low?” In late September, Takato Watanabe of Morgan Stanley MUFG Securities received an inquiry from investors in Hong Kong, China.
This picture is processed from materials from the Japanese library iStock
Zeion is an automobile-related stock of a leading company in the production of synthetic rubber for tires. However, it is less well-known among individual investors. As of October 8th, the price-to-book ratio (PBR, the multiple of stock price and net assets) is below the level of 1 times the company’s dissolution and liquidation value. Watanabe stated that “although the pure electric vehicle (EV) market is expected to expand, this stock is not favored.”
However, Zeon’s technical strength is not limited to the automotive industry. For example, in terms of “single-layer carbon nanotubes”, which are regarded as one of the super materials and combined with carbon atoms, Zeon has successfully produced ultra-high purity products, which can be used in artificial muscles in combination with its main product rubber. And anti-electromagnetic wave interference board. Not only medical-related stocks, but also high-speed communications “5G” related stocks.
Have technical strength, but not favored by the stock market
In the Japanese industry, materials companies have long been considered to have strong international competitiveness. In 2018, Japan’s total exports reached 81 trillion yen, of which industrial materials and transportation equipment (automobiles, etc.) accounted for approximately 20%. However, the presence of Japanese material companies is not directly proportional to the evaluation obtained in the stock market.
The Nikkei Veritas under the Nikkei (Chinese version: Nikkei Chinese website) conducted a survey on the stocks of 30 Japanese materials companies with excellent technology and found that the price-to-book ratio was lower than that of the Toshiba Main Board (one ) There are 24 stocks with an average level (1.24 times) and 20 stocks with a P/B ratio of less than 1 times. Moreover, there are only 6 stocks whose stock prices have recovered to the level of the end of 2019.
“The problem is that the profit earned by invisible good business will”Diluted”, pointed out Richard Kaye of the asset management company Comgest Asset Management. He cited Sekisui Chemical Industry as an example, saying that “Although it has attractive businesses such as automotive films, it is difficult for investors to invest in the company as a whole.” In terms of performance in 2019, the operating profit margin of the high-performance plastics sector and medical-related sectors, including automotive films, was about 12%, but the larger residential sector stopped at 7%.
The same is true for Toray. Although it has technologies that have a high share of global ownership such as carbon fiber, investors have not actively invested in Toray’s stock for the same reason. However, Richard Kaye said that the high technology of these companies will continue to receive attention in the future.
“Will Japanese material manufacturers really want to talk to us?”, Overseas investment Kosuke Kiba of Universal Materials Incubator (UMI, Chuo-ku, Tokyo), a venture capital firm (VC) in the field of materials development, put forward this opinion. Material companies that target companies without directly facing consumers are generally not good at promoting their unique technologies. Kiba sighed: “(Japanese materials company) No rechargeable points to show their charm”.
Talk to investors and promote the highlights
Conversely, however, if we steadily advance measures such as “transformation from general-purpose products to high-yield products” and “actively dialogue with investors”, Japanese materials companies can also be an explanation.Shining investment targets.
Comgest this spring increased its holdings of Japan’s Shin-Etsu Chemical Industry, which has an overwhelming advantage in polyvinyl chloride and semiconductor wafers. Because of its dedication to its share of the first place, Shin-Etsu Chemical Industry has always concentrated its business in areas where it is good at. Therefore, “New Crown Epidemic Cause Get to live There are more and more homes, and the demand for semiconductors is strong, which will have a positive effect on wafer sales” (Richard Kaye) logic. The company’s price-to-book ratio reached 2.2 times.
In particular, the business of large-scale materials companies is evenly distributed, and many are considered to have conglomerate discounts. Kazunari Okuno, Chief Investment Officer (CIO) of Norinchukin Value Investments of Japan Agriculture and Forestry Value Investments, stated that “Although it is important to see your own strengths, you must also see your own weaknesses and decide what should be discarded.”
It is a fact that Japanese materials companies are in the upstream of new industry supply chains such as 5G, next-generation automotive technology “CASE” and environmental protection, and occupy an indispensable and important position. “Nikkei Veritas”, as a new criterion for investment, explores the true strength of these companies in technology development.
The 5G upstream are all Japanese companies
In March 2020, Japan also began to provide commercial services under the high-speed communication standard “5G”. Although some people pointed out that Japanese companies have been slower than the United States and South Korea, which launched services about a year ago, but traced back to the upstream of the supply chain supporting equipment, they found that Japanese materials companies have a strong sense of existence.
5G uses high-frequency radio waves, so it has the characteristics of easy loss of electrical signals. It is said that the resin used in the original wiring board is difficult to maintain communication performance. In this case, Shin-Etsu Chemical’s “quartz cloth” has attracted attention. If you can use ultra-fine quartz wire as the raw material for the wiring substrate, you can greatly reduce signal loss. Shin-Etsu Chemical Industry plans to complete the mass production system by 2021.
As the capacity of 5G processing data increases, the heat generated by semiconductors also increases significantly. Tokuyama (ToKuyama) has a global share of 70% by virtue of aluminum nitride, a material that achieves high heat dissipation performance, and will therefore increase production capacity through investment without hesitation.
As semiconductor circuits continue to be miniaturized, EUV (extreme ultraviolet) exposure devices will play a huge role in related fields. There are also many Japanese companies involved in EUV-related materials. Fujifilm Holdings will establish a photoresist (sensitizer) production system supporting EUV in Shizuoka Prefecture.
Materials for the popularization of 5G are also actively increasing production. Mitsubishi Chemical Holdings will build a new cleaning agent plant in Taiwan, which will be used in the process of removing small impurities and other substances attached to silicon wafers for cutting-edge semiconductors. It is believed that it will be supplied to a large semiconductor manufacturer Taiwan Integrated Circuit Manufacturing (TSMC, TSMC) etc.
Most of these “hidden 5G stocks” are business models that benefit in the medium to long term as the final products and services become popular. In addition to pursuing the highest share, Meijang Other than Shin-Etsu Chemical whose technical strength is transformed into corporate value, others in Japan It is difficult to say that materials companies have fully promoted their charm to investors, and the price-to-book ratios are lower than the Nikkei average.
Especially the largest business scale in the Japanese chemical industryThe large Mitsubishi Chemical Holdings has also been affected by the diversification discount, with a price-to-book ratio of only 0.76, which is less than 1 times. How your company’s technical strength will bring profits requires careful explanation to investors in this regard.
author:
The Nihon Keizai Shimbun (Chinese: Nikkei Chinese Net) Akahide Anzai, Ikuta Kenki, Hadano Tsuki, Fukumoto Hiroki, Iwano Megumi, Hanada Yukunori, Karino Satoshi, Ume Kunideni, Fukutataro, Watanabe-e Li, Yamaguchi Peace