”Stock price highs since August 1990 and semiconductor market outlook”

21st January, 2021

The Nikkei Average rose to 28,979 points during trading hours on 14/1, the highest level since August, 1990.  August, 1990 was the time when, after the Iraqi forces invaded Kuwait, the UN Security Council adopted a resolution condemning the invasion and imposed economic sanctions on Iraq with a total embargo.  At that time, there were headwinds in the stock market due to the intermittent tightening of monetary policies since the official discount rate hike in May, 1989.  Currently, the BOJ under Governor Kuroda is continuing its unconventional monetary easing, and the weighted average net asset price (BPS) of the Nikkei Average, based on market capitalization, is hovering around 22,500 points.  This is different from the “Heisei bubble” period when the Nikkei Average and its weighted average BPS were far apart.

On top of that, according to Bloomberg, comparing the current return on equity (ROE) of the Nikkei Average and TOPIX, that for the Nikkei Average and TOPIX was 6.02% and 4.25% respectively in 2020.  In 2021, that for the Nikkei Average and TOPIX is expected to be 9.92% and 5.63% respectively.  From a fundamental standpoint, it can be said that the Nikkei Stock Average is likely to outperform TOPIX.

 At present, there is a noticeable trend in the Japanese stock market of a shift from focus until the end of last year on stocks related to hydrogen and EVs (electric vehicles) aiming at reducing greenhouse gas emissions, to stocks related to semiconductor manufacturing equipment which contribute significantly to the Nikkei Average due to semiconductor shortages and supply concerns.  According to the latest forecast of the World Semiconductor Trade Statistics (WSTS), the year-on-year growth rate of the overall semiconductor market is expected to be 5.1% in 2020 and accelerate to 8.4% in 2021.  According to the 2021 product forecast, discrete, optical-semiconductors, sensors, and ICs (integrated circuits) are all expected to grow by more than 7% year on year.  In terms of IC category, analog, logic, and memory will grow by 8.6%, 7.1%, and 13.3% respectively, while microprocessors will grow by only 1.0%.    In particular, shipments of 5G-compatible smartphones in 2021 are expected to more than double from the previous year.  The manufacturing of SoCs

(system-on-chips) for 5G smartphones will require 5nm (nano-meter) or 7nm miniaturization processes. The production capacity of Taiwan Semiconductor Manufacturing Company (TSMC), a semiconductor foundry, and ASML, an EUV (Extreme Ultraviolet) lithography equipment manufacturer, may therefore encounter supply constraints. 

In ASEAN, harvesting has been delayed due to restrictions on the movement of foreign workers, and soaring market prices of agricultural products and vegetable oil due to supply shortages have boosted the performance of agricultural-related companies.  If the acquisition of low-wage foreign workers through aggressive immigration policies becomes less likely in the future, we may see an end to deflation and an increase in inflation in a wide range of industries in many countries.

In the 18/1 issue, we will be covering NS Solutions (2327), Mitsubishi Chemical Holdings (4188), CYBERDYNE (7779), and AEON Financial Service (8570).


  • NS Solutions Corp (2327)        3,300 yen (15/1 closing price)

・Established in 1980 with Nippon Steel as the parent company.  Company is a systems integrator of the Nippon Steel (5401) group, but about 80% of its sales come from systems development and consulting for companies and government agencies other than its parent company.

・For 1H (Apr-Sep) results of FY2021/3 announced on 27/10, net sales decreased by 12.9% to 119.068 billion yen compared to the same period the previous year, and operating income decreased by 21.4% to 11.149 billion yen.  Both sales and profits decreased due to the negative repercussion from the large PCB project in the same period of the previous year, but 2Q (Jul-Sep) sales increased 10.2% QoQ and operating income increased 18.5% due to the success of responding to remote and non-contact IT needs. 

・For its full year plan, net sales is expected to decrease by 7.2% to 255.0 billion yen compared to the previous year, and operating income to decrease by 15.8% to 23.9 billion yen.  In addition to working on the digitalization of the telework environment and contract / decision-making operations, company has also begun verifying the application of a self-operated wireless network for local 5G at the Muroran Works of Nippon Steel, with the aim of realizing digital transformation (DX) at manufacturing sites.  President Morita said, “2021 will be the dawn of full-fledged DX,” and company is aiming to provide DX support to customers in a wide range of industries.


  • Mitsubishi Chemical Holdings Corp (4188)  664.5 yen (15/1 closing price)

・Established in 2005 through a joint stock transfer between Mitsubishi Chemical and Mitsubishi Pharma.  Has subsumed Mitsubishi Plastics, Mitsubishi Rayon, Taiyo Nippon Sanso, Mitsubishi Tanabe Pharma and others as wholly-owned subsidiaries.  Operates three business fields, namely Performance Products, Industrial Materials, and Healthcare.

・For 1H (Apr-Sep) results of FY2021/3 announced on 4/11, sales revenue decreased by 17.7% to 1.5048 trillion yen compared to the same period the previous year, and core operating income excluding non-recurring factors decreased by 58.2% to 54.639 billion yen.  Sluggish demand, especially for automotive applications, had a negative impact.  2Q (Jul-Sep) QoQ sales rose 8.2% on the back of a recent pickup, and core operating income rose 2.6 times. 

・Company has revised its full-year plan downwards on 4/11.  Core operating income remains unchanged at 140.0 billion yen, down 28.1% Y-o-Y, but sales are expected to fall 11.3% Y-o-Y to 3.175 trillion yen (original plan 3.334 trillion yen) due to lower-than-expected market conditions for MMA, an acrylic resin raw material.  In addition to promoting a project utilizing CO2 as a resource through artificial photosynthesis using photocatalysts, the 3D printing resin business is also expected to expand in Europe and the United States.


  •  CYBERDYNE Inc (7779)                 656 yen (15/1 closing price)

・Established in 2004 to develop, manufacture and sell robot suits for medical, welfare and nursing care sectors.  Developing businesses in the medical, welfare, and lifestyle fields by utilizing “Cybernics,” which is a fusion of human, machine and information systems.

・For 1H (Apr-Sep) results of FY2021/3 announced on 13/11, revenue decreased by 3.5% to 794 million yen compared to the same period the previous year, and net income turned profitable to 167 million yen from minus 112 million yen in the same period of the previous year.  Although a decline in training service sales had a negative impact on overall revenue, net income was boosted by an increase in other income from contract research and a gain on valuation of investment securities.

・Company has not announced its full-year plan due to the difficulty in forecasting earnings from the development of a new and highly-innovative business.  In November last year, company launched an online remote support service linking data with the company’s cloud for HAL, a robot suit that reads biometric signals.  In December last year, company received approval from the Singapore authorities for HAL lower limb type for medical use.


  • AEON Financial Service Co., Ltd (8570)   1,339 yen (15/1 closing price)

・Established in 1981 as a subsidiary of Jasco (current AEON (8267)).  Handles financial services for the AEON Group.  Comprises the Domestic Retail, Domestic Solutions, Greater China, Mekong and Malaysia segments.

・For 9M (Mar-Nov) results of FY2021/2 announced on 13/1, operating revenue was 361.557 billion yen, and operating profit was 24.852 billion yen.  Rates of change relative to the same period of the previous year are not disclosed due to the difference in the period from the previous year’s 9M (Apr-Dec).  In terms of 3Q (Sep-Nov) QoQ comparisons, operating revenue was up 0.9%, and operating profit increased 2.2 times.  Improvements in various transaction volumes and reductions in credit risk from 2Q onwards had contributed to business performance.

・Company has revised its full-year plan upwards.  Operating revenue has been raised to 470.0 billion yen (original plan 460.0 billion yen), and operating profit to 27.0-33.0 billion yen (original plan 10.0-20.0 billion yen).  With the global reemergence of Covid-19 infections, focus will be on the sustainability of factors that will boost earnings, such as improved shopping and installment sales, recovery of mortgages and other receivables, corporate and individual benefit payments, and the reduction of additional bad debt expenses owing to lower credit risks.    


【Disclaimer and Notes relating to this report】

Issuer of this report:  Phillip Securities Japan, Ltd.    4-2 Nihonbashi Kabutocho, Chuo-ku, Tokyo 103-0026

TEL: 03-3666-2101 URL: http://www.phillip.co.jp/


Authors of this report:

Phillip Securities Research Department 

Kazuhiro Sasaki, Certified International Investment Analyst(CIIA®), Chartered Member of The Securities Analysts Association of Japan (CMA®)


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There is no serious conflict of interest between the analysts who wrote the reports and the corresponding companies.