Technology

Report by Revelare Partners

"The ASML of optical" - this is not an over-earning bottleneck commodity story: JEOL has +40% long-term operating margins and a deep R&D moat. The hidden upside is on the optical side, where JEOL has a front-end tool used in expanding indium phosphide ultra-high-power lasers. With Lumentum and Coherent ramping optical capex to expand capacity by an estimated 5x over 5 years, JEOL is positioned as a picks-and-shovels beneficiary of that cycle. The stock trades on 16x 2027 Street EPS, with consensus forecasting only 10% revenue growth and little optical contribution. Rising Intel and Samsung foundry activity should also broaden demand beyond TSMC, while Chinese AI accelerator design starts adds another source of demand. TP ¥16,500 (90% upside).

Technology

Gradient’s main short-term concern is potential top-line disappointments driven by a host of demand-related factors, including elevated inventory levels at major customer, Ciena (among others), lower levels of data-centre Capex spend, lower demand for smartphone 3D sensing products and softer sales of Commercial Lasers products. A relative spike in AR exacerbates their concern and unusual growth in prepayments and other current assets adds another margin headwind in coming quarters. Additionally, disproportionate inventory growth appears to predate the NeoPhotonics merger and current inventory levels appear disconnected from near-term demand.