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Stocks

Disco hits 2016 high on bullish guidance

TOKYO -- Japanese chipmaking equipment maker Disco marked a year-to-date high Tuesday as investors welcomed full-year earnings projections released the day before.

The shares rose 280 yen, or 2%, to reach 12,860 yen before closing at 12,730 yen. The fiscal 2016 estimates call for operating profit to fall 16% to 25.4 billion yen ($241 million). But this figure represents 7% growth if the impact of the yen's rise against the dollar is factored out.

Disco bases its guidance on orders certain to contribute to profit, leading "projections to lean on the conservative side," said Yukihiko Shimada, senior analyst at SMBC Nikko Securities. Some investors seem to be betting that the company will outperform its guidance.

Exports of mainstay wafer-cutting machinery to South Korea and Taiwan are expected to grow. Sales volume of replacement blades used in those machines also will rise.

These favorable business conditions are backed by demand among Chinese smartphone makers. They have been adding more memory chips to smartphones as the devices grow increasingly complex, lifting demand for chipmaking machinery. Industry peers Tokyo Electron and Advantest upgraded full-year projections in October.

Disco's share price has been rising steadily since July, an uptrend that could turn some investors cautious about overheating. "Once the announcement of full-year projections at rival companies runs its course next week and beyond, the stock will face upward resistance due to a lack of incentives," said Yoshihiko Tabei, chief analyst at Naito Securities.

(Nikkei)

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