The global economy in 2015 was definitely not the best. With emerging economies such as China, Brazil and Russia slowing down and oil prices falling to below half their earlier highs, global markets are in a dire situation despite the relief from the Fed’s rate hike.
However even with the worsening economic situation, there are still a handful of industries selling essential products that are still experiencing strong demand and growth. With that, InvestAsian would like to bring your attention to the pneumatic equipment market.
The demand for pneumatic equipment was continuously solid throughout 2015 with strong growth not only in automobile-related industries, but also in the semiconductor industries and the machine tool sector in North America and Asia.
SMC Corp: Japan’s Top Pneumatic Equipment Company
Well known for its electronics industry throughout the world, Japan is one of the leading nations in the fields of scientific research, technology, and machinery. Japanese electronic products are considered among the best on the market, proven by their higher market share of the global electronics market when compared to those of other countries.
The same holds true for the Japanese pneumatic equipment manufacturer and seller SMC Corporation (TYO:6273). Entering the pneumatic equipment market in 1961, two years after it was established, SMC is now Japan’s leading manufacturer of a variety of pneumatic products for the global market.
SMC’s expertise and experience in the field ultimately led to the expansion in its product line and the number of products offered now stands at an impressive count of more than 600,000.
Its main products can be broken down into four categories – namely air preparation equipment, air line equipment, directional control valves, and actuators. Some of the peripheral products that SMC has expanded into include detection switches, temperature control equipment, and static electricity elimination equipment.
Big and Bad
Not only the biggest company in its playing field, SMC is also the best performing one.
With more than 6 times the market cap than its closest competitor, SMC has 55 local sales offices, overseas partnerships in 82 countries, subsidiaries in 50, and production facilities in over 28 countries.
It reported sales of 458 billion JPY (~US$3.8 billion) and a net income of 109 billion JPY (~US$911 million), boasting an impressive net profit margin of 24%, another record in the industry.
Its impressive financial performance has an effect on its operating metrics as well. Besting all its competitors by a wide stretch, SMC has a ROA of 10.5% and an ROI of 12.5%, giving its shareholders a great return on their capital.
The company also has strong financial fundamentals in place. A brief analysis of its financial ratios would show that it is indeed a very healthy company with a current ratio above 4 and long term debt to assets ratio just a little above 1.
Perfect Way to Start Your Portfolio for the New Year
InvestAsian believes that SMC is a strong buy at this moment due to the price that it is at right now, just at 28,740 JPY, a lower price point than just 6 months ago when it crossed the 39,000 threshold.
With a constant growth trend in its share price for the past 5 years, extremely sound fundamentals, and impressive financial performance, SMC would be a great addition to your 2016 investment portfolio.