YB new stock pitches (Thu, Jun 4)

Sakai Chemical Industry (4078.T), a 1918-founded Osaka inorganic chemicals company, is the world's largest merchant supplier of MLCC dielectric powders, holding roughly 25-28% global share in barium titanate (BaTiO₃) and is one of the few non-Murata players with mass-production sub-100nm nano-hydrothermal BaTiO₃ technology, positioning it as the quiet upstream bottleneck in the AI Server MLCC supply chain. High-end sub-100nm BaTiO₃ is a structurally tight three-company merchant oligopoly outside China (Sakai via hydrothermal, Nippon Chemical Industrial via oxalate/alkoxide, and China's Shandong Sinocera via hydrothermal), and Sakai benefits from two distinct AI Server demand streams: Class II BaTiO₃ for GPU board decoupling (over 1,000 MLCCs per GB200/Rubin board) and NP0/C0G high-purity TiO₂ for PSU LLC resonant capacitors, the latter seeing global PSU NP0 MLCC market growth of +206% in 2026 and +278% in 2027 as server power scales toward 12kW+ (KGI estimates VR200 rack NP0 usage at 5x GB200, and MS pegs VR200 rack MLCC content at ~$4,300 vs GB300's ~$1,525, a 182% increase). The Electronic Materials segment is now Sakai's second largest by revenue and largest by operating profit (¥1.82bn, 16% margin in FY26/3, ~14% of consolidated revenue but ~20% of pre-corporate-cost operating profit), guided to ¥11,500mn revenue (+1.1%) and ¥2,400mn operating profit (+32.2%, margin expanding to 20.9%) in FY27/3—the cleanest signal of AI Server mix shift, with flat revenue but sharply higher profit as high-end SKUs crowd out low-margin product. FY26/3 consolidated revenue was ¥81.4bn (-3.5%), operating profit ¥6.45bn (+5.9%), and net income ¥2.75bn (-45%) due to ¥2.98bn of total impairments (including ¥2.4bn on Cosmetic Materials); FY27/3 guides revenue ¥81.7bn (+0.3%), operating profit ¥6.0bn (-7.0%, entirely from the planned pigment-grade TiO₂ shutdown that contributed ~¥1.4bn), and net income ¥4.4bn (+60%). The company missed its BEYOND2030 plan target of ¥9bn operating profit by ¥3bn (concentrated in Cosmetics and pharmaceutical intermediates), but is executing a portfolio cleanup (pigment TiO₂ exit, Cosmetics impairment, contract processing rationalization), and capital returns signal confidence with a 3% DOE target, FY27/3 dividend raised to ¥160 (+10%), and ¥2.5bn of FY26/3 buybacks all cancelled. On valuation, reported TTM P/E is ~30x and P/B ~1x; forward P/E is ~17x, but FY27/3 net income is inflated by a ~¥1bn fixed-asset disposal gain, making clean forward EPS ~¥225 and clean forward P/E ~22x. The real upside is the FY28/3 setup: once pigment TiO₂ is fully gone and Cosmetics stabilizes, Electronic Materials could reach ¥3bn+ in operating profit at 20%+ margins, supported by the parallel NP0 PSU story. The stock has already rerated +90% (from sub-¥3,000 nine months ago) so the easy money has been made, but it is not yet at fair value, with the thesis grounded in physics and supply structure rather than narrative; key risks include a slower-than-guided mix shift (FY27/3 assumes a 32% profit jump on flat revenue), continued Cosmetics losses (¥437mn loss in FY26/3, ~¥400mn guided FY27/3), and Middle East raw material supply disruption affecting Organic Chemicals and Resin Additives.

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Intuit (INTU), a SaaS fintech powerhouse with a $83.2bn market cap (~$304-307/share, up 16% from when the author wrote at $307) operating TurboTax, QuickBooks, Mailchimp, and Credit Karma across its Consumer and Global Business Solutions segments, is down over 60% YoY on the 'AI is destroying software' mantra, which the author argues is a mispricing—buying at a forecast 10x earnings is 'an extreme mispricing' representing a clear decision to go long. The bull case is that AI is a profit-enhancer rather than a destroyer given INTU's data moat (15+ LLMs, 60bn ML predictions/day, $2tn invoices, 625k data attributes per business across 10m customers, partnerships with OpenAI via a $100m deal and Anthropic), strong brand (94% of 190k reviews give 5 stars), a 100% accuracy guarantee on tax returns that AI rivals can't match, TurboTax Live revenue projected to jump 36% in FY26, ARPU up ~7% in Q3, fast-growing mid-market (57%) and payments (50%) upsell/cross-sell, and recurring defensive income (death and taxes); FY26 guidance is 13-14% revenue growth, ~1-point non-GAAP operating margin expansion, and 18% non-GAAP EPS growth, with brokers forecasting strength through FY28. The balance sheet is a fortress (current ratio 2.23x, debt-to-equity 0.3x, cash covers debt 100%, cash grew $2.2bn YTD), $7.5bn operating cash flow generated in 9 months to April 30 2026 (vs $6.2bn full FY25), $4.2bn net income after ~$2bn stock-based comp (10.9% of market cap, modest vs competitor Sage at 13.9% and 100% performance-related), and $8bn of buybacks planned for 2026 (treasury stock at -$24.9bn). A recent $300m restructuring charge cut 3,000 roles (management, project managers, engineering) to build an AI-native platform. The bear case is that TurboTax Online units are guided to decline 2% in FY26, e-file share to drop 1%, and pay-nothing customers fell to ~7m from 8m, plus Credit Karma is highly cyclical (10% of income) and could struggle in a low-confidence environment. Led by CEO/Chairman Sasan Goodarzi (since 2019, doubled revenue), founder Scott Cook (2.2% ownership), with insiders owning ~2.5%, management is praised as disciplined, AI-forward capital allocators.

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Franklin Electric ($FELE) is transitioning from a slow-growth industrials business focused on municipal water projects into a high-growth provider of water and energy management solutions for datacenters. The new CEO, a former $NVT division leader with significant datacenter sales experience, has an employment agreement tying his compensation to ambitious revenue and margin targets. Recent water business acquisitions, including reverse osmosis technology for filtration and purification, signal a growing portfolio for this end market, while the company's Coolant Distribution Unit technology is a critical datacenter component that keeps systems cool, prevents scaling and corrosion, and maintains 100% uptime. Although datacenters currently represent less than $50 million of consolidated revenue, related backlog and orders are growing double digits. With a rock-solid balance sheet, the stock trades at a single-digit forward earnings multiple versus peers at 20-35x, presenting potential for a material rerating over the next 12 to 24 months.

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