Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

Hitachi Construction Machinery / Equity Bottom-Up

<ul>
<li>HCM reported FY revenue of ¥1,025bn, just above our ¥1,010bn estimate and blowing away clueless consensus’ ¥963bn. </li>
<li>OP was ¥93.5bn despite the trouble in Ukraine/Russia, just below our ¥95bn estimate and significantly above consensus at ¥86.8bn and guidance of ¥84bn. </li>
<li>Guidance for a YoY OP decline is silly in our view and we suspect there will be a double digit increase.</li>
</ul>


HCM reported FY revenue of ¥1,025bn, just above our ¥1,010bn estimate and blowing away clueless consensus’ ¥963bn. 
OP was ¥93.5bn despite the trouble in Ukraine/Russia, just below our ¥95bn estimate and significantly above consensus at ¥86.8bn and guidance of ¥84bn. 
Guidance for a YoY OP decline is silly in our view and we suspect there will be a double digit increase.


HCM – Obvious Blowout Is Obvious… Just Not to the Sell Side

Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

<ul>
<li>Hitachi is evacuating more than 7,000 GlobalLogic employees from Ukraine to other countries, but IT workers are mobile and these may have more work due to cyber attacks.</li>
<li>Hitachi Construction Machinery and other Hitachi Group divisions do some business in Ukraine, but we expect the impact of the crisis to be manageable and temporary.</li>
<li>Hitachi Ltd shares are down 25% since November and the P/E ratio is near the bottom of its historical range. </li>
</ul>


Hitachi is evacuating more than 7,000 GlobalLogic employees from Ukraine to other countries, but IT workers are mobile and these may have more work due to cyber attacks.
Hitachi Construction Machinery and other Hitachi Group divisions do some business in Ukraine, but we expect the impact of the crisis to be manageable and temporary.
Hitachi Ltd shares are down 25% since November and the P/E ratio is near the bottom of its historical range. 


Hitachi Ltd. (6501 JP): Assessing Exposure to Ukraine - Buy into the Sell-Off

<ul>
<li>HCM posted a strong set of 3Q results with revenue of ¥246.7bn a touch below our ¥248.5bn estimate and blowing away clueless consensus’ ¥219.2bn. </li>
<li>That the consensus high was just ¥231bn is an illustration of how poor the sell side understanding of HCM is compared to Komatsu. </li>
<li>We expect more of the same going forward… strength from HCM and cluelessness from sell side analysts.</li>
</ul>


HCM posted a strong set of 3Q results with revenue of ¥246.7bn a touch below our ¥248.5bn estimate and blowing away clueless consensus’ ¥219.2bn. 
That the consensus high was just ¥231bn is an illustration of how poor the sell side understanding of HCM is compared to Komatsu. 
We expect more of the same going forward… strength from HCM and cluelessness from sell side analysts.


HCM – Obvious Upgrade Is Obvious… Just Not to the Sell Side

Executive Director, Metrical Inc

Aki Matsumoto

Executive Director

Independent Leading Corporate Governance Research

Metrical Inc

METRICAL INC. is an independent leading Corporate Governance research firm in Japan where Corporate Governance is increasingly recognized as an important element on corporate management in these days. Thus, CG research and solutions would become an essential component of global capital markets and play important to contribute to transparency of the markets and maximize shareholders’ value in Japan. 

METRICAL INC. provides Corporate Governance research and analysis including rating services, and  also offers investment research and IR services with solutions and customized profound research on CG and IR issues.

<ul>
<li>More important than the continuity of the Hitachi brand is how HCM can increase the competitive advantage of its products and how quickly it can respond to changes in market.</li>
<li>Changes in major shareholders and the presence of major shareholders have been shown to have statistically significant correlations in ROA, Tobin's q (and changes in market capitalization).</li>
<li>The existence of the Ownership factor doesn’t necessarily predict the future of HCM, but in construction equipment market with strong competition, having a reliable partner is encouraging in business decisions.</li>
</ul>


More important than the continuity of the Hitachi brand is how HCM can increase the competitive advantage of its products and how quickly it can respond to changes in market.
Changes in major shareholders and the presence of major shareholders have been shown to have statistically significant correlations in ROA, Tobin's q (and changes in market capitalization).
The existence of the Ownership factor doesn’t necessarily predict the future of HCM, but in construction equipment market with strong competition, having a reliable partner is encouraging in business decisions.


Japan's Governance: Hitachi Construction Machinery: Additional Notes and Ownership Factor

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Itochu today announced a buyback program to buy US$500mm+ in the next 10 weeks. </li>
<li>Net income growth, a rising dividend, and balanced risk book help it perform with low beta and medium correlation to peers. </li>
<li>The low volatility-relative multiple is supportive, and the buyback helps, but style bias vs Peers matters more. </li>
</ul>


Itochu today announced a buyback program to buy US$500mm+ in the next 10 weeks. 
Net income growth, a rising dividend, and balanced risk book help it perform with low beta and medium correlation to peers. 
The low volatility-relative multiple is supportive, and the buyback helps, but style bias vs Peers matters more. 


Short-Term Itochu Buyback - A Cushion, But Style Bias Matters More

Japan

Hitachi Construction Machinery Co., Ltd. develops, manufactures, sells, and repairs construction machinery. The Company's products include hydraulic excavators, crawler cranes, wheel loaders, shield machines, and bulldozers. Hitachi Construction Machinery, a subsidiary of Hitachi, Ltd., markets its products worldwide through sales offices overseas.

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Hitachi Construction Machinery (6305 JP)

HCM – Obvious Blowout Is Obvious… Just Not to the Sell Side

HCM results came in mostly in line with our projections but guidance for a YoY decline in OP is grossly unrealistic in our view. We expect a new...

Mio Kato

Hitachi Ltd. (6501 JP): Assessing Exposure to Ukraine - Buy into the Sell-Off

Hitachi is evacuating GlobalLogic employees from Ukraine, but they can work remotely. The exposure of Hitachi Construction Machinery and other...

Scott Foster

HCM – Obvious Upgrade Is Obvious… Just Not to the Sell Side

HCM posted a strong set of 3Q results with revenue of ¥246.7bn a touch below our ¥248.5bn estimate. Guidance which was bumped from ¥72bn OP to...

Mio Kato

Japan's Governance: Hitachi Construction Machinery: Additional Notes and Ownership Factor

I will provide a supplementary explanation of the process by which Hitachi, Ltd. reduced its stake in a listed subsidiary, referring to the Maxell...

Metrical Inc

Short-Term Itochu Buyback - A Cushion, But Style Bias Matters More

Itochu has announced a buyback to execute in the next 10 weeks. It is a decent part of ADV but not overwhelming. It should support the stock vs...

Travis Lundy

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