Japan Specialist

Mark Chadwick

Equity Bottom-Up

<ul>
<li>Topix inclusion could generate some solid domestic passive buying interest, but we think the fundamentals remain Bearish</li>
<li>Mercari's GMV growth in Japan is slowing sharply. We see higher promotional costs impacting margins as competition with PayPay Flea market heats up</li>
<li>We think that street estimates are too high and we don't see a reason why the stock should be trading at substantial premium to Z Holdings</li>
</ul>


Topix inclusion could generate some solid domestic passive buying interest, but we think the fundamentals remain Bearish
Mercari's GMV growth in Japan is slowing sharply. We see higher promotional costs impacting margins as competition with PayPay Flea market heats up
We think that street estimates are too high and we don't see a reason why the stock should be trading at substantial premium to Z Holdings


Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

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.

<ul>
<li>Monotaro’s 1Q22 topline was broadly in line with expectations but OP overshot consensus and company guidance by ¥355m and ¥396m respectively as SG&amp;A fell short of the plan by ¥435m.</li>
<li>Although the market treated <a href="https://www.smartkarma.com/entities/monotaro-co-ltd" target="_blank" data-smartkarma-citation="entities:15441:1" rel="noopener">MonotaRO Co Ltd (3064 JP)</a> as a pandemic stock, it has stronger fundamentals than most pandemic winners.</li>
<li>Shares are not cheap enough to be outright bullish but it is still a decent long hedge to short many other low-quality names.</li>
</ul>


Monotaro’s 1Q22 topline was broadly in line with expectations but OP overshot consensus and company guidance by ¥355m and ¥396m respectively as SG&amp;A fell short of the plan by ¥435m.
Although the market treated MonotaRO Co Ltd (3064 JP) as a pandemic stock, it has stronger fundamentals than most pandemic winners.
Shares are not cheap enough to be outright bullish but it is still a decent long hedge to short many other low-quality names.


Research from Mita Securities, Mita Securities

Mita Securities

Research from Mita Securities

Mita Securities provides a full scale diversified investment banking and financial services. A comprehensive investment banking department, specializes in rights offerings advisory, take-over bids agents, M&A etc. Including a proprietary trading desk, and wealth management department that offers brokerage, custody, real estate, and full proxy services.

<ul><li>Consolidated OP was 6.664bn yen (+10.9% YoY), and OPM was 12.2% (-0.9ppt YoY).</li><li>Progress toward the company’s 1H OP guidance of 11.702bn yen (-1.6% YoY) was 57%.</li><li>OP exceeded its 1Q target of 6.268bn yen by 396m yen</li></ul>

Consolidated OP was 6.664bn yen (+10.9% YoY), and OPM was 12.2% (-0.9ppt YoY).Progress toward the company’s 1H OP guidance of 11.702bn yen (-1.6% YoY) was 57%.OP exceeded its 1Q target of 6.268bn yen by 396m yen

MonotaRO (3064): Satisfactory 1Q Results; 2Q and Beyond Are More and More Important

<ul><li>Parent company sales in March were 19.771bn yen (+17.4% YoY), slightly below the company’s monthly target</li><li>The number of business days was 22, one day less than in March 2021. The sales growth rate per business day was +22.7% YoY (+21.4% for February).</li><li>Sales to SMEs (monotaro.com) increased by around +13% YoY, below the company’s target.</li></ul>

Parent company sales in March were 19.771bn yen (+17.4% YoY), slightly below the company’s monthly targetThe number of business days was 22, one day less than in March 2021. The sales growth rate per business day was +22.7% YoY (+21.4% for February).Sales to SMEs (monotaro.com) increased by around +13% YoY, below the company’s target.

MonotaRO (3064): Neutral Impression on March Sales; Effects of Price Hikes Appearing

<ul>
<li>Among many e-commerce names, <a href="https://www.smartkarma.com/entities/monotaro-co-ltd" target="_blank" data-smartkarma-citation="entities:15441:1" rel="noopener">MonotaRO Co Ltd (3064 JP)</a> is one of the most promising with operating profitability predicted to improve by 200 bps to 14.0% by 2023.</li>
<li>Unlike many e-commerce players, the company doesn’t strain itself financially while pursuing revenue growth through expansion.</li>
<li>At 35.8x OP, MonotaRo is not cheap to be outright bullish. However, it is a reasonable long hedge to allow you to short a lot of other names in e-commerce.</li>
</ul>


Among many e-commerce names, MonotaRO Co Ltd (3064 JP) is one of the most promising with operating profitability predicted to improve by 200 bps to 14.0% by 2023.
Unlike many e-commerce players, the company doesn’t strain itself financially while pursuing revenue growth through expansion.
At 35.8x OP, MonotaRo is not cheap to be outright bullish. However, it is a reasonable long hedge to allow you to short a lot of other names in e-commerce.


Japan

MonotaRO Co., Ltd. mainly sells machine tools, engine parts, and factory consumable goods on the web site.

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MonotaRO Co Ltd (3064 JP)

Mercari (4385 JP) | Time to Flee

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Mark Chadwick

MonotaRo: Not a Pandemic Stock

With the share price down 51% from the peak at one point, markets discounted MonotaRo alongside the rest of the pandemic stocks, even though the...

Oshadhi Kumarasiri

MonotaRO (3064): Satisfactory 1Q Results; 2Q and Beyond Are More and More Important

Consolidated OP was 6.664bn yen (+10.9% YoY), and OPM was 12.2% (-0.9ppt YoY). Progress toward the company’s 1H OP guidance of 11.702bn yen (-1.6%...

Mita Securities

MonotaRO (3064): Neutral Impression on March Sales; Effects of Price Hikes Appearing

Parent company sales in March were 19.771bn yen (+17.4% YoY), slightly below the company’s monthly target. The number of business days was 22...

Mita Securities

MonotaRo: A Rare Winner in E-Commerce

While most e-commerce players are fighting each other and the e-commerce arms of traditional businesses, MonotaRo operates in a niche with very...

Oshadhi Kumarasiri

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