Japan Specialist

Mark Chadwick

Equity Bottom-Up

<ul>
<li>Shimano's Q2 results exceeded expectations with revenue and operating profit significantly beating estimates despite a YoY decline.</li>
<li>Full-Year revenue and operating profit guidance were revised upward, reflecting improved performance and aligning with analyst consensus.</li>
<li>Our estimate for FY25 was significantly raised; despite full valuations, further recovery and potential shareholder returns offer continued bullish outlook.</li>
</ul>


Shimano's Q2 results exceeded expectations with revenue and operating profit significantly beating estimates despite a YoY decline.
Full-Year revenue and operating profit guidance were revised upward, reflecting improved performance and aligning with analyst consensus.
Our estimate for FY25 was significantly raised; despite full valuations, further recovery and potential shareholder returns offer continued bullish outlook.


Shimano (7309) | Shifts Gears with Upbeat Guidance

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>The review period for the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 Index</a> September rebalance ends in three weeks. There could be three changes at the rebalance with sector balance used for the additions.</li>
<li>Depending on the changes, passive trackers will need to buy between 3-57x ADV (2.4%-24% of real float) on the inclusions and sell between 3.7-8.4x ADV on the deletions.</li>
<li>
<a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a>'s index weight is currently higher than 10% and that will result in capping in September. Passives will need to sell 6x ADV in the stock.</li>
</ul>


The review period for the Nikkei 225 Index September rebalance ends in three weeks. There could be three changes at the rebalance with sector balance used for the additions.
Depending on the changes, passive trackers will need to buy between 3-57x ADV (2.4%-24% of real float) on the inclusions and sell between 3.7-8.4x ADV on the deletions.

Fast Retailing (9983 JP)'s index weight is currently higher than 10% and that will result in capping in September. Passives will need to sell 6x ADV in the stock.


Nikkei 225 Index Rebalance Preview (Sep 2024): Potential Adds/Deletes, Capping & Funding Changes

<ul>
<li>Shimano continues to reel from a slowdown in bike and fishing tackle sales post Covid</li>
<li>1Q operating profit beat the analyst consensus, but the upward revision to full year is minor and falls short of street estimates</li>
<li>The stock has priced in an improving outlook. However, valuations are now looking full compared to historical levels. </li>
</ul>


Shimano continues to reel from a slowdown in bike and fishing tackle sales post Covid
1Q operating profit beat the analyst consensus, but the upward revision to full year is minor and falls short of street estimates
The stock has priced in an improving outlook. However, valuations are now looking full compared to historical levels. 


<ul>
<li>Shimano Q3 results show a 32% YoY net sales decline, led by a 38% drop in bike component sales, BUT both sales and profit beat expectations</li>
<li>The company maintains cost control, sees improving gross margins, and reduces inventories, while cash flow and balance sheet remain strong</li>
<li>With the upward revision in full-year guidance, we believe the market will look through the still challenging Q4 outlook and focus instead on 2024 normalization and relatively low valuation</li>
</ul>


Shimano Q3 results show a 32% YoY net sales decline, led by a 38% drop in bike component sales, BUT both sales and profit beat expectations
The company maintains cost control, sees improving gross margins, and reduces inventories, while cash flow and balance sheet remain strong
With the upward revision in full-year guidance, we believe the market will look through the still challenging Q4 outlook and focus instead on 2024 normalization and relatively low valuation


<ul>
<li>Shimano reported a 40% drop in operating profit for 2Q and revised down full year guidance</li>
<li>Bike sales continue to be weak (-19% YoY) in Q2 and 2H outlook is even worse</li>
<li>We expect the share price to sell-off following the guidance cut. The inventory overhang could take a while to resolve</li>
</ul>


Shimano reported a 40% drop in operating profit for 2Q and revised down full year guidance
Bike sales continue to be weak (-19% YoY) in Q2 and 2H outlook is even worse
We expect the share price to sell-off following the guidance cut. The inventory overhang could take a while to resolve


Shimano (7309) | Profit Recovery Derailed

Japan

SHIMANO INC. manufactures and sells products for bicycling, snowboarding, and fishing.  The Company's products include running gears and brake parts for bicycles and rods, reels, and tackles for fishing.  The Company manufactures golf related products as well.  Shimano mainly exports to Asia, Europe, and the United States.

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Shimano Inc (7309 JP)

Shimano (7309) | Shifts Gears with Upbeat Guidance

Shimano's Q2 results surpassed expectations, leading to an upward revision in full-year guidance and a bullish outlook for potential shareholder...

Mark Chadwick

Nikkei 225 Index Rebalance Preview (Sep 2024): Potential Adds/Deletes, Capping & Funding Changes

We forecast 3 changes for the NKY in September with sector balance determining the inclusions. Fast Retailing will be capped at 10%. Passives need...

Brian Freitas

Shimano (7309) | Stuck in a Low Gear

Shimano continues to reel from a slowdown in bike and fishing tackle sales post Covid. Upward revision to full year operating profit and a small...

Mark Chadwick

Shimano (7309) | A Clear Road Ahead

Shimano Q3 results: Net sales decline, but beat expectations. Cost control, improving margins, and strong balance sheet. We turn bullish on...

Mark Chadwick

Shimano (7309) | Profit Recovery Derailed

We expect the share price to sell-off following the guidance cut. The inventory overhang could take a while to resolve given weak bike sales in Europe

Mark Chadwick

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Shimano (7309) | Shifts Gears with Upbeat Guidance

​Shimano's Q2 results surpassed expectations, leading to an upward revision in full-year guidance and a bullish outlook for potential shareholder...

Mark Chadwick

Nikkei 225 Index Rebalance Preview (Sep 2024): Potential Adds/Deletes, Capping & Funding Changes

We forecast 3 changes for the NKY in September with sector balance determining the inclusions. Fast Retailing will be capped at 10%. Passives need...

Brian Freitas

Shimano (7309) | Stuck in a Low Gear

Shimano continues to reel from a slowdown in bike and fishing tackle sales post Covid. Upward revision to full year operating profit and a small...

Mark Chadwick

Shimano (7309) | A Clear Road Ahead

​Shimano Q3 results: Net sales decline, but beat expectations. Cost control, improving margins, and strong balance sheet. We turn bullish on...

Mark Chadwick

Shimano (7309) | Profit Recovery Derailed

We expect the share price to sell-off following the guidance cut. The inventory overhang could take a while to resolve given weak bike sales in Europe

Mark Chadwick

Shimano's Q2 results surpassed expectations, leading to an upward revision in full-year guidance and a bullish outlook for potential shareholder...

Shimano Q3 results: Net sales decline, but beat expectations. Cost control, improving margins, and strong balance sheet. We turn bullish on...