Japan Specialist

Mark Chadwick

Equity Bottom-Up

<ul>
<li>1Q26 sales beat expectations, but profit missed due to margin compression and non-operational headwinds</li>
<li>Core bike division deteriorating with declining like-for-like sales, sharp profit contraction, and structural pressures from utilization, cost inflation, and weak end-market demand.</li>
<li>Lack of earnings momentum, unchanged weak guidance, and rising FX headwinds increase pressure on management, with activist involvement likely as strategic direction and capital allocation remain unconvincing.</li>
</ul>


1Q26 sales beat expectations, but profit missed due to margin compression and non-operational headwinds
Core bike division deteriorating with declining like-for-like sales, sharp profit contraction, and structural pressures from utilization, cost inflation, and weak end-market demand.
Lack of earnings momentum, unchanged weak guidance, and rising FX headwinds increase pressure on management, with activist involvement likely as strategic direction and capital allocation remain unconvincing.


<ul>
<li>Q1 consensus modestly above guidance: sales ¥112bn vs ¥109bn, OP ¥12.5bn vs ¥11.2bn; however, underlying demand remains weak with limited evidence of near-term recovery.</li>
<li>Bicycle components sales guided -9% YoY to ¥80bn, a marked slowdown versus -3% in 4Q25; operating profit expected to fall 42%, implying ~600bps margin compression.</li>
<li>Weak industry backdrop persists, but valuation support emerging; activist interest rising, with focus shifting toward capital efficiency and lack of credible margin recovery strategy.</li>
</ul>


Q1 consensus modestly above guidance: sales ¥112bn vs ¥109bn, OP ¥12.5bn vs ¥11.2bn; however, underlying demand remains weak with limited evidence of near-term recovery.
Bicycle components sales guided -9% YoY to ¥80bn, a marked slowdown versus -3% in 4Q25; operating profit expected to fall 42%, implying ~600bps margin compression.
Weak industry backdrop persists, but valuation support emerging; activist interest rising, with focus shifting toward capital efficiency and lack of credible margin recovery strategy.


Shimano (7309) | Q1 Preview: Gears Still Slipping

<ul>
<li>Q3 sales fell 4% YoY and operating profit dropped 57%, reflecting continued weakness in bicycles and margin compression, though results aligned with lowered guidance. </li>
<li>Elevated channel inventories in Europe and China highlight lingering post-Covid demand normalization, with 2026 guidance likely to remain conservative amid structural headwinds.</li>
<li>ROIC has halved as invested capital outpaced sales growth; despite strong cash and shareholder returns, Shimano faces slow recovery and limited near-term catalysts.</li>
</ul>


Q3 sales fell 4% YoY and operating profit dropped 57%, reflecting continued weakness in bicycles and margin compression, though results aligned with lowered guidance. 
Elevated channel inventories in Europe and China highlight lingering post-Covid demand normalization, with 2026 guidance likely to remain conservative amid structural headwinds.
ROIC has halved as invested capital outpaced sales growth; despite strong cash and shareholder returns, Shimano faces slow recovery and limited near-term catalysts.


Japanese Equity Specialist, Ortus Advisors

Andrew Jackson

Japanese Equity Specialist

Ortus Advisors

Thematic (Sector/Industry)

<ul>
<li>Cable laggards SEI -16%, Furukawa -14% and Fujikura -10% over the last 5 sessions. Worth looking at for solid upside as the market scrambles for laggards.</li>
<li>Softbank only +1.5% Friday despite ARM +11%. Could see a rebound today if fears from margin loan struggles fade.</li>
<li>Japanese names are likely to give Friday’s gains back but excessive weakness could be an opportunity to reengage ahead of the dust settling post-SpaceX.</li>
</ul>


Cable laggards SEI -16%, Furukawa -14% and Fujikura -10% over the last 5 sessions. Worth looking at for solid upside as the market scrambles for laggards.
Softbank only +1.5% Friday despite ARM +11%. Could see a rebound today if fears from margin loan struggles fade.
Japanese names are likely to give Friday’s gains back but excessive weakness could be an opportunity to reengage ahead of the dust settling post-SpaceX.


Japan Morning Connection: Cable and Optical Laggards in Focus as AI Strength Returns

<ul>
<li>Watch refiners, shippers, and heavies for upside vs weakness for airlines and companies with shipping exposure to EU.</li>
<li>This rotation could be short lived given the very one-sided outcome of the conflict so far, so expect volatility.</li>
<li>Precious metals and oil are already starting to pare early gains this morning which may be indicative of the longevity of some of these moves.</li>
</ul>


Watch refiners, shippers, and heavies for upside vs weakness for airlines and companies with shipping exposure to EU.
This rotation could be short lived given the very one-sided outcome of the conflict so far, so expect volatility.
Precious metals and oil are already starting to pare early gains this morning which may be indicative of the longevity of some of these moves.


Japan Morning Connection: Japan Set for Short-Term Rotation Away from Tech After Attacks on Iran

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) | Going Nowhere Fast

1Q26 sales beat expectations but profit missed due to margin compression and non-operational headwinds, core bike division deteriorating with...

Mark Chadwick

Shimano (7309) | Q1 Preview: Gears Still Slipping

Q1 Preview: Bicycle components sales expected to decline significantly, highlighting industry challenges. Activist interest growing

Mark Chadwick

Shimano (7309 JP) | Digesting the Boom

Shimano's Q3 results show sales and profit decline, with lingering post-Covid demand normalization and conservative 2026 guidance due to...

Mark Chadwick

Japan Morning Connection: Cable and Optical Laggards in Focus as AI Strength Returns

Cable laggards SEI and Furukawa worth watching as AI strength returns. Softbank looks set to rebound on ARM's surge. Chiyoda looks well placed as...

Andrew Jackson

Japan Morning Connection: Japan Set for Short-Term Rotation Away from Tech After Attacks on Iran

Expect a fairly sharp rotation away from tech and AI into defense and defensives names in Japan today. JP defense names are all trading close to...

Andrew Jackson

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Shimano (7309) | Going Nowhere Fast

​1Q26 sales beat expectations but profit missed due to margin compression and non-operational headwinds, core bike division deteriorating with...

Mark Chadwick

Shimano (7309) | Q1 Preview: Gears Still Slipping

​Q1 Preview: Bicycle components sales expected to decline significantly, highlighting industry challenges. Activist interest growing

Mark Chadwick

Shimano (7309 JP) | Digesting the Boom

​Shimano's Q3 results show sales and profit decline, with lingering post-Covid demand normalization and conservative 2026 guidance due to...

Mark Chadwick

Japan Morning Connection: Cable and Optical Laggards in Focus as AI Strength Returns

Cable laggards SEI and Furukawa worth watching as AI strength returns. Softbank looks set to rebound on ARM's surge. Chiyoda looks well placed as...

Andrew Jackson

Japan Morning Connection: Japan Set for Short-Term Rotation Away from Tech After Attacks on Iran

Expect a fairly sharp rotation away from tech and AI into defense and defensives names in Japan today. JP defense names are all trading close to...

Andrew Jackson

1Q26 sales beat expectations but profit missed due to margin compression and non-operational headwinds, core bike division deteriorating with...

Q1 Preview: Bicycle components sales expected to decline significantly, highlighting industry challenges. Activist interest growing

Shimano's Q3 results show sales and profit decline, with lingering post-Covid demand normalization and conservative 2026 guidance due to...