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

<ul>
<li>SMM beat at the PTP level by 10% driven by the surge in nickel prices but guided for just ¥194bn undershooting consensus by 9.3%. </li>
<li>We do not find guidance credible at all as it would defy historical trends to a very large degree. </li>
<li>In fact we believe that excluding one-off gains from the sale of Sierra Gorda, PTP could actually be up YoY.</li>
</ul>


SMM beat at the PTP level by 10% driven by the surge in nickel prices but guided for just ¥194bn undershooting consensus by 9.3%. 
We do not find guidance credible at all as it would defy historical trends to a very large degree. 
In fact we believe that excluding one-off gains from the sale of Sierra Gorda, PTP could actually be up YoY.


<ul>
<li>Sumitomo Metal Mining delivered a strong 3Q with ¥73.7bn in current profit vs. consensus at ¥57.1bn. </li>
<li>Guidance was raised from ¥266bn in current profit to ¥314bn although this is inflated by about a ¥74bn gain on Sierra Gorda. </li>
<li>Nevertheless, valuations look cheap relative to earnings and imply a sharp commodity price correction which may not happen very quickly.</li>
</ul>


Sumitomo Metal Mining delivered a strong 3Q with ¥73.7bn in current profit vs. consensus at ¥57.1bn. 
Guidance was raised from ¥266bn in current profit to ¥314bn although this is inflated by about a ¥74bn gain on Sierra Gorda. 
Nevertheless, valuations look cheap relative to earnings and imply a sharp commodity price correction which may not happen very quickly.


SMM – Bump to Guidance Supports Recent Share Price Rise

<ul>
<li>The Nikkei reports that Sumitomo Metal Mining has developed a method to more effectively recycle Li-Ion battery materials. </li>
<li>Importantly, lithium can be recycled in addition to copper, nickel and cobalt and SMM expects costs to be competitive. </li>
<li>This is positive news but timelines also illustrate the hurdles for a quick transition.</li>
</ul>


The Nikkei reports that Sumitomo Metal Mining has developed a method to more effectively recycle Li-Ion battery materials. 
Importantly, lithium can be recycled in addition to copper, nickel and cobalt and SMM expects costs to be competitive. 
This is positive news but timelines also illustrate the hurdles for a quick transition.


SMM – Important Breakthrough for Li-Ion Battery Recycling

<p>SMM revised up guidance significantly yesterday but most of this was driven by the sale of its Sierra Gorda project. The mine had been consistently generating large losses for SMM and its decisiveness in selling when prices turned up is a positive in our view. Assumptions for the rest of the year are conservative and the market is pricing in an overly negative scenario on copper and nickel prices in our view.</p>

SMM revised up guidance significantly yesterday but most of this was driven by the sale of its Sierra Gorda project. The mine had been consistently generating large losses for SMM and its decisiveness in selling when prices turned up is a positive in our view. Assumptions for the rest of the year are conservative and the market is pricing in an overly negative scenario on copper and nickel prices in our view.

SMM – Market Underpricing Inflation Risk

Contemporary Amperex Technology (CATL) / Equity Bottom-Up

Contemporary Amperex Technology (CATL) (300750 CH)

<p><a href="https://asia.nikkei.com/Spotlight/Electric-cars-in-China/CATL-goes-all-in-on-next-gen-sodium-ion-EV-batteries" target="_blank" rel="noopener">CATL continues to invest heavily in material diversification</a>. We warned as far back as <a href="https://www.smartkarma.com/insights/a-common-concern-is-there-enough-lithium-to-support-the-expected-growth-in-evs" target="_blank" rel="noopener">three and a half years ago</a> that investors were too complacent about lithium supply and as we head towards the middle of this decade with the prospect of supply crunches for battery grade lithium and nickel looking increasingly likely, CATL appears to be hedging its bets.</p>

CATL continues to invest heavily in material diversification. We warned as far back as three and a half years ago that investors were too complacent about lithium supply and as we head towards the middle of this decade with the prospect of supply crunches for battery grade lithium and nickel looking increasingly likely, CATL appears to be hedging its bets.

CATL – Sodium-Ion Battery Development Highlights the Issues with Lithium

Japan

Sumitomo Metal Mining Co., Ltd. develops and mines non-ferrous metals in Japan and overseas.  The Company's primary products include copper, gold, silver, nickel, lead, and zinc.  The Company refines, produces, and sells precious metals.  Sumitomo Metal Mining also produces and markets electronic & housing construction materials and provides civil engineering works.

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Sumitomo Metal Mining (5713 JP)

SMM – Guidance Makes Little Sense

We believe SMM's share price implies a drastic decline in commodity prices and while that is not impossible we believe it skews risk-reward...

Mio Kato

SMM – Important Breakthrough for Li-Ion Battery Recycling

SMM has developed a method to more effectively recycle Li-Ion battery materials including lithium cost competitively. This is very positive but...

Mio Kato

SMM – Market Underpricing Inflation Risk

SMM revised up guidance significantly but assumptions for the rest of the year are conservative and the market is pricing in an overly negative...

Mio Kato

CATL – Sodium-Ion Battery Development Highlights the Issues with Lithium

As we head towards the middle of this decade the prospect of supply crunches for battery grade lithium and nickel looking increasingly likely and...

Mio Kato

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

SMM – Guidance Makes Little Sense

We believe SMM's share price implies a drastic decline in commodity prices and while that is not impossible we believe it skews risk-reward...

Mio Kato

SMM – Bump to Guidance Supports Recent Share Price Rise

SMM delivered a strong 3Qand guidance was raised to ¥314bn in current profit. Valuations look cheap relative to earnings and imply a sharp...

Mio Kato

SMM – Important Breakthrough for Li-Ion Battery Recycling

SMM has developed a method to more effectively recycle Li-Ion battery materials including lithium cost competitively. This is very positive but...

Mio Kato

SMM – Market Underpricing Inflation Risk

SMM revised up guidance significantly but assumptions for the rest of the year are conservative and the market is pricing in an overly negative...

Mio Kato

CATL – Sodium-Ion Battery Development Highlights the Issues with Lithium

As we head towards the middle of this decade the prospect of supply crunches for battery grade lithium and nickel looking increasingly likely and...

Mio Kato