In today’s briefing:
- Toyota – Guidance Meaningless With A ¥115 Assumption
- Softbank Corp Q4 21 Results Reaction: Behind the Headlines, Disappointing Guidance
- TSMC (TSM.US; 2330.TT): Further Wafer Price Raise About 6% from the Beginning of 2023
- Faraday Future (FFIE): Not Looking So Bright
- Shinko Electric (6967 JP): Reality Check – Risk on the Downside
- Beenos Decides to Lock-In Profits from Incubator Investments
- Toyota Guides for a 22% Profit Drop–Tough to Buy This Dip For Now
- Capcom – Can They Keep Suppressing Profit?
- China Longyuan (916 HK): On Your Mark, Get Set, Go!
- SMIC (981.HK): 2Q22 Preview- We Estimate Around 5% Growth Could Be the Case
Toyota – Guidance Meaningless With A ¥115 Assumption
- Toyota results were weak missing by 2.9% and OP by 8.5% due to weak volumes, material costs and some evidence of pulling forward costs.
- Guidance was for a sharp YoY decline from ¥3trn in OP to just ¥2.4trn but this assumes limited price hikes and ¥115/$ so… who cares?
- We expect the weak yen, rising hybrid penetration and volume recovery to drive OP into the ¥3.6-4.0trn range.
Softbank Corp Q4 21 Results Reaction: Behind the Headlines, Disappointing Guidance
- Softbank Corp will meet its mid-term business plan commitment of ¥1,000bn in FY22 operating income but it needs a boost from valuation gains from PayPay to get there
- Operationally, it is forecasting a 11% EBITDA decline driven by mobile revenue erosion and higher marketing expense with the lack of a growth contribution from Z Holdings apparent
- The good news is the dividend is unchanged. We expect a better story from NTT and KDDI later in the week but stable returns provide support
TSMC (TSM.US; 2330.TT): Further Wafer Price Raise About 6% from the Beginning of 2023
- TSMC decided to notify clients that it will raise wafer price about 6% from the beginning of 2023.
- It’s believed the Fabless company’s margin could be raised too much, which is considered to be abnormal.
- There are too many factors influencing the market right now, like the inflation, geopolitical confrontation, Russia-Ukraine war, supply-chain risks, and etc.
Faraday Future (FFIE): Not Looking So Bright
- EV start-up Faraday Future (FF) will be de-listed by the Nasdaq if it fails to file its 2021 annual report & Q1 2022 results by May 16th.
- FF has no revenues yet, but plans to start production in Q3. Cash as of March-end was only $273m vs cash burn of $181m & payment obligations of $193m.
- FF’s growth strategy is risky & relies on the ultra-luxury car market, which is peaking. Without financing, FF may struggle to survive this year.
Shinko Electric (6967 JP): Reality Check – Risk on the Downside
- Shinko may look attractively valued, but it is highly geared to a slowdown in demand. Rising materials costs and depreciation accentuate downside gearing.
- Management is guiding for another year of strong sales growth, but may be ignoring the possibility of a decline in remote-work and other COVID-related demand.
- Rolling over, but still up 6.7x since March 2020. Not worth the risk in the current environment.
Beenos Decides to Lock-In Profits from Incubator Investments
- Beenos Inc (3328 JP) results beat with revenue at ¥7.2bn (+4.6% vs consensus) and OP of ¥431m (+21.4% vs consensus).
- FY22 guidance was raised across Beenos’ core e-commerce businesses due to the favourable impact of the yen depreciation on overseas demand and changes to shipping methods and rates.
- What caught our eye the most was Beenos’ decision to gradually realise gains from its VC investments.
Toyota Guides for a 22% Profit Drop–Tough to Buy This Dip For Now
- Toyota is famous for conservative guidance, but today’s FY3/23 estimates of a 22% decline in pretax profit raised some eyebrows. Raw materials & logistics are to blame.
- Adjusting for various conservative assumptions by Toyota for FY3/23, flat profits are possible, but margin deterioration appears unavoidable.
- On flat profits in FY3/23, the 12x PER & 5.5x EV/EBITDA are not particularly cheap. Toyota is in the “Guidance Dog House” until it can produce a significant beat.
Capcom – Can They Keep Suppressing Profit?
- Capcom results were previously flagged with a late guidance upgrade and so were unsurprising.
- Guidance was a touch above consensus at both the revenue and OP levels but look somewhat conservative even on assumed unit volumes.
- But we think there is significant upside to unit volumes and Capcom’s biggest challenge will be to hold down profit so they can generate double digit growth the year after.
China Longyuan (916 HK): On Your Mark, Get Set, Go!
- China Longyuan Power (916 HK) will see accelerating earnings momentum in the rest of the year – after a weak start due to high base for YoY comparison.
- We believe the combination of increase in utilisation hours, growth in installed capacity, improvement in power tariff and better cash flow and cost performance are the major drivers.
- Share price has been weak in this year, and has returned the stock to less demanding level of 13.3x FY22 PER which we think cannot adequately reflects earnings prospects.
SMIC (981.HK): 2Q22 Preview- We Estimate Around 5% Growth Could Be the Case
- We think SMIC is likely to reach the high-end of 1Q22 guidance, which was US$6,259~6,368mn/36~38% respectively.
- We thick SMIC is likely to reach ~US$6,680mn/39% for revenue/GM respectively in 2Q22.
- SMIC cannot have the EUV machine because of the Wassenaar Arrangement. Therefore, SMIC has to optimize its operation and to expand 28nm and above technologies.
Related tickers: Toyota Motor (7203.T), Taiwan Semiconductor Sp Adr (TSM.N), Shinko Electric Industries (6967.T), Beenos Inc (3328.T), Toyota Motor (7203.T), Capcom Co Ltd (9697.T), China Longyuan Power (0916.HK), Semiconductor Manufacturing International Corp (SMIC) (0981.HK)
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