Japan: Komatsu Ltd, Pan Pacific International Holdings, Tokyo Stock Exchange Tokyo Price Index Topix, Yamaha Motor and more

In today’s briefing:

Komatsu – Sensible Top Line Guidance But Margins Too Conservative
Pan Pacific International: A Reasonably Strong Third Quarter Warrants Further Upside
Japan’s Governance: About an Article on Human Rights Due Diligence
Yamaha Motors (7272 JP) | Staying the Course in Choppy Macro Waters

Komatsu – Sensible Top Line Guidance But Margins Too Conservative

Komatsu reported 4QFY22 results on the 28th of April and recorded revenue of ¥787bn (6.2% above consensus) and OP of ¥94.5bn (13.1% above consensus).
They also guided for revenue to increase 7.1% YoY vs. HCM which guided for a 6.3% fall driving a significant and premature share price decline.
The market has corrected some of that fall as it appears to increasingly agree with our call that HCM’s guidance was nonsense conservatism.

Although consensus looks a bit challenging, there could be a decent OP beat yet again in the third quarter.
Meanwhile Pan Pacific International Holdings (7532 JP)’s valuation is still cheap and has decent potential for multiple expansion.
Thus, there could be more upside to PPIH if the company dismisses whatever the remaining concerns over profitability through a reasonably strong third-quarter performance.

On November 30, 2021, Nikkei Shimbun published article titled “Human Rights Risks in Supply Chains, 52% of Listed Companies Understand.” I would like to consider the issues in the article.
The METI survey shows that only a small number of companies have developed human rights policies and conducted human rights due diligence.
It’s clear that progress will not be made unless management itself takes the initiative and takes action to root a corporate culture of respect for human rights within the company.

The share price of Yamaha Motors has sunk to a low of 1x book on concerns that the marine business has peaked
Recent results and commentary from Brunswick suggest that the market remains as buoyant as ever
We would be buying the stock ahead of earnings, expecting a similarly bullish outlook from Yamaha

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