In today’s briefing:
- Renesas (6723 JP) – Salutary Q1, Strong Q2 Forecast, and a BIG Buyback
- Renesas – Like We Said… Accelerating
- Keyence – Just Built Different
- Hitachi Metals – Steel Price Recovery Probably Limits Downside Even in the Event of a Break
- HCM – Obvious Blowout Is Obvious… Just Not to the Sell Side
- Zozo – Q4 21 Results Reaction: Mixed but Underlying Consumer Growth Remains Solid
- Shin-Etsu – FY23 Could Put Shin-Etsu Within a Step of ¥1trn in OP
- Zozo – Operating Leverage Apparently Less Fun On The Downside
- Asahi Raises Domestic Beverage Prices: Elastic “Beer” Demand Makes the Price Hike Unfavourable
- Advantest – That Time in the Cycle When Orders Apparently Stop Being Important
Renesas (6723 JP) – Salutary Q1, Strong Q2 Forecast, and a BIG Buyback
- About 9 days I ago I wrote Renesas (6723 JP) – On Top of Peer-Beating Growth, and Valuation… Watch for Buybacks. Today with Q1 earnings, they announced a ¥200bn buyback.
- What appears to be a quite strong Q1 in automotive in both revenues and margins, and decent incremental margins, sees a stronger Q2 forecast (but less good incremental margins).
- The Street is well behind guidance, and a buyback at the high end of potential guidance and coming earlier than expected is all to the good.
Renesas – Like We Said… Accelerating
- Renesas’ 1Q numbers blew away guidance and consensus as revenue beat by 3.4% and adjusted OP beat by 16%.
- Revenue growth was strong for both Auto and Industrial with Industrial margins also improving noticeably vs. last Q.
- Renesas also announced a rather large buyback which is effectively a repurchase of the INCJ’s stake.
Keyence – Just Built Different
- Another quarter another Keyence beat as revenue beat by 5.3% and OP beat by a more modest 4.7% due to high SG&A costs.
- Sell side analysts on the conference call remain confused by the outperformance vs. peers because they fail to realise that Keyence gonna Keyence.
- Despite this strength we remain cautious as Keyence is now a truly exceptional company that is being priced like a magical one.
Hitachi Metals – Steel Price Recovery Probably Limits Downside Even in the Event of a Break
- Hitachi Metals started drifting noticeably below terms from early Nov last year and fell as low as 14% below the ¥2,181 offer price in early March.
- Along with relatively strong guidance yesterday the company reaffirmed the commitment of the Bain consortium to the offer despite some delays.
- We have no special insight into the actual likelihood of a break here but we do believe downside may be limited even if one occurs.
HCM – Obvious Blowout Is Obvious… Just Not to the Sell Side
- HCM reported FY revenue of ¥1,025bn, just above our ¥1,010bn estimate and blowing away clueless consensus’ ¥963bn.
- OP was ¥93.5bn despite the trouble in Ukraine/Russia, just below our ¥95bn estimate and significantly above consensus at ¥86.8bn and guidance of ¥84bn.
- Guidance for a YoY OP decline is silly in our view and we suspect there will be a double digit increase.
Zozo – Q4 21 Results Reaction: Mixed but Underlying Consumer Growth Remains Solid
- Results for Q4 and FY22 guidance were mixed with platform sales and revenue largely in-line but margins slightly weaker
- The loss of a major B2B customer wipes out almost all the growth in that segment but core consumer growth remains solid (10%+) as do operating KPIs
- The read across to parent Z Holdings is limited as the difference in company guidance and consensus operating profit is less than 1% of ZHD consolidated
Shin-Etsu – FY23 Could Put Shin-Etsu Within a Step of ¥1trn in OP
- Shin-Etsu results were mostly in-line with revenue beating by 5% and OP both within 1% of consensus and just a touch above guidance.
- OP was about 6% weaker than our estimate however driven by the Electronic Materials business.
- The lack of guidance may worry some investors but trends look positive enough that results should end up materially above consensus.
Zozo – Operating Leverage Apparently Less Fun On The Downside
- Zozo reported yesterday missing slightly across the board with OP missing consensus by 6.7% on a 0.7% miss at the top line.
- GMV was reasonable due to apparent generosity on reward points and strong promotional spending.
- OP guidance of ¥51.5bn was noticeably below consensus and while Zozo is considered conservative we expect a miss and long-term stagnation.
Asahi Raises Domestic Beverage Prices: Elastic “Beer” Demand Makes the Price Hike Unfavourable
- Asahi Group Holdings (2502 JP) announced yesterday that it will raise the prices of a majority of its domestic beverage brands to pass the rising cost of raw materials to customers.
- Although beers as a whole has a relatively inelastic demand, the price elasticity in different categories of beer varies quite a bit with high malt beers having highly elastic demand.
- We think the price hike could be more detrimental to Asahi than its competitors as the company generates most of its domestic revenue from the price-sensitive high malt beer segment.
Advantest – That Time in the Cycle When Orders Apparently Stop Being Important
- Advantest results were relatively uneventful with a marginal beat at the top line and a marginal miss at the OP level.
- Guidance was decent however with both revenue and OP above consensus and some lowballing on margins suggesting some upside to guidance.
- The company also said that it would no longer disclose orders because changing lead times made them less comparable because of course they do…
Before it’s here, it’s on Smartkarma
