Equity Analyst, LightStream Research

Oshadhi Kumarasiri

An equity research analyst with over 7 years of experience in multiple sectors. Previously worked for one of the world's largest asset managers with about USD2.5trn in AUM, covering small and micro-cap companies in the consumer sphere across Europe and developed Asia. Also experienced in covering multiple industries including banking, insurance and asset management, retail, tech, telco and REIT.

Equity Analyst

Fast Retailing: Upbeat Consensus Unlikely to Be Met in 2QFY21

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Fast Retailing: Lowered Guidance Still Unrealistic

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

The spread of COVID-19 forced <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a> to lower its revenue and OP guidance thrice during the three previous earnings releases. In 3Q2020, the company set revenue guidance of ¥1,990bn for FY2020, but eventually achieved revenue of ¥2,008.8bn, 0.95% above guidance. On the other hand, Fast Retailing generated an OP of ¥149.3bn, which was higher than the company’s 3Q2020 OP guidance of ¥130bn.
In our last two quarterly results analysis insights, we mentioned that Fast retailing could be keeping a little bit of a buffer at the OP level as we felt that they are being a bit aggressive with the revenue forecast.
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 52.0pt;">
 
</td>
<td style="width: 69.25pt;">
FY08/2019
</td>
<td style="width: 63.8pt;">
FY08/2020
</td>
<td style="width: 56.7pt;">
YoY (%)
</td>
<td style="width: 77.95pt;">
Guidance 
</td>
<td style="width: 77.95pt;">
Difference (%)
</td>
</tr>
<tr>
<td style="width: 52.0pt;">
Revenue
</td>
<td style="width: 69.25pt;">
2,290,546
</td>
<td style="width: 63.8pt;">
2,008,846
</td>
<td style="width: 56.7pt;">
-12.3%
</td>
<td style="width: 77.95pt;">
1,990,000
</td>
<td style="width: 77.95pt;">
0.9%
</td>
</tr>
<tr>
<td style="width: 52.0pt;">
 OP
</td>
<td style="width: 69.25pt;">
257,634
</td>
<td style="width: 63.8pt;">
 149,347
</td>
<td style="width: 56.7pt;">
-42.0%
</td>
<td style="width: 77.95pt;">
130,000
</td>
<td style="width: 77.95pt;">
14.9%
</td>
</tr>
<tr>
<td style="width: 52.0pt;">
 OPM 
</td>
<td style="width: 69.25pt;">
11.2%
</td>
<td style="width: 63.8pt;">
7.4%
</td>
<td style="width: 56.7pt;">
 
</td>
<td style="width: 77.95pt;">
6.5%
</td>
<td style="width: 77.95pt;">
 
</td>
</tr>
</tbody>
</table>
<div class="content-caption">Source: Cap IQ, LSR</div>

The spread of COVID-19 forced Fast Retailing (9983 JP) to lower its revenue and OP guidance thrice during the three previous earnings releases. In 3Q2020, the company set revenue guidance of ¥1,990bn for FY2020, but eventually achieved revenue of ¥2,008.8bn, 0.95% above guidance. On the other hand, Fast Retailing generated an OP of ¥149.3bn, which was higher than the company’s 3Q2020 OP guidance of ¥130bn.
In our last two quarterly results analysis insights, we mentioned that Fast retailing could be keeping a little bit of a buffer at the OP level as we felt that they are being a bit aggressive with the revenue forecast.




 


FY08/2019


FY08/2020


YoY (%)


Guidance 


Difference (%)




Revenue


2,290,546


2,008,846


-12.3%


1,990,000


0.9%




 OP


257,634


 149,347


-42.0%


130,000


14.9%




 OPM 


11.2%


7.4%


 


6.5%


 




Source: Cap IQ, LSR

Fast Retailing: Longs Should Consider Taking Profits, Shorts Should Wait