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

Down 24% From February Peak, But Still Has a Long Way to Go Before The Longs Get Back On Board

Fast Retailing: Trying to Pass Benefits of Cost Cutting to Customers

Fast Retailing: Expensive but the Fundamentals for Long-Term Strong

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

Gravity Works As WeWork Doesn't; Now Plan B

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

<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> delivered its 1QFY21 results on 14th Thursday with operating profit surpassing consensus estimate by more than 11%. However, the company’s 1QFY21 consolidated revenue was 2.5% below consensus. Despite mixed Q1 results, Fast Retailing's flexibility and resilience in the time of COVID is highly commendable as YoY revenue decline narrowed to just 0.6% YoY in 1QFY21 while operating profit improved by 23.3% YoY. With the FY+2 EV/OP multiple at 28.5x, 43% above the past three-year average, the market has generously compensated Fast Retailing for its commendable performance amidst COVID-19.
Though the company has maintained FY21 revenue and OP guidance at ¥2,200bn (4% below pre-pandemic revenue) and ¥245bn (8% below pre-pandemic OP) respectively, consensus revenue estimate is 5.5% above guidance while OP estimate is 9.7% above guidance, indicating that the market expects FY21 revenue and profitability to be above the pre-pandemic level.
On the surface, 1QFY21 revenue and OP growth indicate that everything is on track to meet FY21 consensus. However, this may not be entirely accurate as 1QFY20 was affected by the Hong Kong protests and the South Korea Boycott. Thus, Fast Retailing could be vulnerable to downside risks, if it fails to return revenue and profitability to the pre-pandemic level in FY21.

Fast Retailing (9983 JP) delivered its 1QFY21 results on 14th Thursday with operating profit surpassing consensus estimate by more than 11%. However, the company’s 1QFY21 consolidated revenue was 2.5% below consensus. Despite mixed Q1 results, Fast Retailing's flexibility and resilience in the time of COVID is highly commendable as YoY revenue decline narrowed to just 0.6% YoY in 1QFY21 while operating profit improved by 23.3% YoY. With the FY+2 EV/OP multiple at 28.5x, 43% above the past three-year average, the market has generously compensated Fast Retailing for its commendable performance amidst COVID-19.
Though the company has maintained FY21 revenue and OP guidance at ¥2,200bn (4% below pre-pandemic revenue) and ¥245bn (8% below pre-pandemic OP) respectively, consensus revenue estimate is 5.5% above guidance while OP estimate is 9.7% above guidance, indicating that the market expects FY21 revenue and profitability to be above the pre-pandemic level.
On the surface, 1QFY21 revenue and OP growth indicate that everything is on track to meet FY21 consensus. However, this may not be entirely accurate as 1QFY20 was affected by the Hong Kong protests and the South Korea Boycott. Thus, Fast Retailing could be vulnerable to downside risks, if it fails to return revenue and profitability to the pre-pandemic level in FY21.

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