Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

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

<ul>
<li>Despite supply chain and material cost headwinds Mazda beat consensus FY OP estimates by 15% despite being in-line on revenue. </li>
<li>Guidance was also 17% above consensus but we think both should be ignored because guidance is being sandbagged and consensus remains clueless. </li>
<li>We expect sales volumes to beat Mazda’s guidance slightly and for OP generation to be ¥240-300bn rather than ¥120bn.</li>
</ul>


Despite supply chain and material cost headwinds Mazda beat consensus FY OP estimates by 15% despite being in-line on revenue. 
Guidance was also 17% above consensus but we think both should be ignored because guidance is being sandbagged and consensus remains clueless. 
We expect sales volumes to beat Mazda’s guidance slightly and for OP generation to be ¥240-300bn rather than ¥120bn.


Mazda – Guidance Is Actually MORE Conservative Than Peers

<ul>
<li>We have been consistently saying that the sell side is utterly clueless about Mazda’s profit structure. </li>
<li>The company just missed top line by 13.2% but beat on OP by 26% even excluding a reclassification of some costs to extraordinary losses. </li>
<li>The thesis here is simple – consensus projects a 3% OPM next FY and we believe Mazda will double that.</li>
</ul>


We have been consistently saying that the sell side is utterly clueless about Mazda’s profit structure. 
The company just missed top line by 13.2% but beat on OP by 26% even excluding a reclassification of some costs to extraordinary losses. 
The thesis here is simple – consensus projects a 3% OPM next FY and we believe Mazda will double that.


Event-Driven

<ul>
<li>After initially grinding up slowly but underperforming the Nikkei our suggested skew trade gave up ground during the new year sell off.</li>
<li>It did so slowly, however and was outperforming Nikkei when last we checked despite being down slightly. </li>
<li>Thankfully, a lot of the idiosyncratic volatility hurting the skew trade has reversed now and it is positive and outperforming Nikkei consistently.</li>
</ul>


After initially grinding up slowly but underperforming the Nikkei our suggested skew trade gave up ground during the new year sell off.
It did so slowly, however and was outperforming Nikkei when last we checked despite being down slightly. 
Thankfully, a lot of the idiosyncratic volatility hurting the skew trade has reversed now and it is positive and outperforming Nikkei consistently.


TOPIX-Nikkei Skew Trade Starting to Work Nicely

<ul>
<li>
<a href="https://asia.nikkei.com/Business/Automobiles/Toyota-plans-to-make-record-11m-cars-in-fiscal-year-starting-April" target="_blank" rel="noopener"> The Nikkei is reporting</a> that Toyota has set internal production targets of 11m units for the fiscal year ending March 2023. </li>
<li>That would imply a more than 20% YoY increase in production volumes. </li>
<li>And that in turn is very positive news not just for Toyota but for several other auto-related names.</li>
</ul>



 The Nikkei is reporting that Toyota has set internal production targets of 11m units for the fiscal year ending March 2023. 
That would imply a more than 20% YoY increase in production volumes. 
And that in turn is very positive news not just for Toyota but for several other auto-related names.


Toyota – 11m Unit Production Target Is a Positive Surprise

<p>Mazda 2Q easily beat consensus at the OP line with OP generation of ¥13.6bn significantly above consensus’ ¥4.1bn. What should be taken notice of though is that it did so while missing on the top line by 10%. This underscores what we have been saying for some time – the sellside is completely clueless about Mazda’s evolving profit structure. In our view even the buyside underestimates just how much it has improved.</p>

Mazda 2Q easily beat consensus at the OP line with OP generation of ¥13.6bn significantly above consensus’ ¥4.1bn. What should be taken notice of though is that it did so while missing on the top line by 10%. This underscores what we have been saying for some time – the sellside is completely clueless about Mazda’s evolving profit structure. In our view even the buyside underestimates just how much it has improved.

Mazda – Stealth Upgrade and On Track to Blowout

Japan

MITSUBISHI MOTORS CORPORATION develops and manufactures passenger cars and its related parts.  The Company has production facilities in Japan, the US, and Thailand.  Mitsubishi Motors Corp provides vehicle-related financing and leasing service through its subsidiary.

Yamaha Motor Co., Ltd. manufactures motorcycles.  The Company also produces motor vehicle engines for Toyota Motor Corp. and Ford Motor Co.  Yamaha Motor's specialty products include motor boats, snowmobiles, golf carts, and electric power generators.  Yamaha Motor sells products in Japan, North America, Europe, Asia, and South America.

Isuzu Motors Limited manufactures and markets trucks and automobile parts. The Company's products include pickup trucks, light/heavy duty trucks, medium and large-sized buses, recreational vehicles, and sport utility vehicles.

NISSAN SHATAI CO., LTD. develops, designs, and assembles automobiles including sedans, Recreational Vehicles(RV), station wagons, and buses for Nissan Motor. The Company also manufactures parts for motor vehicles.

NGK SPARK PLUG Co., Ltd. manufactures and markets spark plugs for automobiles, motorcycles, agricultural machinery, ships, and aircrafts.  The Company also makes ceramic products for semiconductor and telecommunication equipment. NGK Spark Plug markets its products under the NGK and NTK brand names and has subsidiaries in the US, Canada, France, Germany, and South Korea.

KOITO MANUFACTURING CO., LTD. produces lighting equipments for automobiles such as head and tail lights, rear combination lamps, and fog lamps.  The Company has  its production facilities in Japan, the US, the UK, Czech, China, Thailand, Taiwan, and India.  Koito Manufacturing also manufactures electronics parts for aircrafts including lighting equipments and oil pressure gauges.

Stanley Electric Co., Ltd. manufactures lighting equipment including head lights, HID (High Intensity Discharge) assist lamps, and rear combination lamps for automobiles.  The Company also produces LCD (Liquid Cristal Display) and LED (Light Emitted Diode) lamps for communication equipment, office automation equipment, and information displays.

NIFCO INC. manufactures synthetic resinous fasteners and plastic components for automobiles and home electronic appliances.  The Company has its subsidiaries in Korea, Hong Kong, Australia, Malaysia, Singapore, and the US.

NOK CORPORATION manufactures oil seals and industrial rubber products for automobiles.  The Company also produces electronic equipment used for cellular phones and PCs.  NOK has production facilities in Taiwan and Thailand.

The Yokohama Rubber Company Limited produces rubber products including automobile tires, tubes, and conveyor belt for industrial use.  The Company also produces golf clubs and passenger aircraft parts such as restroom units and tanks for drinking water.

Harley-Davidson, Inc. designs, manufactures, and sells motorcycles.  The Company's products include heavyweight touring, custom, and performance motorcycles, as well as a line of motorcycle parts, accessories, and general merchandise.  Harley-Davidson also provides motorcycle floor planning and parts and accessories financing to its North American and European dealers.

FAW Jiefang Group Co., Ltd, through joint ventures, manufactures and markets cars and auto parts.  The Company produces automobiles, transmission systems, and engines.  FAW Car also provides auto repair and customizing services.

BAIC BluePark New Energy Technology Co.,Ltd. operates as a passenger car manufacturer. The Company engages in research, development, and marketing of new energy vehicles and power battery system. BAIC BluePark New Energy Technology conducts businesses in China.

BAIC BluePark New Energy Techn (600733 CH)

Guangzhou Automobile Group Company, Ltd. manufactures, sells, and services automobiles. The Company is also involved in automobile parts and components, and auto finance and related services for both overseas and domestic markets.

Chongqing Changan Automobile Company Limited develops, manufactures, and markets mini cars, mini sedans, full size sedans, and engines.

Chongqing Changan Automobile Company (200625 CH)

Thor Industries, Inc. produces and sells a wide range of recreation vehicles.  The Company markets its products through independent dealers located throughout the United States and Canada.  Thor's products are sold under the Airstream Classic, Dutchmen, Skamper, Infinity, Four Winds, Citation, Signature, and other names.

Anhui Jianghuai Automobile Co., Ltd. manufactures and markets bus and truck chassis, gear boxes, other auto parts, and business automobiles.

Yadea Group is a leading electric two wheeler brand in China. The company produces electric bikes and scooters.

Tofas Turk Otomobil Fabrikasi AS manufactures cars and automobile parts under license from Fiat.  The Group also imports Alfa Romeo and Fiat cars for domestic market and provides financing services.

BAIC Motor Corporation Limited designs, researches, develops, manufactures and sells a variety of passenger vehicles in China.

Mazda Motor Corporation manufactures and sells automobiles, trucks, auto parts, and its accessories.  The Company operates its business worldwide.

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Mazda Motor (7261 JP)

Mazda – Guidance Is Actually MORE Conservative Than Peers

Mazda results and guidance beat consensus but we believe the best is yet to come and that the stock still has multi bagger potential remaining.

Mio Kato

Mazda – Profitability Is Surging

Mazda just missed top line by 13.2% but beat on underlying OP by 26%. The thesis here is simple – consensus projects a 3% OPM next FY and we...

Mio Kato

TOPIX-Nikkei Skew Trade Starting to Work Nicely

After initially grinding up slowly but underperforming the Nikkei our suggested skew trade gave up ground during the new year sell off. It is now...

Mio Kato

Toyota – 11m Unit Production Target Is a Positive Surprise

Toyota has set internal production targets of 11m units for the FY23 implying a more than 20% YoY increase which is very positive news not just for...

Mio Kato

Mazda – Stealth Upgrade and On Track to Blowout

Mazda 2Q easily beat consensus OP by 230% despite missing on the top line by 10%. This underscores Mazda’s evolving profit structure which the...

Mio Kato

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