Japan Specialist

Mark Chadwick

Equity Bottom-Up

<ul>
<li>Q1 Operating Profit -2% YoY; weaker than analyst consensus; Full year guidance unchanged but risk to the downside</li>
<li>Key concerns around EU and China remain in Q1. Both regions seeing zero top line growth and heat pumps have cratered </li>
<li>The stock price has declined 16% since our last note, underperforming Topix by around 6%. Valuation more supportive</li>
</ul>


Q1 Operating Profit -2% YoY; weaker than analyst consensus; Full year guidance unchanged but risk to the downside
Key concerns around EU and China remain in Q1. Both regions seeing zero top line growth and heat pumps have cratered 
The stock price has declined 16% since our last note, underperforming Topix by around 6%. Valuation more supportive


Daikin (6367) | Q1 Earnings: Frozen in Uncertainty

<ul>
<li>FY2023 Success: Daikin achieved record-high sales and profit, driven by FX impacts. Despite challenges like reduced demand, the Air Conditioning business expanded in key markets.</li>
<li>Ambitious Targets: FY3/25 targets include surpassing previous financial records, despite continued sluggish demand.</li>
<li>Cautious Outlook: While optimistic about market share gains, reservations persist, particularly regarding heat pumps. Stock performance remains steady, trading in line with historical averages.</li>
</ul>


FY2023 Success: Daikin achieved record-high sales and profit, driven by FX impacts. Despite challenges like reduced demand, the Air Conditioning business expanded in key markets.
Ambitious Targets: FY3/25 targets include surpassing previous financial records, despite continued sluggish demand.
Cautious Outlook: While optimistic about market share gains, reservations persist, particularly regarding heat pumps. Stock performance remains steady, trading in line with historical averages.


<ul>
<li>We turn bullish on Daikin ahead of Q1 results as we become less concerned about growth risks in China and the US</li>
<li>Peer results suggest that air conditioner demand is stronger than expected due to record high global temperatures</li>
<li>Company management has a good track record of pushing through price hikes and cutting costs. We expect the company to beat guidance this year</li>
</ul>


We turn bullish on Daikin ahead of Q1 results as we become less concerned about growth risks in China and the US
Peer results suggest that air conditioner demand is stronger than expected due to record high global temperatures
Company management has a good track record of pushing through price hikes and cutting costs. We expect the company to beat guidance this year


Japanese Equity Specialist, Ortus Advisors

Andrew Jackson

Japanese Equity Specialist

Ortus Advisors

Thematic (Sector/Industry)

<ul>
<li>China names will be in focus with yesterdays gains holding overnight in the US.</li>
<li>Worth looking at Japanese names previously bucketed as China plays which could now be squeeze targets with large short interests.</li>
<li>The list is long, but some names which could squeeze on the improved sentiment include Shiseido, Daikin, TOTO, Yamaha Corp and Nabtesco.</li>
</ul>


China names will be in focus with yesterdays gains holding overnight in the US.
Worth looking at Japanese names previously bucketed as China plays which could now be squeeze targets with large short interests.
The list is long, but some names which could squeeze on the improved sentiment include Shiseido, Daikin, TOTO, Yamaha Corp and Nabtesco.


Japan Morning Connection: Improved Sentiment in China Puts the Focus on Squeeze Targets

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Event-Driven

<ul>
<li>Following up on our earlier cross-shareholding work, in this note we look to summarize our work so far by looking at where most of the selling will likely come.</li>
<li>Of the seven companies that we have looked at so far, collectively they have around US$102bn worth of shares to sell in 118 companies. </li>
<li>Of these, they have a combined stake of over US$1bn in 23 companies.</li>
</ul>


Following up on our earlier cross-shareholding work, in this note we look to summarize our work so far by looking at where most of the selling will likely come.
Of the seven companies that we have looked at so far, collectively they have around US$102bn worth of shares to sell in 118 companies. 
Of these, they have a combined stake of over US$1bn in 23 companies.


Japan Cross-Shareholding - Summary Matrix - Over US$100bn of Selling in 118 Companies

Japan

DAIKIN INDUSTRIES, LTD. manufactures air conditioning equipment for household and commercial use.  The Company also produces fluorine chemical products such as fluorinated hydrocarbon gas and shells and warheads for defense industry.

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Daikin Industries (6367 JP)

Daikin (6367) | Q1 Earnings: Frozen in Uncertainty

Q1 operating profit down 2% YoY; key concerns in EU and China remain; stock price declined 16% since last note & valuations more supportive.

Mark Chadwick

Daikin (6367) | Keep Cool

While optimistic about market share gains, reservations persist, particularly regarding heat pumps. Stock performance remains steady, trading in...

Mark Chadwick

Daikin (6367) | Keep Cool and Carry On

We turn bullish on Daikin ahead of 1Q earnings. The risk to top line growth in the US and China is receding. We now expect the company to beat full...

Mark Chadwick

Japan Morning Connection: Improved Sentiment in China Puts the Focus on Squeeze Targets

Investors should keep an eye on potential squeeze targets with large short interests, including Shiseido, Daikin, TOTO, Yamaha Corp, and Nabtesco.

Andrew Jackson

Japan Cross-Shareholding - Summary Matrix - Over US$100bn of Selling in 118 Companies

Toyotal has just announced that it will buy back around 290m (around 2% of the stock) of its own shares from MS&AD, Tokio Marine, MUFG and SMFG. In...

Sumeet Singh

Price Gauge

52-week Range

Market Cap (USDm)

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Dividend (Yield)

Daikin (6367) | Q1 Earnings: Frozen in Uncertainty

​Q1 operating profit down 2% YoY; key concerns in EU and China remain; stock price declined 16% since last note & valuations more supportive.

Mark Chadwick

Daikin (6367) | Keep Cool

While optimistic about market share gains, reservations persist, particularly regarding heat pumps. Stock performance remains steady, trading in...

Mark Chadwick

Daikin (6367) | Keep Cool and Carry On

We turn bullish on Daikin ahead of 1Q earnings. The risk to top line growth in the US and China is receding. We now expect the company to beat full...

Mark Chadwick

Japan Morning Connection: Improved Sentiment in China Puts the Focus on Squeeze Targets

​Investors should keep an eye on potential squeeze targets with large short interests, including Shiseido, Daikin, TOTO, Yamaha Corp, and Nabtesco.

Andrew Jackson

Japan Cross-Shareholding - Summary Matrix - Over US$100bn of Selling in 118 Companies

Toyotal has just announced that it will buy back around 290m (around 2% of the stock) of its own shares from MS&AD, Tokio Marine, MUFG and SMFG. In...

Sumeet Singh

Q1 operating profit down 2% YoY; key concerns in EU and China remain; stock price declined 16% since last note & valuations more supportive.

Investors should keep an eye on potential squeeze targets with large short interests, including Shiseido, Daikin, TOTO, Yamaha Corp, and Nabtesco.