Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

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

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<li>
<a href="https://www.smartkarma.com/entities/shiseido-company-limited" target="_blank" data-smartkarma-citation="entities:5718:1" rel="noopener">Shiseido Company (4911 JP)</a> delivered strong 4Q20 results yesterday with revenue and operating profit surpassing consensus estimates by ¥5.1bn and ¥19.5bn respectively.</li>
<li>The company’s revenue declined 6.2% YoY in 4Q20, compared to 17.1%, 34.4% and 16.3% in 1Q20, 2Q20 and 3Q20 respectively.</li>
<li>Shiseido made an operating profit of ¥6.1bn in the seasonally weak 4th quarter compared to the consensus operating loss estimate of ¥13.4bn.</li>
<li>The company’s October and November 2020 performance was above its expectations as the China business performed exceptionally well during the singles day sales period. However, the momentum decelerated from December 2020 onwards due to the resurgence of COVID-19 in Japan and the rest of the world.</li>
<li>Nonetheless, the share price rallied over 16% during the last couple of weeks on news regarding the disposal of the personal care business.</li>
</ul>



Shiseido Company (4911 JP) delivered strong 4Q20 results yesterday with revenue and operating profit surpassing consensus estimates by ¥5.1bn and ¥19.5bn respectively.
The company’s revenue declined 6.2% YoY in 4Q20, compared to 17.1%, 34.4% and 16.3% in 1Q20, 2Q20 and 3Q20 respectively.
Shiseido made an operating profit of ¥6.1bn in the seasonally weak 4th quarter compared to the consensus operating loss estimate of ¥13.4bn.
The company’s October and November 2020 performance was above its expectations as the China business performed exceptionally well during the singles day sales period. However, the momentum decelerated from December 2020 onwards due to the resurgence of COVID-19 in Japan and the rest of the world.
Nonetheless, the share price rallied over 16% during the last couple of weeks on news regarding the disposal of the personal care business.


<a href="https://www.smartkarma.com/entities/kose-corp" target="_blank" data-smartkarma-citation="entities:18009:1" rel="noopener">Kose Corp (4922 JP)</a> delivered 3QFY21 results on 29th Friday with revenue and operating profit surpassing consensus estimates by 1.8% and 10.9% respectively. Kose's revenue declined just 5.6% YoY in 3QFY21, compared to 26.5% and 21.2% YoY in 1QFY21 and 2QFY21 respectively.The company’s 3QFY21 operating profit was ¥7.1bn, compared to ¥1.1bn in 1QFY21 and ¥2.9bn in 2QFY21. Travel Retail (TR) and E-Commerce (EC) continued to perform well with 46.3% and 34.3% YoY revenue growth in 3QFY21. (TR – 26.1% YoY in 1HFY21, EC – 52.5% YoY in 1HFY21)However, Kose lowered its FY21 revenue and OP guidance by 2.3% and 24.4% respectively, because of the new measures introduced to curtail the third wave of COVID-19.

Kose Corp (4922 JP) delivered 3QFY21 results on 29th Friday with revenue and operating profit surpassing consensus estimates by 1.8% and 10.9% respectively. Kose's revenue declined just 5.6% YoY in 3QFY21, compared to 26.5% and 21.2% YoY in 1QFY21 and 2QFY21 respectively.The company’s 3QFY21 operating profit was ¥7.1bn, compared to ¥1.1bn in 1QFY21 and ¥2.9bn in 2QFY21. Travel Retail (TR) and E-Commerce (EC) continued to perform well with 46.3% and 34.3% YoY revenue growth in 3QFY21. (TR – 26.1% YoY in 1HFY21, EC – 52.5% YoY in 1HFY21)However, Kose lowered its FY21 revenue and OP guidance by 2.3% and 24.4% respectively, because of the new measures introduced to curtail the third wave of COVID-19.

Kose: China and E-Commerce Propels Kose’s Performance Towards the Pre-Pandemic Level

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<li>
<a href="https://www.smartkarma.com/entities/fancl-corp" target="_blank" data-smartkarma-citation="entities:15862:1" rel="noopener">Fancl Corp (4921 JP)</a> delivered 3QFY21 results today, (28th January 2021) which saw operating profit increase by 6.5% YoY to ¥3.8bn (consensus ¥3.97bn). The company’s revenue was down 2.1% YoY, compared to consensus estimated growth rate of 0.7% YoY. Fancl lowered its FY21 revenue and OP guidance by 4.2% and 11.5% respectively, because of the additional measures introduced to curtail the rapid spread of COVID-19.</li>
<li>These negative factors are likely to impact the entire domestic cosmetics industry. However, Fancl is better placed among other Japanese cosmetic players, perhaps excluding <a href="https://www.smartkarma.com/entities/kao-corp" target="_blank" data-smartkarma-citation="entities:12933:1" rel="noopener">Kao Corp (4452 JP)</a>, to face these challenging times, through Fancl's significantly greater exposure to the online and catalogue retail sales channel and diversification into the nutritional supplements business.</li>
</ul>



Fancl Corp (4921 JP) delivered 3QFY21 results today, (28th January 2021) which saw operating profit increase by 6.5% YoY to ¥3.8bn (consensus ¥3.97bn). The company’s revenue was down 2.1% YoY, compared to consensus estimated growth rate of 0.7% YoY. Fancl lowered its FY21 revenue and OP guidance by 4.2% and 11.5% respectively, because of the additional measures introduced to curtail the rapid spread of COVID-19.
These negative factors are likely to impact the entire domestic cosmetics industry. However, Fancl is better placed among other Japanese cosmetic players, perhaps excluding Kao Corp (4452 JP), to face these challenging times, through Fancl's significantly greater exposure to the online and catalogue retail sales channel and diversification into the nutritional supplements business.


FANCL: Lowers FY21 Guidance Amidst Rising COVID Cases, Still Outperforming Peers

Event-Driven

<a href="https://www.smartkarma.com/entities/shiseido-company-limited" target="_blank" data-smartkarma-citation="entities:5718:1" rel="noopener">Shiseido Company (4911 JP)</a>, Japan’s biggest cosmetics company with annual revenue and OP of ¥1,131.5bn and ¥113.8bn respectively in 2019, said that it is considering selling its personal care business, which includes famous brands like TSUBAKI, SENKA, SEA Breeze, Ag DEO 24, AQUAIR and Uno, to CVC Capital Partners in the first half of 2021. This sale comes as a part of Shiseido’s 2023 transformation plan which targets 15% operating margin (an increase of 5 percentage points from 2019 level) by 2023.

Shiseido Company (4911 JP), Japan’s biggest cosmetics company with annual revenue and OP of ¥1,131.5bn and ¥113.8bn respectively in 2019, said that it is considering selling its personal care business, which includes famous brands like TSUBAKI, SENKA, SEA Breeze, Ag DEO 24, AQUAIR and Uno, to CVC Capital Partners in the first half of 2021. This sale comes as a part of Shiseido’s 2023 transformation plan which targets 15% operating margin (an increase of 5 percentage points from 2019 level) by 2023.

Shiseido’s 2023 Transformation Plan Kicks Into Gear With The Proposed Sale of The Personal-Care Unit

Since lifting the state of emergency towards the end of May 2020, Japan relied on mask-wearing and social distancing to curtail the spread of COVID-19. It was successful for about five months as Japan’s new COVID cases remained under control until the end of October 2020. Since then, COVID cases have spiralled out of control due to cold weather and pandemic fatigue. In November 2020, the seven-day average of COVID cases rose from about 500-600 cases per day at the beginning of November to over 2,000 cases per day by the end of the month. Seven-day average of COVID cases rose to around 6,500 cases per day by early January 2020, just before Japan declared a state of emergency in the capital Tokyo and three surrounding prefectures.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/183/876/original/image_56442858141611229982276.png?1611229987" class="editor-image img-responsive" data-smartkarma-image-id="183876"></figure>COVID-19 has a significant impact on the domestic cosmetics market. The domestic cosmetics sector earnings declined by 68% and shares underperformed TOPIX by 10 percentage points during the last 12 months due to the ongoing COVID-19 crisis.In this insight, we analyse Japan’s cosmetic industry performance during the first two months of 4Q20, using the monthly data released by the Ministry of Economy, Trade and Industry (METI) and the Ministry of Finance.

Since lifting the state of emergency towards the end of May 2020, Japan relied on mask-wearing and social distancing to curtail the spread of COVID-19. It was successful for about five months as Japan’s new COVID cases remained under control until the end of October 2020. Since then, COVID cases have spiralled out of control due to cold weather and pandemic fatigue. In November 2020, the seven-day average of COVID cases rose from about 500-600 cases per day at the beginning of November to over 2,000 cases per day by the end of the month. Seven-day average of COVID cases rose to around 6,500 cases per day by early January 2020, just before Japan declared a state of emergency in the capital Tokyo and three surrounding prefectures.COVID-19 has a significant impact on the domestic cosmetics market. The domestic cosmetics sector earnings declined by 68% and shares underperformed TOPIX by 10 percentage points during the last 12 months due to the ongoing COVID-19 crisis.In this insight, we analyse Japan’s cosmetic industry performance during the first two months of 4Q20, using the monthly data released by the Ministry of Economy, Trade and Industry (METI) and the Ministry of Finance.

Japanese Cosmetics Industry: Statistics Update – October & November 2020

Japan

Kao Corporation is a manufacturer of household and chemical products. The company produces cosmetics, laundry and cleaning products, hygiene products, fatty chemicals, edible oils, and specialty chemicals.

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Kao Corp (4452 JP)

Shiseido: Lowballing 2021 Guidance

Previously, we questioned whether Shiseido is playing safe or departing from cost discipline as we felt that that the 4Q20 OP estimate was too low...

Oshadhi Kumarasiri

Kose: China and E-Commerce Propels Kose’s Performance Towards the Pre-Pandemic Level

Even though there are indications that Kose could be relaxing cost controls, an implied 4QFY21 OPM of 2.5% seem conservative making an OP beat a...

Oshadhi Kumarasiri

FANCL: Lowers FY21 Guidance Amidst Rising COVID Cases, Still Outperforming Peers

Fancl delivered 3QFY21 results today, which saw operating profit increase by 6.5% YoY to ¥3.8bn (consensus ¥3.97bn). The company’s revenue was down...

Oshadhi Kumarasiri

Shiseido’s 2023 Transformation Plan Kicks Into Gear With The Proposed Sale of The Personal-Care Unit

Shiseido could generate over ¥100bn through the proposed sale of the personal care business unit and the company could use that cash proceeds to...

Oshadhi Kumarasiri

Japanese Cosmetics Industry: Statistics Update – October & November 2020

We analyse Japan’s cosmetic industry performance during the first two months of 4Q20, using the monthly data released by the Ministry of Economy,...

Oshadhi Kumarasiri

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