In today’s briefing:
- Toyota’s Q2 Is a Huge Miss; EV Strategy in Flux
- SONY (6758) | Q2 Earnings Beat, Guidance Raise
- Komatsu(6301) | Post 2Q Earnings – BACKTEST STILL Says over 45% Upside
- Japan Tobacco: Revised Guidance & Growth in the US With Altria JV Could Get The Shares Moving Again
- Changes in Voting Practices of Japan’s Major Investment Managements Will Take Time to Take Hold
Toyota’s Q2 Is a Huge Miss; EV Strategy in Flux
- Toyota’s Q2 EPS undershot estimates by 28%. FY3/23 guidance was kept flat, but given a more favorable assumption for forex tailwinds, Toyota effectively lowered FY3/23 EPS by 7%.
- Management partially admitted to parts of recent media reports that Toyota was overhauling its EV strategy. Targets of 3.5m BEVs by 2030 are unchanged, but the ramp may be slower.
- Toyota’s 2H FY3/23 hurdles are low and its auto division’s operating profits appear to be bottoming. Stock may still be a laggard, but we’re bullish on a 12-month basis.
SONY (6758) | Q2 Earnings Beat, Guidance Raise
- Q2 OP rises +8% to Y344 billion on strong growth in Music and Image Sensors, despite 49% profit fall in Games segment.
- SONY sold 3.3 million PS5 units in the quarter, the same figure as a year ago. Managment remains confident of hitting 18m units by the end of the fiscal year
- Sony’s stock is down -30% YTD. We think the Q2 results/guidance lift should help put a floor under the stock. We would be buyers below 15x earnings
Komatsu(6301) | Post 2Q Earnings – BACKTEST STILL Says over 45% Upside
- Komatsu reported above Consensus 2Q OP; lifted OP guidance; and raised dividends. Outlook for next FY3/24 looks bright
- Share price is pricing in a severe recession. A PBR of 1.1x is implies a significant OP decline. We see no evidence of an earnings contraction next year
- We expect the share price to re-rate as the market prices in resilient earnings outlook. Our back test still suggests over 45% upside
Japan Tobacco: Revised Guidance & Growth in the US With Altria JV Could Get The Shares Moving Again
- Japan Tobacco (2914 JP)’s 3Q22 was stronger than expected with revenue and OP surpassing consensus by 9.2% and 8.8% respectively through better than expected performance in almost all the markets.
- Just as we predicted in our previous insights, JT upgraded its revenue, OP, FCF and DPS guidance by ¥182bn, ¥100bn, ¥77bn and ¥38 respectively sighting stronger volumes and favorable pricing.
- We believe this earnings upgrade and a JV with Altria to expand Ploom in the US should get the share price going again after being held back by Russia fears.
Changes in Voting Practices of Japan’s Major Investment Managements Will Take Time to Take Hold
- Because there’s nothing about addressing environmental issues that the company itself opposes because they are global issues, it’s relatively easy to vote in favor of shareholder proposals on environmental issues.
- Governance proposal is the most sensitive because it’s directly related to election of directors. It’s challenging for domestic investment managers to vote in favor of shareholder proposals during proxy fights.
- FSA’s tightening of oversight of ESG investment trusts has triggered shift by major Japanese investment managers toward establishing ESG-related-voting policies and exercising their voting rights in accordance with these policies.
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