Japan: Softbank Group, Tokyo Electron, Subaru Corp, NTT (Nippon Telegraph & Telephone), Nissan Motor, SUMCO Corp, Takeda Pharmaceutical, Olympus Corp and more

• Softbank results were about as ugly as expected and the only major new information in our view was that they took a small (too small) write-down on their private holdings. 
• Masayoshi Son did Masayoshi Son things regaling investor with tales of “To the moon bro!” but offered little of substance to suggest a turnaround was near. 
• Ultimately we keep coming back to the question of where margin calls might be struck.

• Softbank reported record losses, as expected, including some writedowns in the private portfolio. That may not be enough to assuage concerns with valuations still in free fall
• Management says tech’s day will come again and it is best to be more defensive for now, including a slower pace of investing, which we think is positive
• Concern on weak tech and high leverage likely keep the discount in the mid-50s range.  There was nothing today to signal an inflection is at hand

• TEL generated ¥169bn in OP in 4Q, well above consensus at ¥150bn and even our ¥160bn estimate. 
• The issue is that this was on ¥565bn in revenue, well above ourselves and consensus, due to ramping R&D and depreciation expenses. 
• Those expenses also meant that guidance of ¥716bn in OP was just barely above consensus at ¥692bn.

• Subaru 4QFY22 was relatively strong compared to previous quarters with revenue of ¥737bn (+4.4% vs. consensus) but material prices pushed OP down to ¥13.3bn (-48.6% vs. consensus). 
• The FY23 guidance was relatively weak at just ¥3,500bn in revenue (+4.5% vs. consensus) and OP guidance of ¥200bn (-1.0% vs. consensus). 
• However with the yen where it is we believe Subaru is on track for a return to double digit OPM and OP of ¥370-450bn.

• Q4 results and FY22 guidance are in line with expectations and management is confident it is on track to meet its FY23 ¥370 EPS commitment
• Returns to shareholders modestly better than expected with a ¥400bn buyback and the possibility of a further dividend hike later in the year still on the table
• We remain positive on NTT shares which trade at an attractive 10-11x EPS with further support from expanding shareholder returns

• Nissan generated total revenue of ¥2,271bn (-12.0% vs. consensus) and OP of ¥56bn (+33.3% vs. consensus) in 4QFY22. 
• This enabled the company to hit ¥247bn in OP vs. our start of year projection of ¥250bn (when guidance was for breakeven). 
• Guidance looked superficially weak at ¥10trn in revenue (-0.4% vs. consensus) and ¥250bn in OP ¥250bn (-21.1% vs. consensus) but margin assumptions are silly and we expect ¥500bn in OP. 

• Sumco 1Q revenues were on the strong side, 1.5% above consensus but OP beat by 9.9%. 
• As we have been flagging, consensus is underestimating operating leverage and that was before the weakening of the yen. 
• Revenue guidance for 2Q was 4.9% above consensus and OP 12.8% higher but we expect results to be an even larger beat.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Greenland Holdings Corp
• Softbank Group

• Takeda Pharmaceutical (4502 JP) reported 4QFY03/2022 results yesterday. Reported revenue grew 13.4% YoY to JPY873.3bn (vs consensus JPY825.7bn) while the company reported operating losses of JPY1.7bn.
• Revenue from Top 14 drugs grew 20.3% YoY, while revenue from top-seller Entyvio grew 15.0% YoY during the quarter. Excluding Entyvio, other top 13 drugs grew 23.3% during the period.
• Takeda’s shares moved down 2.0% at the end of yesterday’s trading and down 3% during today’s trade as profit drop disappointed the market.

• Olympus Corp (7733 JP) reported strong double-digit revenue growth in Q4 on continued medical business recovery. Net profit has more than doubled and 40% ahead of consensus.  
• The company has achieved growth to above pre-pandemic level in FY22 and CAGR of >7% over last two years. Operating margin improved significantly to 19.3%.
• Olympus is on track to achieve more than 20% operating margin in FY23. Management projected a record high net profit of ¥154 billion for FY23.