Equity Analyst, LightStream Research

Oshadhi Kumarasiri

An equity research analyst with over 7 years of experience in multiple sectors. Previously worked for one of the world's largest asset managers with about USD2.5trn in AUM, covering small and micro-cap companies in the consumer sphere across Europe and developed Asia. Also experienced in covering multiple industries including banking, insurance and asset management, retail, tech, telco and REIT.

Equity Analyst

Toyo Suisan: Activist Advocates For Legacy Divestiture & More Capital for Global Expansion

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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<a href="https://www.smartkarma.com/entities/nissin-foods-holdings-co-ltd" target="_blank" rel="noopener">Nissin Foods (2897 JP)</a> and <a href="https://www.smartkarma.com/entities/toyo-suisan-kaisha-ltd" target="_blank" data-smartkarma-citation="entities:16752:1" rel="noopener">Toyo Suisan (2875 JP)</a> share 40% and 20%, respectively, of Japan’s ¥607 billion instant noodle market which has seen compound average volume growth of 0.7% over the last ten years. Cup-type instant noodles has grown 1.5% by volume, while the bagged instant noodles have declined by 1.1%.</div>
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Source: Company Disclosures</div>
<div>Globally, Japan has the sixth-highest per capita instant noodles consumption at 3.7 servings a month - behind South Korea, Vietnam, Indonesia, Thailand and Nepal. Demographics and increasing health awareness are likely to constrain future volume growth and pricing is becoming an increasingly important factor. Nissin, and to a lesser extent, and Toyo Suisan, have increased average unit prices by introducing new products and flavours. Additionally, the average price of cup-type noodles is 61% higher than bagged instant noodles.</div>
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<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/140/834/original/image_88461963631592490839479.png?1592490838" class="editor-image img-responsive" data-smartkarma-image-id="140834"></figure>
Source: Company Disclosures</div>
<p>Nissin and Toyo Suisan are currently trading at the higher end of their respective valuation ranges, Therefore, we are reluctant to recommend a long position in either company, however, a short position in Toyo Suisan could be considered given the prospect of continued margin deterioration in the domestic instant noodles segment over the next few years.</p>


Nissin Foods (2897 JP) and Toyo Suisan (2875 JP) share 40% and 20%, respectively, of Japan’s ¥607 billion instant noodle market which has seen compound average volume growth of 0.7% over the last ten years. Cup-type instant noodles has grown 1.5% by volume, while the bagged instant noodles have declined by 1.1%.


Source: Company Disclosures
Globally, Japan has the sixth-highest per capita instant noodles consumption at 3.7 servings a month - behind South Korea, Vietnam, Indonesia, Thailand and Nepal. Demographics and increasing health awareness are likely to constrain future volume growth and pricing is becoming an increasingly important factor. Nissin, and to a lesser extent, and Toyo Suisan, have increased average unit prices by introducing new products and flavours. Additionally, the average price of cup-type noodles is 61% higher than bagged instant noodles.


Source: Company Disclosures
Nissin and Toyo Suisan are currently trading at the higher end of their respective valuation ranges, Therefore, we are reluctant to recommend a long position in either company, however, a short position in Toyo Suisan could be considered given the prospect of continued margin deterioration in the domestic instant noodles segment over the next few years.

Evolving Competition in Japan's Instant Noodles Market: Toyo Suisan Vs Nissin Foods

Toyo Suisan Kaisha

Evolving Competition in Japan's Instant Noodles Market: Toyo Suisan Vs Nissin Foods