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

The Market Is Yet to Price Fancl’s China Expansion

Under-Appreciated China Expansion:  Fancl Now Our Preferred Japanese Cosmetics Stock

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

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

<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 4QFY21 results today, which saw operating profit increase by 74.8% YoY to ¥2.9bn (consensus ¥3.4bn). The company’s revenue grew 2.6% YoY, compared to the consensus estimated growth rate of 8.3% YoY.With 3.7% YoY projected revenue and OP growth in FY22, FANCL’s guidance is quite disappointing (considering the low-base set in FY21 due to COVID-19). However, it seems like FANCL could be playing safe by lowballing FY22 guidance amidst uncertainties relating to COVID.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/205/281/original/image_515953276131620648943397.png?1620648944" class="editor-image img-responsive" data-smartkarma-image-id="205281"></figure>Since we said that we favor FANCL over the popular and bigger Japanese cosmetics names in early 2019, FANCL has outperformed <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>, <a href="https://www.smartkarma.com/entities/kao-corp" target="_blank" data-smartkarma-citation="entities:12933:1" rel="noopener">Kao Corp (4452 JP)</a>, <a href="https://www.smartkarma.com/entities/kose-corp" target="_blank" data-smartkarma-citation="entities:18009:1" rel="noopener">Kose Corp (4922 JP)</a> and <a href="https://www.smartkarma.com/entities/pola-orbis-holdings-inc" target="_blank" data-smartkarma-citation="entities:2287:1" rel="noopener">Pola Orbis Holdings (4927 JP)</a> by 42%, 64%, 58% and 65% respectively.Our long thesis for FANCL remains intact and would therefore buy any weakness resulting from the less than impressive FY22 guidance.

Fancl Corp (4921 JP) delivered 4QFY21 results today, which saw operating profit increase by 74.8% YoY to ¥2.9bn (consensus ¥3.4bn). The company’s revenue grew 2.6% YoY, compared to the consensus estimated growth rate of 8.3% YoY.With 3.7% YoY projected revenue and OP growth in FY22, FANCL’s guidance is quite disappointing (considering the low-base set in FY21 due to COVID-19). However, it seems like FANCL could be playing safe by lowballing FY22 guidance amidst uncertainties relating to COVID.Since we said that we favor FANCL over the popular and bigger Japanese cosmetics names in early 2019, FANCL has outperformed Shiseido Company (4911 JP), Kao Corp (4452 JP), Kose Corp (4922 JP) and Pola Orbis Holdings (4927 JP) by 42%, 64%, 58% and 65% respectively.Our long thesis for FANCL remains intact and would therefore buy any weakness resulting from the less than impressive FY22 guidance.

FANCL: Conservative Guidance Could Form an Opening on The Long Side