Japan/Asia Long-Short, LightStream Research

Mio Kato

Over 15 years analysing Japanese and Asian stocks from a long/short perspective

I focus on cyclically driven sectors such as Gaming, Factory Automation and Autos

An eclectic background as a long-short analyst, upper management at a financial data startup through its listing, and as the founder of a team analysing big/alternative data, all of which supports independent and differentiated views... we hope

An appreciation for Mathematics drives the development of a "Micro-Quantamental" process which can provide a data-driven, historically-informed and semi-automated foundation upon which to layer more qualitative and judgemental analysis, thus improving investment decision-making speed and accuracy

Japan/Asia Long-Short

HCM – Could Retest All-Time Highs Given Time But…

HCM – Profit Beat and Discussion of Hitachi Stake

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

Hitachi Construction Machinery / Equity Bottom-Up

<h2>Revenue Guidance Overly Conservative</h2>HCM reported its 3QFY21 results on Friday (29th January) which saw both revenues and OP decrease YoY by 4.3% and 30.6% respectively with the deterioration in its profitability mainly due to the impact of lower sales volume in 3QFY21. However, the reported revenue was 1.6% higher than consensus while OP was -23.1% lower.<div><table class="table table-striped"><tbody>
<tr>
<td rowspan="2" style="width: 23.9%;">In ¥m</td>
<td colspan="3" style="width: 76.1%;">3QFY21</td>
</tr>
<tr>
<td style="width: 29.8%;">Actual Results</td>
<td style="width: 30.4%;">Consensus</td>
<td style="width: 15.9%;">Surprise</td>
</tr>
<tr>
<td style="width: 23.9%;">Revenue</td>
<td style="width: 29.8%;">                             197,825</td>
<td style="width: 30.4%;">                              194,733</td>
<td style="width: 15.9%;">1.6%</td>
</tr>
<tr>
<td style="width: 23.9%;">Operating Profit</td>
<td style="width: 29.8%;">                                  9,749</td>
<td style="width: 30.4%;">                                 12,675</td>
<td style="width: 15.9%;">-23.1%</td>
</tr>
<tr>
<td style="width: 23.9%;">OPM</td>
<td style="width: 29.8%;">4.9%</td>
<td style="width: 30.4%;">6.5%</td>
<td style="width: 15.9%;">-1.6% points</td>
</tr>
</tbody></table></div><div style="text-align: left;" class="content-caption">Source: Company disclosures, CapIQ</div>The company has not changed its full year guidance for FY21 and expects revenue and OP of ¥211bn (-13.5% YoY) and ¥21bn (-1% YoY, implying an OPM of 10.4%) respectively in 4QFY21.HCM's revenue expectation for 4QFY21 is 9.0% lower than consensus while OP is 6% higher than consensus implying an OPM of 10.3%.<table class="table table-striped"><tbody>
<tr>
<td style="width: 29.1%;">In ¥m</td>
<td style="width: 34.96%;">Expected 4QFY21</td>
<td style="width: 35.94%;">Guidance – FY21</td>
</tr>
<tr>
<td style="width: 29.1%;">Net sales</td>
<td style="width: 34.96%;">                             211,273</td>
<td style="width: 35.94%;">                              770,000</td>
</tr>
<tr>
<td style="width: 29.1%;">Operating income</td>
<td style="width: 34.96%;">                               21,702</td>
<td style="width: 35.94%;">                                 40,000</td>
</tr>
<tr>
<td style="width: 29.1%;">OPM</td>
<td style="width: 34.96%;">10.3%</td>
<td style="width: 35.94%;">5.2%</td>
</tr>
</tbody></table><div style="text-align: left;" class="content-caption">Source: Company disclosures, CapIQ</div>

Revenue Guidance Overly ConservativeHCM reported its 3QFY21 results on Friday (29th January) which saw both revenues and OP decrease YoY by 4.3% and 30.6% respectively with the deterioration in its profitability mainly due to the impact of lower sales volume in 3QFY21. However, the reported revenue was 1.6% higher than consensus while OP was -23.1% lower.

In ¥m
3QFY21


Actual Results
Consensus
Surprise


Revenue
                             197,825
                              194,733
1.6%


Operating Profit
                                  9,749
                                 12,675
-23.1%


OPM
4.9%
6.5%
-1.6% points

Source: Company disclosures, CapIQThe company has not changed its full year guidance for FY21 and expects revenue and OP of ¥211bn (-13.5% YoY) and ¥21bn (-1% YoY, implying an OPM of 10.4%) respectively in 4QFY21.HCM's revenue expectation for 4QFY21 is 9.0% lower than consensus while OP is 6% higher than consensus implying an OPM of 10.3%.

In ¥m
Expected 4QFY21
Guidance – FY21


Net sales
                             211,273
                              770,000


Operating income
                               21,702
                                 40,000


OPM
10.3%
5.2%

Source: Company disclosures, CapIQ

Hitachi Construction Machinery

HCM - Favour HCM over Komatsu for Now