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

Komatsu – Sensible Top Line Guidance But Margins Too Conservative

Komatsu and HCM – Komtrax Suggests Recovery In Store

Komatsu – Is the Company Starting to Lose Ground Vs. HCM?

Komatsu – Better Momentum than HCM in Americas and China

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

<h2>Better Revenue, but Lower Profitability Compared to 2QFY21</h2>Komatsu reported its 3QFY21 results on Friday (29th January) with revenue and OP decreasing YoY by 10% and 20% respectively. Revenue beat consensus by 2% but OP missed by 6.6%.<table class="table table-striped"><tbody>
<tr>
<td rowspan="2" style="width: 24.18%;">In ¥m</td>
<td colspan="3" style="width: 75.82%;">3QFY21</td>
</tr>
<tr>
<td style="width: 29.08%;">Actual Results</td>
<td style="width: 29.9%;">Consensus</td>
<td style="width: 16.84%;">Surprise</td>
</tr>
<tr>
<td style="width: 24.18%;">Revenue</td>
<td style="width: 29.08%;">                             555,593</td>
<td style="width: 29.9%;">                              544,731</td>
<td style="width: 16.84%;">2.0%</td>
</tr>
<tr>
<td style="width: 24.18%;">Operating Profit</td>
<td style="width: 29.08%;">                               34,017</td>
<td style="width: 29.9%;">                                 36,440</td>
<td style="width: 16.84%;">-6.6%</td>
</tr>
<tr>
<td style="width: 24.18%;">OPM</td>
<td style="width: 29.08%;">6.1%</td>
<td style="width: 29.9%;">6.7%</td>
<td style="width: 16.84%;">-0.6% points</td>
</tr>
</tbody></table><div style="text-align: left;" class="content-caption">Source: Company disclosures, CapIQ</div>The company did not change its full year guidance for FY21 and thus implied guidance for 4Q is now revenue of ¥606bn (-1.6% YoY) and OP of ¥26bn (-54% YoY) implying an OPM of 4.4% in 4QFY21.Even though, Komatsu’s revenue guidance for 4QFY21 is 11% higher than consensus OP guidance is -27% lower and the implied OPM of 4.4% would be extremely low when considering typical seasonality.<table class="table table-striped"><tbody>
<tr>
<td style="width: 29.08%;">In ¥m</td>
<td style="width: 34.96%;">Implied 4QFY21 Guidance</td>
<td style="width: 35.94%;">Guidance – FY21</td>
</tr>
<tr>
<td style="width: 29.08%;">Net sales</td>
<td style="width: 34.96%;">                             605,690</td>
<td style="width: 35.94%;">                           2,119,000</td>
</tr>
<tr>
<td style="width: 29.08%;">Operating income</td>
<td style="width: 34.96%;">                               26,464</td>
<td style="width: 35.94%;">                              134,000</td>
</tr>
<tr>
<td style="width: 29.08%;">OPM</td>
<td style="width: 34.96%;">4.4%</td>
<td style="width: 35.94%;">6.3%</td>
</tr>
</tbody></table><div style="text-align: left;" class="content-caption">Source: Company disclosures, CapIQ</div>

Better Revenue, but Lower Profitability Compared to 2QFY21Komatsu reported its 3QFY21 results on Friday (29th January) with revenue and OP decreasing YoY by 10% and 20% respectively. Revenue beat consensus by 2% but OP missed by 6.6%.

In ¥m
3QFY21


Actual Results
Consensus
Surprise


Revenue
                             555,593
                              544,731
2.0%


Operating Profit
                               34,017
                                 36,440
-6.6%


OPM
6.1%
6.7%
-0.6% points

Source: Company disclosures, CapIQThe company did not change its full year guidance for FY21 and thus implied guidance for 4Q is now revenue of ¥606bn (-1.6% YoY) and OP of ¥26bn (-54% YoY) implying an OPM of 4.4% in 4QFY21.Even though, Komatsu’s revenue guidance for 4QFY21 is 11% higher than consensus OP guidance is -27% lower and the implied OPM of 4.4% would be extremely low when considering typical seasonality.

In ¥m
Implied 4QFY21 Guidance
Guidance – FY21


Net sales
                             605,690
                           2,119,000


Operating income
                               26,464
                              134,000


OPM
4.4%
6.3%

Source: Company disclosures, CapIQ

Komatsu Ltd

Komatsu - Guidance Beat Looking Likely