Global Automotive Stocks/EV Focus/Event Driven, SC Capital

SC Capital

SC Capital has over 20 years' experience covering the global automotive industry both on the Sell Side (UBS & Morgan Stanley) and Buy Side (Och-Ziff), along with a wealth of industry contacts. 

Current focus is on electric vehicle stocks & their supply chains. Aim is to identify the winners and losers from a long/short perspective. This includes close coverage of legacy automakers as well.  

From time to time. we cover opportunistic events with stocks in the manufacturing sector, food & beverage, healthcare and tech, where we also have coverage experience.

Global Automotive Stocks/EV Focus/Event Driven

Eurjpy - Close to Explosive Bullish Exit Level 125.90

EURJPY - Close to Super Cycle Bullish Acceleration Level 125.90

Over 22 years covering Japanese equities on both the sell side and the buy side. 

Bottom-up Japan Equities Research

Equity Bottom-Up

On April 25, the Nikkei Shimbun, Japan’s main financial daily, previewed Mazda’s operating profits (OP) for FY16 and outlook for FY17. While the Nikkei never attributes such articles to sources, the numbers usually come from the company being previewed.It appears that Mazda’s FY16 OP came in at Y130bn, in line with its own targets and slightly below consensus. For FY17, the Nikkei says that Mazda should see OP at Y150bn (+15% YoY), which is 17% below consensus of Y184bn, mostly because Mazda is using more conservative currency and raw material assumptions than the Street.Our sense is that Mazda will indeed guide for FY17 OP of Y150bn and possibly have higher internal targets initially, but the conditions in the US market are of concern and pose a risk to earnings targets this year.Mazda is lagging Japanese rivals in the race to lower the ratio of sedans, while growing sales by increasing the weighting of sports utility vehicles (SUV) in the US. Sales in 1Q did grow by a solid +6.8%, but the high-end CX-9 SUV is selling below monthly targets and Mazda’s sedan models are seeing higher incentives.Mazda’s stock rallied 6% over the three days since the Nikkei article came out, despite the forecast OP figure being nearly 20% below consensus. While the article did coincide with a risk-on sentiment in the markets, it seems as though there is a sense of “the bad news has been exhausted” regarding Mazda’s stock.Mazda’s remarkable brand enhancement over the past five years and niche powertrain technology have paved the way to growth over the long-term and this appears to be amply factored into valuations. Assuming Mazda does guide for FY17 OP of Y150bn, it would imply a PER of 10x and an EV/EBITDA of 4.4x. This is higher than the average among its Japanese rivals of 9x and 3.6x, while also quite a bit higher than Subaru and Nissan, both of which should see higher profitability than Mazda (see table-2).

On April 25, the Nikkei Shimbun, Japan’s main financial daily, previewed Mazda’s operating profits (OP) for FY16 and outlook for FY17. While the Nikkei never attributes such articles to sources, the numbers usually come from the company being previewed.It appears that Mazda’s FY16 OP came in at Y130bn, in line with its own targets and slightly below consensus. For FY17, the Nikkei says that Mazda should see OP at Y150bn (+15% YoY), which is 17% below consensus of Y184bn, mostly because Mazda is using more conservative currency and raw material assumptions than the Street.Our sense is that Mazda will indeed guide for FY17 OP of Y150bn and possibly have higher internal targets initially, but the conditions in the US market are of concern and pose a risk to earnings targets this year.Mazda is lagging Japanese rivals in the race to lower the ratio of sedans, while growing sales by increasing the weighting of sports utility vehicles (SUV) in the US. Sales in 1Q did grow by a solid +6.8%, but the high-end CX-9 SUV is selling below monthly targets and Mazda’s sedan models are seeing higher incentives.Mazda’s stock rallied 6% over the three days since the Nikkei article came out, despite the forecast OP figure being nearly 20% below consensus. While the article did coincide with a risk-on sentiment in the markets, it seems as though there is a sense of “the bad news has been exhausted” regarding Mazda’s stock.Mazda’s remarkable brand enhancement over the past five years and niche powertrain technology have paved the way to growth over the long-term and this appears to be amply factored into valuations. Assuming Mazda does guide for FY17 OP of Y150bn, it would imply a PER of 10x and an EV/EBITDA of 4.4x. This is higher than the average among its Japanese rivals of 9x and 3.6x, while also quite a bit higher than Subaru and Nissan, both of which should see higher profitability than Mazda (see table-2).

Mazda Motor—4Q Earnings Preview & FY17 Outlook