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

Nissan Motor--Bullish FY17 Forecasts & Zero Buffers

Nissan Motor's FY17 Outlook--The Year of Living Dangerously

Nissan's Cheap Valuation Offset by Cyclical and Trump Tax Risks

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

Bottom-up Japan Equities Research

Equity Bottom-Up

Nissan announced a weak start to FY17, with Q1 operating profit (OP) of Y153bn, undershooting consensus estimates of Y173bn by 11.6%. Recurring profit (RP)--which includes Nissan's equity method income from its large Chinese operations--came to Y189bn, which was 7.8% lower than consensus estimates of Y206bn.The Q1 OP margin was 5.6% versus the consensus estimate of 6.1%, while the RP margin was 6.9% versus the consensus estimates of 7.3%.Nissan actually had quite firm global vehicle sales growth of +5% YoY in Q1, but half of this increase was due to minicar sales in Japan, which rose from a low hurdle last year and are unprofitable for overall mix. Excluding Japanese minicar sales, global sales volumes still grew by +2.7% YoY, which is most likely better than results at Toyota or Honda.The culprit behind Nissan's lower-than-consensus Q1 results and huge deterioration in profitability is higher incentive spending per vehicle in the US, but more so a sudden deterioration in profitability in Europe (see details and table below)--the first negative mix number in that region in five quarters and the biggest drop YoY in at least two years.Despite the horrible conditions in the US market, Nissan continues to grow its lease assets there, with Q1 assets at its finance subsidiary there growing by nearly 2% YoY in USD-terms.Nissan's US vehicle sales should've fallen in Q1, not grown by 2.7% YoY in our view. This is because, in Q1 of FY16, Nissan's fleet sales amounted to 24% of overall US sales volume, a level that is higher than Japanese rivals and above Nissan's target level of around 10% to 15%. The fact that Q1 vehicle sales grew, instead of falling from lower fleet sales, points to the fact that Nissan may have still have had high fleet sales in Q1.Nissan's Q1 Chinese operations appear to have registered flattish OP YoY but a deterioration in profitability, as competition has heated up and some new models are not selling as well as expected. For Q1, Chinese vehicle sales were up only 5% YoY versus 9% growth targets for the full year, but there are still some new models in the pipeline in FY17.Nissan's shares have been the best performers out of the Japanese Big-3 since they all announced their results three months ago, up 7.4% versus Toyota's rise of only 2.8% and Honda's decline of -4.7%. We expect some profit taking tomorrow.

Nissan announced a weak start to FY17, with Q1 operating profit (OP) of Y153bn, undershooting consensus estimates of Y173bn by 11.6%. Recurring profit (RP)--which includes Nissan's equity method income from its large Chinese operations--came to Y189bn, which was 7.8% lower than consensus estimates of Y206bn.The Q1 OP margin was 5.6% versus the consensus estimate of 6.1%, while the RP margin was 6.9% versus the consensus estimates of 7.3%.Nissan actually had quite firm global vehicle sales growth of +5% YoY in Q1, but half of this increase was due to minicar sales in Japan, which rose from a low hurdle last year and are unprofitable for overall mix. Excluding Japanese minicar sales, global sales volumes still grew by +2.7% YoY, which is most likely better than results at Toyota or Honda.The culprit behind Nissan's lower-than-consensus Q1 results and huge deterioration in profitability is higher incentive spending per vehicle in the US, but more so a sudden deterioration in profitability in Europe (see details and table below)--the first negative mix number in that region in five quarters and the biggest drop YoY in at least two years.Despite the horrible conditions in the US market, Nissan continues to grow its lease assets there, with Q1 assets at its finance subsidiary there growing by nearly 2% YoY in USD-terms.Nissan's US vehicle sales should've fallen in Q1, not grown by 2.7% YoY in our view. This is because, in Q1 of FY16, Nissan's fleet sales amounted to 24% of overall US sales volume, a level that is higher than Japanese rivals and above Nissan's target level of around 10% to 15%. The fact that Q1 vehicle sales grew, instead of falling from lower fleet sales, points to the fact that Nissan may have still have had high fleet sales in Q1.Nissan's Q1 Chinese operations appear to have registered flattish OP YoY but a deterioration in profitability, as competition has heated up and some new models are not selling as well as expected. For Q1, Chinese vehicle sales were up only 5% YoY versus 9% growth targets for the full year, but there are still some new models in the pipeline in FY17.Nissan's shares have been the best performers out of the Japanese Big-3 since they all announced their results three months ago, up 7.4% versus Toyota's rise of only 2.8% and Honda's decline of -4.7%. We expect some profit taking tomorrow.

Nissan Motor's Q1 Results Below Consensus on Bad Mix in Europe & US