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

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

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

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

FANCL 3QFY20 Alternative Data Earnings Preview: Supplements Weaknesses to Offset Cosmetics Growth

FANCL 4Q Earnings Preview: Margins Weaker Than Consensus Believes

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>’s second-quarter revenue and operating income fell short of consensus estimates by 0.3% and 14.5%, respectively, but 1HFY21 revenue was broadly in line with the interim revenue guidance, while 1HFY21 OP beat guidance by 13.5%. Cosmetics revenue and operating profit declined by 23.3% and 58.7%, while the Nutritional Supplements segment saw revenue declined 10.4%, but operating profit grew by 3.4% year-on-year.Fancl eventually admitted that inbound demand is unlikely to recover in the second half of the year. Therefore, the company decided to lower its full-year revenue and OP guidance by ¥7.0 billion and ¥1.5 billion, respectively. However, the revised full-year revenue guidance is just 5.4% lower than the previous year, which is significantly lower compared to 15.8% and 12.5% for <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> and <a href="https://www.smartkarma.com/entities/kose-corp" target="_blank" data-smartkarma-citation="entities:18009:1" rel="noopener">Kose Corp (4922 JP)</a> respectively. The relative performance difference of Fancl was substantially better at the OP level.

Fancl Corp (4921 JP)’s second-quarter revenue and operating income fell short of consensus estimates by 0.3% and 14.5%, respectively, but 1HFY21 revenue was broadly in line with the interim revenue guidance, while 1HFY21 OP beat guidance by 13.5%. Cosmetics revenue and operating profit declined by 23.3% and 58.7%, while the Nutritional Supplements segment saw revenue declined 10.4%, but operating profit grew by 3.4% year-on-year.Fancl eventually admitted that inbound demand is unlikely to recover in the second half of the year. Therefore, the company decided to lower its full-year revenue and OP guidance by ¥7.0 billion and ¥1.5 billion, respectively. However, the revised full-year revenue guidance is just 5.4% lower than the previous year, which is significantly lower compared to 15.8% and 12.5% for Shiseido Company (4911 JP) and Kose Corp (4922 JP) respectively. The relative performance difference of Fancl was substantially better at the OP level.

The Market Is Yet to Price Fancl’s China Expansion