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Shimano: FY2022 Results Review, Updated Valuation

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man checking retired bicycles successful motorcycle shop

man checking retired bicycles successful motorcycle shop

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Shimano's primer

Shimano (OTCPK:SMNNY, OTCPK:SHMDF) is nan world's largest bicycle parts and second-largest food tackle manufacturer, commanding astir 70% of nan motorcycle marketplace and 20% of nan sportfishing tackle market. It's a uncommon institution that benefits from standard and differentiation advantages complete competitors by operating nan astir precocious manufacturing capability, nan broadest merchandise range, and nan largest distribution network.

Free rate travel per stock (FCF/share) has expanded astatine a 17% CAGR successful nan past decade (15% successful nan past 15 years) and returned 24% CAGR connected invested superior (22% successful nan past 15 years).

Today, nan institution is still headed by nan aforesaid family and driven by nan aforesaid mission, 'focusing connected customer happiness and bringing them person to nature.' And nan early looks agleam arsenic eco-friendly proscription and outdoor leisure activities go much cardinal to our lives.

This article reviews Shimano's FY2022 results. Read here for a elaborate institution analysis, including nan marketplace position, competition, risks, and valuation.

Shimano's FY22 results

 Shimano's FY22 results

Shimano's FY22 results

Shimano reported better-than-expected results for nan financial twelvemonth ending 2022 connected Feb 14th, 2023.

Revenue came successful astatine JPY 628B ($4.7B successful USD), an summation of 15% compared to nan anterior year. The affirmative results were driven by resilient request successful US and Japan, while Europe and China's markets were sluggish. The motorcycle segment's request remains higher than pre-Covid levels contempt nan prolonged proviso disruption coming from nan Ukraine-Russia warfare and cardinal banks' conflict against inflation. The sportfishing tackle conception was robust successful each regions too nan North American market.

Operating income came successful astatine JPY 169B ($1.2B), an summation of 14.1% compared to FY2021.

Compared to nan guidance FY22 guidance issued successful Q3'FY22 results, nan existent FY22 results were overmuch better. The institution hit gross guidance by 7% and exceeded operating separator guidance by 4%.

FY 2022 guidance astatine Q3'22

FY 2022 guidance astatine Q3'22

FY 2022 existent consequence connected Feb 14th, 2023

FY 2022 existent consequence connected Feb 14th, 2023

FY2022 results besides hit analysts' gross estimate of JPY 605B aliases 4%.

Shimano closed nan twelvemonth pinch a rate equilibrium of JPY 417B ($3.1B), up from JPY 375B ($2.8B) successful 2021. Its financial spot is looking stronger than ever.

Shimano's firm governance and superior return

Besides beating gross and net estimates, Shimano improved its firm governance and accrued stock repurchases and dividends.

More independent directors

For FY2023, nan committee has projected to summation nan number of extracurricular board to 4 from three, and it's nan first twelvemonth they person a female director. The alteration is affirmative successful nan agelong term, showing nan institution is continuously adapting to nan modern operating environment.

Shimano's ESG

Shimano's ESG

Share Buyback

What is besides affirmative is nan company's increasing appetite to bargain backmost shares. FY2022, nan institution reduced stock counts to 91M from 92.5M successful FY2021. It spent JPY 34B ($257M) to repurchase 1.34B shares for an mean of JPY 25,373/share.

At nan existent value of JPY 21,000 (or $16/ ADR share), that's a 2.2% buyback yield.

Shimano FY results

Shimano FY results

It's a immense step, arsenic nan institution hardly bought backmost a meaningful magnitude of shares earlier 2019. The array beneath shows nan institution buyback activity successful USD.

Sleep Well Investments - Shimano's superior allocation

Sleep Well Investments

Increased Dividends

The institution besides pays semi-annual dividends and has been expanding them since 2009. The FY2022 dividend continues nan uptrend. The institution projected to salary a JPY 285 dividend per stock successful FY2023 aliases a 1.4% output astatine nan existent value of JPY 21,000.

Shimano's FY 2022 dividend

Shimano's FY 2022 results

If Shimano continues buying backmost shares (2.2% yield) and paying dividends (1.4% yield), shareholders could get astir 3.6% successful full successful FY2023.

Shimano's FY23 guidance

Shimano's FY 2022 results

Shimano's FY 2022 results

Shimano's guidance is known to beryllium conservative. Unsurprisingly, they guided for FY2023 gross and operating income to driblet by 20% and 38%, respectively.

If history is simply a guide, my exemplary suggests FY2023 will beryllium astatine slightest JPY 53B, 6% higher than estimates. The existent business of inventories for completed bicycles besides intends nan worst is over. The guidance reports that high-end-class bikes remained low, followed by higher inventory levels of middle-class and entry-class bicycles. Recent reports from Thule (OTCPK:THUPY) and MIPS (MIPS) besides propose nan aforesaid picture. Shimano's halfway offering is mid-to-high-end parts, truthful nan inventory headwind should spell distant by 2024.

Updated valuation

With nan better-than-reported FY2022 and blimpish FY2023 estimates, Shimano's adjacent worth connected a DCF valuation based connected my estimates accrued to $24/ ADR from $23/ ADR share.

Previously, I assumed nan operating separator to beryllium 18% for 2022 and 2023. However, existent results came successful astatine 27% and guidance astatine 20%. Shimano's expertise to support beardown profitability convinced maine to summation my operating separator presumption betwixt 2023-2027.

Shimano's DCF valuation

DTF's Sleep Well Investments

Reversing my DCF exemplary to nan existent value of $16/ADR stock shows that nan marketplace assumes Shimano doesn't turn until 2032.

Finally, its FY2032 PE aggregate stands astatine 13x successful nan guidelines lawsuit (maintaining marketplace stock and increasing astatine nan industry-wide rate). All methods constituent to a convincing bargain astatine nan existent price.

Summary

The marketplace was not excited by Shimano's FY2022 results. But I am. Fundamentally, everything has stayed nan same. Shimano's FY2022 results showed improved income of 15% vs. 8% expected and higher than bike-related peers, MIPS, THULPY, and LEATT, who saw their income cratered during nan year. Shimano's operating separator besides performed overmuch amended than I expected, generating a 22% operating separator vs. 15%. Additionally, while inventory backlog remains a problem successful nan adjacent term, nan image for Shimano's mid-to-high-end conception is already better.

Finally, investors are getting a somewhat little value coming astatine JPY 21,000/share aliases $16/ADR share. I support my BUY standing and summation Shimano's adjacent value to $24/ADR share, representing a 50% upside.

Editor's Note: This article discusses 1 aliases much securities that do not waste and acquisition connected a awesome U.S. exchange. Please beryllium alert of nan risks associated pinch these stocks.

This article was written by

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I run Sleep Well Investments to find high-quality businesses astatine a reasonable price, helping you to slumber soundly astatine night.I besides constitute for aggregate SA marketplace services to get a different position from different disciplines.I purpose to beryllium nan champion investor I tin be; thus, I americium eager to study from your feedback and americium unfastened to mentorship/collaborations/internships/analyst positions successful a quality-focused finance fund.The articles are my ain opinion. Your feedback is appreciated.Track record:Dec 2017-Nov 2021: +171% (28% CAGR) - pre-tech crash Dec 2017-Jul 2022: +78% (12% CAGR) - post-tech crashSleep Well investing!

Disclosure: I/we person a beneficial agelong position successful nan shares of SMNNY, MPZAY either done banal ownership, options, aliases different derivatives. I wrote this article myself, and it expresses my ain opinions. I americium not receiving compensation for it (other than from Seeking Alpha). I person nary business narration pinch immoderate institution whose banal is mentioned successful this article.

Editor: Naga



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