Shimano Earnings: Gradual Top-Line Recovery Amid High Channel Inventories

We maintain our fair value estimate of JPY 22,000 for wide-moat Shimano. Shimano reported 1.4% quarter-on-quarter revenue growth in the September quarter, which is largely in line with our estimates, marking positive quarter-on-quarter growth for three consecutive quarters. This suggests that the company is on a recovery track since the bottom hit in the December quarter of fiscal 2023. While we slightly lower our revenue growth forecast for fiscal 2024 to negative 4.6% from negative 3.7%, as we see the channel inventories across the markets are still generally high, our long-term outlook is intact. We maintain our CAGR revenue growth assumption of 6.8% between 2024 and 2028, and expect operating margin to gradually improve year by year to 20% in fiscal 2028 from 15.3% in fiscal 2024, mainly driven by improved utilization. We believe the company’s shares are currently fairly valued.