Shimano Earnings: Recovery of Bicycle Components to Offset the Worsening Margin in Fishing Tackle

Wide-moat Shimano’s March quarter sales were JPY 113 billion, up 13% year on year and largely in line with our estimate of JPY 111 billion. Meanwhile, quarterly operating profit reached JPY 16.1 billion, or a margin of 14.2%, surpassing our estimate of JPY 14.4 billion, or a margin of 13%. A breakdown of operating profit suggests a mixed result for this quarter—while the operating margin for bicycle components improved by 3.2 percentage points year on year to 16.5% in this quarter, the operating margin for fishing tackle deteriorated further to 6.4%, marking the lowest level since 2015. Based on the profit level we saw in the first quarter, we raised our 2025 operating margin estimate for bicycle components to 16.9% from 16.4%, reflecting a more significant recovery of the utilization rate given the inventory correction is faster than expected, and trimmed our operating margin estimate for fishing tackle to 8.8% from 10%, as the low utilization rate hit harder than we expected. As a result, we maintain our companywide operating margin estimate of 15% for 2025, and we reiterate our fair value estimate for Shimano at JPY 22,000 as our long-term outlook for the company remains intact. Shimano shares have dropped roughly 8% since President Donald Trump’s April 2 announcement, as investors are concerned about the tariff impact on the company given that more than 90% of sales in 2024 were overseas; however, we think the tariff impact on the company is limited as North America accounted for merely 10% of total sales in 2024. In addition, Shimano’s overseas headquarters and leading factory are located in Singapore, which, among others, enjoys the lowest of baseline US tariffs at 10%.