Nissan Earnings: Turnaround Progress Demonstrated with Increased Revenue Despite Down Volume

No-moat-rated Nissan 7201 reported fiscal fourth-quarter 2022 (ended March 31, 2023) earnings per share of JPY 27.28, trouncing the JPY 10.47 FactSet consensus by JPY 16.81, and JPY 23.66 better than the JPY 3.62 reported a year ago when the chip crisis was at a peak. While automotive revenue soared 41% to JPY 2.84 trillion, consolidated volume was 13% higher and average revenue per unit jumped 21%. Pricing, mix, and favorable currency were partially offset by the chip shortage and COVID-19 resurgence in China. We raised our fair value estimate to JPY 1,490 from JPY 1,450 as the time value of money added JPY 30, while changes to our model added JPY 10. The 5-star-rated Nissan shares currently trade at a 66% discount to our new fair value. For long-term investors with patience for a turnaround situation, we think the shares offer compelling value.

Consolidated adjusted operating profit of JPY 87.4 billion with a 2.8% operating margin increased 56% from JPY 56.0 billion and a 2.5% margin a year ago, despite 7% lower financial services operating profit on increased interest rates. Automotive operating profit climbed JPY 37.3 billion to JPY 34.0 billion, from a JPY 3.3 billion loss last year, as turnaround efforts were partially offset by higher costs, including energy, logistics, and inflationary pressures.

Management initiated ambitious fiscal 2023 guidance. Revenue, operating income, and net income were forecast at JPY 12.4 trillion, JPY 520 billion, and JPY 315 billion, respectively, compared with fiscal 2022 revenue of JPY 10.6 trillion, JPY 377.1 billion in operating profit, and net income of JPY 221.9 billion. Volume guidance is for 4.0 million retail units, up 21% from 3.3 million, as the company is optimistic about chip crunch alleviation. Nissan guidance during its turnaround has tended to be high on revenue and volume, but low on margin. As a result, we left our model unchanged with revenue at JPY 10.7 trillion and operating profit of JPY 509 million.