Toyoda Gosei (7282): FY18 Story – Better from H2 FY17
Key Points
- Disappointing overall as auto division FY17 Q1 OPM fell to 5.0% vs 5.6% FY16 Q1.
- Automotive division Q1 OP fell 4% YoY to ¥9.3bn despite sales rising 7.0% (airbag sales rose 8.1%).
- Europe Q1 segment, supposed to improve on restructuring, remained at the same ¥500m operating loss as last year.
- The only bright spot: operating losses in the Opto (LED) division shrinking from -¥1.2bn last Q1 to -¥0.3bn. However, much of this improvement relates to shifting workers from Opto to Automotive – which temporarily weighs on Automotive margins.
- We believe FY17 Opto losses will be ¥2.3bn rather than our earlier ¥3.5bn loss figure, on a good Q1 plus a promising pipeline. The Q1 results call revealed several LED headlamp projects are starting – Toyota’s (7203) mid-sized Camry sedan and later the Toyota Noah minivan, the Subaru (7270) Impreza compact, and the Subaru Levorg station wagon.
- Opto losses swell temporarily in Q2 on the rapid ramp-up of LEDs for headlamps (management sees ¥2.0bn loss for H1 Opto, but we project ¥1.6bn) and could reach breakeven by Q3 FY18, we think.
- We raise by 3% our FY17 sales forecast; on 5% growth in the high-margin Interior Plastics and Airbag product groups while Fuel Tanks and Weatherstrips remain flattish.
- We maintain our FY17 ¥45.0bn OP forecast, as high-margin product groups grow faster than low-margin ones, and Q1 Europe losses involved shifting weatherstrip production from the UK to Czechoslovakia. N. America earnings also strong, with sales increasing to Honda (CR-V), Subaru and Ford.
Toyoda Gosei is primarily engaged in the manufacture and sale of automobile parts and optoelectronic products. Along with its subsidiaries and associated companies, Co. operates in two business segments. Automobile Parts segment offers interior and exterior parts, body sealing products, functional parts, and safety system products. Optoelectronic Products segment handles high luminosity light emitting diode ("LED") lamps and chips for mobile electronic equipment, display products, and signal lights. In addition, Co. manufactures and sells communication equipment components, air conditioning products, home construction components, and construction and industrial machinery components.
Founded in 2009, Pelham Smithers Associates (PSA) provides market intelligence on Asian technology, focusing in particular on Japan. The industries covered by our team of specialists are: consumer electronics, telecomms, pharmaceuticals, internet, electronic parts and materials, automotive technology, retail and capital goods.
PSA produces both company and sector reports. The focus of PSA’s research is to identify winners and losers as new technologies impact the top and bottom lines of corporations. Critical to our research is the clear explanation of how these new technologies work and how they impact companies and industries.
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