Shimano Earnings: Channel Inventories Remain High, but Top-Line Recovery Better Than Expected

Shimano’s 15% year-on-year revenue decline in the June quarter was better than our previous estimate, as we had expected the impact of ongoing inventory adjustments by its customers (bicycle frame manufacturers and retailers) to be worse. On the earnings call, the company confirmed that although channel inventories are generally high, orders from select customers that have already completed inventory adjustments have picked up. As quarterly sales and capacity utilization did not deteriorate as much as we had anticipated, we raise our operating income estimate for fiscal 2024 (ending December) by 11% to JPY 70 billion, assuming a 4% revenue decline and operating margin of 15.3%. However, our overall outlook remains largely intact, and we maintain our fair value estimate at JPY 22,000. We believe Shimano’s shares are fairly valued.