Shimano (7309.T) short, mcap=¥1950bn

7309.T short pitch:
– Shimano – the largest producer of bicycle parts in the world.
– Significant COVID beneficiary with inflated sales and margins.
– Japanese investors are incorrectly anchoring on this strong recent performance.
– Optimistic consensus forecasts show flat revenue for 2023/24 and a continuation of a recent uptrend after that.
– This bullish narrative is wrong.
– Shimano’s cycles have been fairly predictable, with past booms resulting in multi-year hangovers.
– Shimano has already begun reporting normal/above normal inventories in its low-mid-end bikes
– Higher-end bikes are expected to follow suit.

7309.T valuation:
– Bear case 2024 EPS expectations at ¥600.
– At 20x multiple would be ¥12000 stock.

Exp. gain: 16-45%

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