As per previous post, i will write the conclusion first.
I believe that earnings will be around -10% to 20% of FY 2024. As such, in March, we are unlikely to see a positive profit alert. EPS should come in at around 98 cents to 129 cents. This implies a 2H 2025 EPS range of 53 cents to 84 cents.
1H 2025 has seen an improvement of results due to Positive Yen Movement against the USD. However, this has reversed in 2H 2025.
However, i have been proven wrong in my analysis at times so its hard to be 100% right.
Revenue in FY 2025 should beat FY 2024 but Gross Profit Margin should be lower.
From the 1H 2025 Results Release, it is well understood that they have new customers and full utilisation.
As such, based on the 40k workers mentioned, i think revenue has a chance to hit 3.5 to 4 billion in 2H 2025.
However, management has mentioned that new orders tend to have lower margin as the orders are lower and more standardisation would result in better margins. In a smartkarma report, they mentioned that management mentioned they will look to improve margins in 2026. This made me believe that margins are still likely depressed.
This means that current customers which has a sizable revenue increasing their orders is more likely than a new customer.
To give an example, 2023 had better margins than 2024
Top 4 customers in 2024 accounted for 67% of the revenue
Top 4 customers in 2023 accounted for 68% of the revenue
With more revenue coming in 2H 2023 but a lower margin is recorded, we could think about how the reduction of Customer B from 1.1B to 770M has hurt the margins.
Customer B from my research is likely Funko
Customer A is likely Disney
Customer C or D is likely Spinmaster / OLC / Bandai / Hasbro
My estimation of the revenue should be as follows.
|
Segment |
Revenue |
Level of Confidence (1 to 10) |
|
Disney (Shanghai and Hong Kong) |
Positive (+5% to +20%) |
6 |
|
Oriental Land (Disney Japan) |
Negative (-10% to 20%) |
8 |
|
Funko |
Negative (-10% to 20%) |
8 |
|
Hasbro |
Negative (Hard to assess) |
5 |
|
Spinmaster |
Negative (-5% to 10%) |
5 |
|
Bandai Namco |
Positive (5% to 20%) |
3 |
Reasons for the above estimation
Disney - Strong Revenue for International Park , Visitorship to Shanghai is stronger in 2H 2025 vs 2H 2024
Oriental Land - Inventory Level Falling while merchandise revenue gain is not sufficient to make up the shortfall
Funko - Q3 2025 Inventory and revenue lower than Q3 2024. Inventory drop from Q2 2025 to Q3 2025 compared to increase in Q2 2024 to Q3 2024.
Hasbro - Inventory Fall quite significant. But too much product lines makes assessing revenue difficult
Spinmaster - Monster Jam weaker in Q3 2025
Bandi Namco - Positive Inventory Increase + One Piece Strong Performance.
As a result, i think that the customer diversification effect will be even stronger in FY 2025 which will in turn affect margins. It will be interesting to see how many customers account for at least 10% of revenue and if there is any new customers.
Possible Reasons for Analysis to be wrong (Leading to better profit growth or even positive profit announcement)
1) Winning Orders from current customers due to shift in manufacturing to Vietnam
2) Improved Margins seen due to economies of scale
3) Stronger than expected revenue from Disney China and Shanghai
4) New Customer Orders is strong and becomes a huge % of revenue
Possible Reasons for Earnings to be lower in 2H 25 vs 2H 24
1) Margins Erode due to New Customer and Diverse Orders
2) Other Income affected by JPY Weakening vs
3) Japan Theme Park Weakened in Revenue and is the strongest part of earnings margin
4) 3 Rounds of Raising Salary in Vietnam with 2 rounds being in 2025 and around 7% to 10% per increase eating into margins
No comments:
Post a Comment