Consumer Discretionary
Trading at 2x EV/EBITDA, at book and with tons of cash, Amir Anvarzadeh thinks Subaru remains highly attractive, especially as he sees significant upside to consensus forecasts of ¥330bn OP. As supply issues disappear, strong customer loyalty, low incentives and rising N.American sales can take OP closer to ¥500bn. Subaru's small size also leaves it with better hopes of retaining its customers as we migrate towards EVs. It will have 3 new models by 2025/26 joining the Solterra, adding a dedicated line in Oizumi by 2027 for 200k units to add to another 200k at Yajima by 2026 - unlike Solterra, whilst it will source the batteries from Toyota with 900 mile range, it will build the new models itself.
Consumer Discretionary
The thesis here is simple - consensus projects a 3% OPM next FY and Mio Kato believes Mazda will double that. Profitability is surging. Q322 OP beat expectations by 26% even excluding a reclassification of some costs to extraordinary losses. Mazda has been revamping its US business, sales structure and model line-up (Mio compares its approach to Subaru’s when the stock went from ¥660 to ¥5,000). If Mazda can do all this in the face of significant headwinds, when those turn and become tailwinds next FY it will blow away consensus numbers (could see OP of ¥300bn!). Mazda could be a multi-bagger even if we end up going into a bear market.
Consumer Discretionary
Revving up the hydrogen engine - in keeping with its penchant for developing every type of technology imaginable, Toyota has been working on not just fuel cells but also hydrogen engines. Now it is partnering with Mazda, Subaru, Yamaha and KHI to further expand on this concept and add synthetic carbon neutral fuels to the mix. These efforts could provide alternative zero carbon transition paths and are worth understanding, especially since EVs and renewables are nowhere near as mature for mass adoption as is generally portrayed.
