April 14, 2011 Equity Research Barclays Capital does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. This research report has been prepared in whole or in part by research analysts based outside the US who are not registered/qualified as research analysts with FINRA. PLEASE SEE ANALYST(S) CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 20. Nissan Motor Co., Ltd. (7201.T) Initiation of Coverage Industrials Japan Autos & Auto Parts Initiate at 1-OW; disaster risk priced in more than at peers, strong potential to price in recovery from 2Q Kei Nihonyanagi BCJL, Tokyo 81 3 4530 2933 [email protected]Yoshihiko Nishizawa BCJL, Tokyo 81 3 4530 2994 [email protected]Stock Rating Price Target New: 1-Overweight New: JPY 870 Old: N/A Old: JPY N/A Sector View: 2-Neutral Price (13 Apr 2011): JPY 716 Fiscal Year End: MAR 52-Week Range: 894 - 600 Stock Overview Chart EPS (JPY) Nissan Motor Co., Ltd. May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Source: Barclays Capital Live 600 700 800 900 Volume 25M 2010 2011 2012 2013 Actual Old New Old New Old New EPS 10.4A NA 80.7E NA 55.6E NA 118.7E Source: Barclays Capital Estimates Investment view: Major leeway for pricing in high probability of ROE recovery; initiating coverage with 1-OW As of 14 April we are initiating coverage on Nissan Motor (7201) with a target price of JPY870 (potential upside: +22%) and 1-OW rating. We believe the shares already discount much of the risk associated with earthquake damage, and our earnings growth scenario for FY3/13 remains unchanged, backed by strong growth in the Chinese market. At the current price, the P/B is only 0.9x against FY3/12 ROE forecasts of 7.4% and FY3/13 forecasts of 14.4%, and we expect Nissan to outperform our universe. We can also expect the alliance with Renault to bring benefits over the longer term. Share price drivers: Quake-related risks discounted more thoroughly than peers In the short term, we expect the main share price driver to be the market’s view of the quake impact. Based on our conservative plant-utilization assumptions, we expect Nissan to fall into the red at the operating line in 1Q FY3/12, the same as the other OEMs. However the shares have already fallen 12% since the quake (vs. an average of 11% for our coverage universe), and the quake risk seems to be discounted more thoroughly than sector peers. This is partly because only the Iwaki engine plant was directly damaged and as many of Nissan’s main plants are located in the Kanto area. However, we expect the quake to have an impact on tier-2 and 3 suppliers, or even more stages farther upstream, and for every supplier affected by planned power outages negatively impacts vehicle assembly. As a result, we believe that there will be little difference in the impact of the quake on Japanese OEMs, and we do not expect the underperformance at Nissan to continue. Valuation: We see major upside from current P/B of 0.9x Our target price for the next 12 months is JPY870 (equivalent to a P/B of 1.1x and P/E of 16x based on our FY3/12 forecasts), calculated based on the correlation between ROE and P/B for the firms under our coverage. Our outlook for earnings growth from FY3/13 onwards remains unchanged, and the current share price appears overly discounted. Risk factor: Chinese macro concerns becoming a normal part of the background The greatest risk factor for Nissan is market concerns over monetary tightening in China, which may become a normal part of the company’s operating environment. We assume that about 35% of Nissan’s OP (FY3/11) comes from China, which is relatively high among Japanese OEMs.
Transcript
April 14, 2011 Equity Research
Barclays Capital does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment decision.
This research report has been prepared in whole or in part by research analysts based outside the US who are not registered/qualified as research analysts with FINRA. PLEASE SEE ANALYST(S) CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 20.
Nissan Motor Co., Ltd. (7201.T) Initiation of Coverage
IndustrialsJapan Autos & Auto Parts
Initiate at 1-OW; disaster risk priced in more than at peers, strong potential to price in recovery from 2Q
Stock Overview Chart EPS (JPY) Nissan Motor Co., Ltd.
May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr
Source: Barclays Capital Live
600
700
800
900
Volume
25M
2010 2011 2012 2013 Actual Old New Old New Old New
EPS 10.4A NA 80.7E NA 55.6E NA 118.7E
Source: Barclays Capital Estimates
Investment view: Major leeway for pricing in high probability of ROE recovery; initiating coverage with 1-OW
As of 14 April we are initiating coverage on Nissan Motor (7201) with a target price of JPY870 (potential upside: +22%) and 1-OW rating. We believe the shares already discount much of the risk associated with earthquake damage, and our earnings growth scenario for FY3/13 remains unchanged, backed by strong growth in the Chinese market. At the current price, the P/B is only 0.9x against FY3/12 ROE forecasts of 7.4% and FY3/13 forecasts of 14.4%, and we expect Nissan to outperform our universe. We can also expect the alliance with Renault to bring benefits over the longer term.
Share price drivers: Quake-related risks discounted more thoroughly than peers
In the short term, we expect the main share price driver to be the market’s view of the quake impact. Based on our conservative plant-utilization assumptions, we expect Nissan to fall into the red at the operating line in 1Q FY3/12, the same as the other OEMs. However the shares have already fallen 12% since the quake (vs. an average of 11% for our coverage universe), and the quake risk seems to be discounted more thoroughly than sector peers. This is partly because only the Iwaki engine plant was directly damaged and as many of Nissan’s main plants are located in the Kanto area. However, we expect the quake to have an impact on tier-2 and 3 suppliers, or even more stages farther upstream, and for every supplier affected by planned power outages negatively impacts vehicle assembly. As a result, we believe that there will be little difference in the impact of the quake on Japanese OEMs, and we do not expect the underperformance at Nissan to continue.
Valuation: We see major upside from current P/B of 0.9x
Our target price for the next 12 months is JPY870 (equivalent to a P/B of 1.1x and P/E of 16x based on our FY3/12 forecasts), calculated based on the correlation between ROE and P/B for the firms under our coverage. Our outlook for earnings growth from FY3/13 onwards remains unchanged, and the current share price appears overly discounted.
Risk factor: Chinese macro concerns becoming a normal part of the background
The greatest risk factor for Nissan is market concerns over monetary tightening in China, which may become a normal part of the company’s operating environment. We assume that about 35% of Nissan’s OP (FY3/11) comes from China, which is relatively high among Japanese OEMs.
Fourth Quarter (Jan-Mar)4Q FY3/10 Actual 2,137,702 82,660 61,854 -11,5804Q FY3/11 BCE 2,391,800 11.9% 108,100 30.8% 96,600 56.2% 40,500 turn to black
CoE 2,378,169 11.2% 86,139 4.2% 73,763 19.3% 26,553 turn to black Source: Reuters Consensus, Company data and Barclays Capital estimates Note: Closing price as of 13 April
Initiating coverage with 1-OW rating — quake-related risk discounted more thoroughly than peers and we still expect profit growth from FY3/13
We initiate coverage of Nissan Motor Company (7201), and based on the company’s position relative our coverage universe we assign a 1-Overweight rating.
Since 2H 2010, Nissan’s stock has continued to perform poorly compared with the firms in our coverage, partly due to concerns about monetary tightening in China, but put differently, we believe that the current share price discounts for this risk. In addition, the fall in the share price following the quake was greater than for the other OEMs, and from the point of view of earthquake-related risk, we see little reason for any further share price underperformance.
Longer-term outlook: securing the next source of revenue after China - the V-Platform is one card the company is playing
Over the longer term, like Toyota and Honda, the question for Nissan is how to make money in emerging economies. Our impression is that Nissan, which already has China as a source of revenue, is slightly ahead of Toyota and Honda from this perspective, but the company is only just starting to develop emerging economies outside of China. However, considering Nissan’s role within the overall Renault group, going forward Nissan is likely to continue to put effort into developing operations in the Asian region.
Here we are watching closely Nissan’s strategy for its V-Platform, the platform that it started to deploy globally in 2010 with the March (Micra) and Sunny. Nissan plans to develop the V-Platform in different markets globally, using the same platform for three types of vehicles (sedan, hatchback, and MPV). For small cars (corresponding to A/B global segments), sales price per vehicle is low, which makes economies of scale important (Nissan expects to produce and sell 1m vehicles overall using the V-PF platform in FY3/14).
Previously in the automotive industry the normal view was that automotive needs were different in each country/region, and Nissan’s V-Platform initiative sets it out from other Japanese makers. Because Nissan belongs to the Renault group, in future the company does not have to rely exclusively on its own brands, and this is also an element in the background allowing it to adopt its V-Platform strategy. We will be watching to see whether the company’s use of a strategy that is different from other firms in our coverage allows it to make money in emerging markets as well.
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Valuation: relatively attractive from a risk/reward perspective
Based on correlation between ROE and P/B for the companies in our coverage, we set our target price for Nissan at JPY870. The current share price (JPY 716 as of 13 April) appears relatively undervalued, and we are initiating coverage with a 1-Overweight rating.
Figure 2: Though ROE recovery has been slow compared with other OEMs, we believe a P/B 0.9x is excessively pessimistic Rating, target price, and assumptions for eight companies in our coverage
FY11E-FY12E P/B (X) ex finance bizCurrent share price Price target
Note: We estimate ROE based on a normalized tax rate as FY11 net profits are likely to be taxed at an abnormal rate at Toyota Motor, Mazda Motor, Fuji Heavy Industries, and Yamaha Motor. Target price = (fair P/B excluding finance business) x (BPS excluding finance business) + BPS on finance business. Our fair P/B is based on the assumption that each OEM’s P/B will return to an approximate value based on ROE correlation (calculated based on the least square-method). For stocks that have continually been classified as undervalued/overvalued, target P/B is calculated based on the average gap between the historical fair P/B and actual P/B, based on the least-square method: Toyota +5%, Suzuki +15%, Fuji Heavy Industries -15% (on simple calculations, Toyota and Suzuki consistently look “overvalued” and Fuji Heavy looks “undervalued”). Source: Company data, Datastream and Barclays Capital estimates
Figure 3: Strong correlation between ROE and P/B for NissanNissan: Trends for target price and actual share price
Figure 4: At P/B of 0.9x share price seems pessimistic Nissan: Historical valuations
Source: Company data and Barclays Capital estimates Note: Valuations for 2012/3 onward based on closing price as of 13 April Source: Company data and Barclays Capital estimates
Risk of deterioration in capacity utilization relatively fully discounted
We forecast ROE (excluding financing operations) growing from 8.7% in FY3/12 to 13.6% in FY3/13, and at the current P/B of 0.9x, we see considerable price upside. We expect the impact from quake damage to be the main share price driver at all of the OEMs, but we believe any risks to capacity utilization at Nissan are already relatively fully discounted (see Figure 5).
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Figure 5: Current share price factors in around 10 days’ lost production compare to FY3/11 Japanese OEMs – market’s expected earnings levels as deduced from current share price, and theoretical fair values given level of production losses
Operating days vs FY3/11(BCE): Operating days vs FY3/11(BCE):
FY3/11 BCE
Implied analysis
FY3/11 BCE
FY3/11 BCE
Operating days vs FY3/11(BCE): Operating days vs FY3/11(BCE):
FY3/11 BCE
Source: Barclays Capital estimates
Margin of ROIC improvement top class among coverage firms
Among FY3/11 automaker earnings, Nissan stands out as greatly different in improvement in capital turnover. This is due in large part to a rapid recovery in sales. The companies in our coverage saw an average YoY increase in sales of 7% in FY3/11, while Nissan saw a 17% increase. In addition, increased sales in high-margin China are improving the regional mix, and profit margins are on a sharp improvement trend. The FY3/11 ROIC improvement margin was top class (from 1.5% in FY3/10 to 6.8% in FY3/11; the averages for our coverage firms increased from 1.9% to 5.0%).
From FY3/12, we expect a temporary deterioration in the first year as a result of the quake, in line with the other OEMs, but from FY3/13 we expect a recovery in capacity utilization to drive a major recovery trend.
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Figure 6: Nissan manages its balance sheet carefully; we expect margin improvement to tie directly into ROIC improvement Nissan: ROIC value driver trends
Source: Company data and Barclays Capital estimates Source: Company data and Barclays Capital estimates
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Earnings trends: Impact from quake unavoidable, as at other OEMs, but progress for the V-Platform a medium-term confidence-builder
FY3/11 sales trends: sales strong in different regions
In addition to benefiting from the growth in the market in China, now a main market for Nissan, the company also gained market share in the US and Western Europe, markets where Japanese firms struggled (see Figures 10-11); Nissan grew in global markets. Toyota was affected by quality problems, which brought a relative increase in Nissan’s position, while in European markets in particular, the company’s tie-up with Renault has allowed it to construct arrangements to produce and sell cars that sell well in Europe (for instance, with diesel engines).
Figure 9: The importance of China is increasing, but in 2010 sales increased in the US and Europe as well Nissan: Changes in regional weightings for global retail sales volume, 2007 to 3Q 2010
Nissan CY07
Home market21%
US32%Western Europe
12%
China10%
ASEAN4%
South America2%
Eastern Europe5%
Others14%
India0%
Nissan 3QCY10
Home market17%
US24%
China23%
ASEAN6%
South America3%
Eastern Europe4%
Others11%
Western Europe11%
India1%
Source: JD Power, compiled by Barclays Capital
Figure 10: US market share increase in 2010 US market share trends for the three large Japanese firms, GM, and Ford
Figure 11: Like Hyundai, also putting on a good showing in Western Europe Market share trends in Western Europe for the three large Japanese firms and Hyundai
Source: JD Power, compiled by Barclays Capital Source: JD Power, compiled by Barclays Capital
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FY3/12 sales forecasts: after recovery in capacity utilization, we expect increased penetration of inland Chinese market
Important to watch the trend for market in China overall, but…
We estimate that the Chinese business generates approximately 35% of Nissan’s OP (on a FY3/11 basis) and it will be important to watch overall market trends in China. We expect the growth rate for the Chinese market overall to contract from +33% in 2010 to +8% in 2011, but for Nissan and the other Japanese makers, the outlook now depends on the pace of recovery following the quake.
We expect yoy growth of 8% for the overall market
In 2011 we project mild growth of 8% YoY. 1) Partly due to central government policy, we expect a real GDP growth rate of +9% to be maintained (see Figure 12), and 2) as motorization progresses, we continue to expect growing demand in the regions (see Figure 13).
Figure 12: The only YoY decline in passenger vehicle demand was immediately after the financial crisis hit YoY trends for China real GDP growth rate and passenger vehicle market
Figure 13: Inland motorization to take off going forward Comparison of passenger vehicle penetration rates by region and GDP
China real GDP yoy change vs China PC market yoy change
-20%
0%
20%
40%
60%
80%
100%
120%
2004
/1/1
2004
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/1/1
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2010
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2011
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/7/1
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%China Real GDP yoy change (RHS) China Passenger Car Market yoy change (LHS)
Source: National Bureau of Statistics of China、CAAM、Barclays Capital estimates Source: Fourin, compiled by Barclays Capital
Nissan developments in China (1): Sunny rollout has major impact; current China sales strong despite a slowing market
If factory capacity utilization recovers, then we expect Nissan’s sales in China to remain strong in FY3/12. In the short term, amid lingering concerns about the impact of monetary tightening, at the beginning of 2011 Nissan started selling the Sunny (built on the V-Platform), and at the moment sales are still excellent (the Sunny’s January-February cumulative sales volume was around 20,000 vehicles, accounting for 11% over the Nissan brand overall). January-February cumulative monthly sales volume rose 23% YoY (while the overall market was +8% YoY). The new Sunny is a model that targets a young Chinese demographic, and within Nissan’s line-up it is positioned as a low-priced sedan (as low as CNY80,000) (see Figure 14). Nissan has already expanded its target market from tier 1 cities along the coast to tier 2-3 cities inland, and our impression is that adding Sunny to its line-up has added momentum to the company’s inland sales.
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Figure 14: New Sunny appeals versus the City on price, and against the Verna on equipment Comparison of Sunny and competing vehicles
Source: Company data, Auto Sina.com, compiled by Barclays Capital
Nissan developments in China (2): steady progress on completing sales network, healthy sales growth over the medium term
Nissan’s efforts to build a sales network are contributing to the company’s sales growth in China. The number of Nissan’s dealerships in China reached 460 locations in 2010, and the company plans to add a further 70 locations in 2011 (as of plans announced prior to the quake). We do not expect reduction in forward looking investment in growth markets owing to the quake, and Nissan maintains high sales volume per dealership (see Figure 16),. Accordingly, from a longer term perspective as well, the company’s Chinese operations are in a process of healthy growth. As noted, Nissan’s efforts to increase sales in tier 2-3 cities are gradually bearing fruit.
Figure 15: Recent Nissan sales have been above the market trend YoY trends for Chinese demand and Nissan’s sales volume
Figure 16: Strengthening of sales network along with an increase in the number of vehicles sold per location Nissan: Trends for the number of dealerships in China and sales volume per dealership
China market yoy % change vs Nissan sales yoy % change
0%
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140%
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Nissan (Include DFL)
China Market (IncludeTruck and bus)
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2,000Number of dealers (lhs)Sales units per dealer (rhs)
Source: CAAM, Company data, compiled by Barclays Capital Source: JD Power, compiled by Barclays Capital
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We project FY3/12 OP of JPY354.3 bn (-36% YoY)
Based on cautious operating rate assumptions and the business assumptions detailed above, we project Nissan FY3/12 OP of JPY354.3 bn (down 36% YoY). We believe the quake will make a fall in the red in 1Q unavoidable, but we expect earnings to follow a recovery trend from 2Q onwards as operating rates recover and we see a steady impact from ongoing cost reductions
Figure 17: We use conservative operating rate assumptions following the quake, but expect an earnings recovery from 2Q on
Nissan Motor – quarterly capacity utilization and op. profit trends
Figure 17: We use conservative operating rate assumptions following the quake, but expect an earnings recovery from 2Q on Nissan Motor – quarterly capacity utilization and op. profit trends
Source: Company data and Barclays Capital estimates
Over the longer term, we expect earnings contributions from the V-Platform
Over the medium term we are focusing on the V-Platform that Nissan has started to roll out, centring on emerging markets. Because it is still not possible to expect major economies of scale, we have not allowed for large contributions to profits in FY3/12. The V-Platform is Nissans new global platform covering the A/B segments centring on emerging economies (but also partially in advanced economies, including Japan. The company aims to increase sales volume for V-Platform vehicles from 530,000 vehicles in FY3/10 to over 1m vehicles in FY3/14, and we expect it to be able to greatly reduce costs from previous levels via localization and far-reaching sharing of components (for example, Nissan managed a 25% decrease in the case of the new March, despite an increase in product competitiveness).
If Nissan were able to post high profit margins on small cars as well, it would mean Nissan would be able to quickly accelerate its sales expansion strategy in emerging markets, which are growth markets, improving its position in global competition, and increasing its potential for earnings growth over the longer term. Normally, profitability is low in many cases for small vehicles, but with the V-Platform, Nissan aims to achieve its companywide OP margin target (of 8%) for this segment as well.
Figures 18-19 show trends for Nissan OP positive and negative factor analysis
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Figure 18: In FY3/11 major sales growth drove earnings Nissan: ‘+ve/-ve factors for OP in FY10 yoy
Figure 19: Continued top line growth expected Nissan: P‘+ve/-ve factors for OP in FY11 yoy
FY09
FY10E
Sales volume/product mix
Change inproduction costs
Change in rawmaterial costs
Change in serviceguarantee costs
Retail financing
After-sales .costs
Sales costs
Forex impact
Residual value riskon auto loans
Change in R&D costs
0
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1,000,000Nissan-OP Walk down:FY09-->10E¥ mn
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Change in R&D costs
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Forex impactSales costs
0
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200,000
300,000
400,000
500,000
600,000
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800,000Nissan-OP positives and negatives:FY10E-->11E¥ mn
Source: Barclays Capital estimates Source: Barclays Capital estimates
Figure 20: Top line growth continues; dollar and euro forex risk relatively low Trends for Nissan OP positive and negative factor analysis
OP variance analysis2004/3 2005/3 2006/3 2007/3 2008/3 2009/3 2010/3 2011/3E 2012/3E 2013/3E 2014/3E 11/3 CoE New
Change in raw material costs - - +60,000 +59,900 +88,200 +400 +215,400 +96,600 +59,200 +58,500 +60,800 +95,000 Raw material/energy costs - - -100,000 -110,100 -84,700 -134,200 +81,000 -88,800 -41,700 -25,100 -26,000 -90,000 Change in purchasing costs +183,000 +131,000 +160,000 +170,000 +172,900 +134,600 +134,400 +185,400 +100,900 +83,600 +86,800 +185,000Change in production costs - -15,000 -16,900 -4,900 -9,200 +8,200 +20,400 +23,100 -34,200 -48,400 -52,200Residual value risk on auto loans - - - - - -91,800 +141,700 -20,000 0 0 0 -20,000Change in service guarantee costs - -41,000 -37,000 +1,900 +7,600 +5,600 -8,800 +10,000 0 0 0 0Change in R&D costs -54,000 -44,000 -22,600 -1,400 -1,500 -8,700 +64,500 -39,500 -21,300 -7,200 -12,400 -40,000Change in product enhancement, regulato -83,000 -92,000 -69,000 -66,300 -52,200 -13,800 -7,100 0 0 0 0 0Retail financing - - - - - -40,200 +50,100 +34,100 -40,700 +900 -23,100 +20,000After-sales costs -26,300 -25,700 -10,200 -6,600 -18,000 -26,700 +81,800 +30,000 0 0 0Impact of changes to scope of consolidate - +31,000 +21,000 +29,800 -21,700 -4,300 0 0 0 0 0 +18,000Total +84,700 +36,300 +10,600 -94,900 +13,900 -928,800 +449,500 +245,400 -202,700 +391,000 +65,100 +233,000 Source: Company data, Barclays Capital estimates
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Alliance with Renault: Long-term benefits for Nissan, too
Given the relative OP performance (1.7% at Renault vs. 7.3% at Nissan over the past 10 years) it is easy to dismiss the alliance with 44% owner RNO as being more relevant to RNO than Nissan. However, we see three key benefits to Nissan:
(1) Scale
The Renault Clio adds just over 500k units to Nissan’s B-platform. Efforts to rationalize the rest of the combined fleet have been slow (in part due to product cycles), but having achieved (1.5mn) units on the combined B platform, there are plans in place to launch a C/D platform that will achieve annual production volumes of 1.5mn units. In terms of purchasing power, the combined group produces close to 8mn units vehicles per annum making it the 3rd biggest carmaker globally, on par with GM.
(2) EV
The total over JPY400bn investment in electric vehicle technology has been shared with RNO. The Nissan Leaf was the first product to mkt, but RNO has 3 models (Fluence, Zoe, Twizzy) that will come to mkt using the investment.
(3) Entry level expertise
RNO has enjoyed continued success with its Logan project. This vehicle, based on prior generation Clio technology, was designed to be built for EUR3.5k and sold for EUR5k. The model range has expanded to 5 variants, units have grown to c.640k in 2010 and, whilst not disclosed, we estimate operating margins are in the range of 4-5%.
Risk factor: Impact of “Nissan is a China-related stock” top-down approach
Besides the impact of the earthquake, a risk factor that could cause Nissan to underperform the other firms in our coverage contrary to our expectations would be deceleration in the Chinese market (falling into negative YoY growth) or low equity market expectations for the direction of the Chinese market. In 2011 we expect the Chinese market to grow 8% YoY, of which Nissan will face -1% YoY. Given the impact from the quake, we do not expect the growth rate at Nissan to match the market average in 2011, but over the long term we believe the outlook for sales is still good, as Nissan uses its low-priced Sunny sedan as a weapon to help it open up the regional markets. However, if the markets were to continue to merely consider Nissan as a China-related stock and not take into account trends specific to the company, its stock could underperform those of other firms in the sector.
Figures 21 to 22 show capacity utilization at Nissan’s domestic and North American plants, and direct damage from the quake.
Figure 21: Nissan Motor – capacity utilization at domestic plants following quake Operations suspendedOvertime operations suspended. Operating hours shortened
Resumption of auto production at all domestic plants fromApril 11. Until end-April, production capacity utilization forcomponents for overseas production and autos roughly 50%pre-disaster target. Plans to increase capacity utilizationstarting from May.
Source: Company data, compiled by Barclays Capital
Figure 22: Nissan Motor – capacity utilization at North American plants following quake Operations suspendedOvertime operations suspended. Operating hours shortened
Tochigi Plant, Oppama Plant:Some damage to buildings but operationsresumed;Damage at Tochigi more extensive thanOppama
Iwaki Plant: Damage to buildingsand facilities(targets full resumption ofoperations in latter half of April)
Nissan brand vehicles: Roughly1,000
Infiniti brand vehicles: Roughly1,300
Fukushima, Miyagi: Extensive damage -
ToyotaMotor Yaris sedan, etc.: Roughly 1,000
7 prefectures in Tohoku/KantoCompletely destroyed: 10 of 810Some damage: 300 of 810
-
MazdaMotor - - - Operations impacted at some dealerships -
DaihatsuMotor - - 200-300
Operations suspendedMiyagi: 7/14Fukushima: 1/14
-
HondaMotor -
Tochigi Factory: Damage to walls,ceiling partially collapsed, butrepairs and inspection completed
- -Automobile R&D center, Honda Engineering:Significant damage, full resumption ofoperations expected to take several months
SuzukiMotor - - Approximately 2,000 No dealerships completely destroyed
(unaffiliated dealerships not confirmed) -Fuji HeavyIndustries - - - Extensive damage -YamahaMotor - - - - Damage to motor sports facility in Miyagi
Prefecture
Damage to auto industry property (as of March 29)
3 plants in Tohoku: No serious damage to buildings or facilities
Plants Vehicles(vehicles damaged by tsunami) Other facilitiesDealerships
Source: Company data, various sources,, compiled by Barclays Capital
Figures 24-30 show Nissan’s consolidated P&L statements, sales and OP trends by segment, wholesale and retail sales volume trends by region, consolidated balance sheets, and consolidated statements of cash flows.
We, Kei Nihonyanagi and Yoshihiko Nishizawa, hereby certify that (1) the views expressed in this research report accurately reflect our personal views about any or all of the subject securities or issuers referred to in this research report and (2) no part of our compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this research report. IMPORTANT DISCLOSURES:
Rating and Price Target Chart
Nissan Motor Co., Ltd. (7201.T) (13 Apr 2011) JPY 716
Barclays Bank PLC and/or an affiliate has received compensation for investment banking services from this issuer in the past 12 months. Barclays Bank PLC and/or an affiliate expects to receive or intends to seek compensation for investment banking services from this issuer within the next 3 months. Barclays Bank PLC and/or an affiliate beneficially owns 1% or more of any class of common equity securities of this issuer. One of the analysts on the coverage team (or a member of his or her household) owns shares of the common stock of this issuer. Barclays Bank PLC and/or an affiliate trades regularly in the shares of this issuer. Barclays Bank PLC and/or an affiliate has received non-investment banking related compensation from this issuer within the past 12 months. This issuer is, or during the past 12 months has been, an investment banking client of Barclays Bank PLC and/or an affiliate. This issuer is, or during the past 12 months has been, a non-investment banking client (securities related services) of Barclays Bank PLC and/or an affiliate. Valuation Methodology Our target price for the next 12 months is JPY870, calculated based on the correlation between ROE and P/B for the firms under our coverage. Our outlook for earnings growth from FY3/13 onwards remains unchanged, and the current share price appears overly discounted. Risks Which May Impede the Achievement of the Price Target Risks other than the earthquake impact include persistent stock market concerns about monetary tightening in China and forex trends.
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Related Mentions Daihatsu Motor (7262.T) (13 Apr 2011) JPY1,125 2-Equal Weight / 2-Neutral
Toyota Motor (7203.T) (13 Apr 2011) JPY3,285 2-Equal Weight / 2-Neutral
Yamaha Motor (7272.T) (13 Apr 2011) JPY1,463 3-Underweight / 2-Neutral
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IMPORTANT DISCLOSURES CONTINUED:
The analysts responsible for preparing this report have received compensation based upon various factors including the firm's total revenues, a portion of which is generated by investment banking activities.
For current important disclosures regarding, including, where relevant, price target charts, companies that are the subject of this research report, please send a written request to: Barclays Capital Research Compliance, 745 Seventh Avenue, 17th Floor, New York, NY 10019 or refer to http://publicresearch.barcap.com or call 1-212-526-1072.
On September 20, 2008, Barclays Capital acquired Lehman Brothers' North American investment banking, capital markets, and private investment management businesses. All ratings and price targets prior to this date relate to coverage under Lehman Brothers Inc. Research analysts employed outside the US by affiliates of Barclays Capital Inc. are not registered/qualified as research analysts with FINRA. These analysts may not be associated persons of the member firm and therefore may not be subject to NASD Rule 2711 and incorporated NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst’s account.
Barclays Capital produces a variety of research products including, but not limited to, fundamental analysis, equity-linked analysis, quantitative analysis, and trade ideas. Recommendations contained in one type of research product may differ from recommendations contained in other types of research products, whether as a result of differing time horizons, methodologies, or otherwise.
Guide to the Barclays Capital Fundamental Equity Research Rating System:
Our coverage analysts use a relative rating system in which they rate stocks as 1-Overweight, 2-Equal Weight or 3-Underweight (see definitions below) relative to other companies covered by the analyst or a team of analysts that are deemed to be in the same industry sector (the “sector coverage universe”). Below is the list of companies that constitute the sector coverage universe:
Daihatsu Motor (7262.T) Fuji Heavy Industries (7270.T) Honda Motor (7267.T) Mazda Motor (7261.T) Nissan Motor (7201.T)
Suzuki Motor (7269.T) Toyota Motor (7203.T) Yamaha Motor (7272.T)
In addition to the stock rating, we provide sector views which rate the outlook for the sector coverage universe as 1-Positive, 2-Neutral or 3-Negative (see definitions below). A rating system using terms such as buy, hold and sell is not the equivalent of our rating system. Investors should carefully read the entire research report including the definitions of all ratings and not infer its contents from ratings alone.
Stock Rating
1-Overweight - The stock is expected to outperform the unweighted expected total return of the sector coverage universe over a 12-month investment horizon.
2-Equal Weight - The stock is expected to perform in line with the unweighted expected total return of the sector coverage universe over a 12- month investment horizon.
3-Underweight - The stock is expected to underperform the unweighted expected total return of the sector coverage universe over a 12- month investment horizon.
RS-Rating Suspended - The rating and target price have been suspended temporarily due to market events that made coverage impracticable or to comply with applicable regulations and/or firm policies in certain circumstances including when Barclays Capital is acting in an advisory capacity in a merger or strategic transaction involving the company.
Sector View
1-Positive - sector coverage universe fundamentals/valuations are improving.
2-Neutral - sector coverage universe fundamentals/valuations are steady, neither improving nor deteriorating.
3-Negative - sector coverage universe fundamentals/valuations are deteriorating.
Distribution of Ratings:
Barclays Capital Equity Research has 1734 companies under coverage.
43% have been assigned a 1-Overweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Buy rating; 52% of companies with this rating are investment banking clients of the Firm.
42% have been assigned a 2-Equal Weight rating which, for purposes of mandatory regulatory disclosures, is classified as a Hold rating; 44% of companies with this rating are investment banking clients of the Firm.
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12% have been assigned a 3-Underweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Sell rating; 34% of companies with this rating are investment banking clients of the Firm.
Guide to the Barclays Capital Price Target:
Each analyst has a single price target on the stocks that they cover. The price target represents that analyst's expectation of where the stock will trade in the next 12 months. Upside/downside scenarios, where provided, represent potential upside/potential downside to each analyst's price target over the same 12-month period.
Barclays Capital offices involved in the production of equity research:
London Barclays Capital, the investment banking division of Barclays Bank PLC (Barclays Capital, London)
New York
Barclays Capital Inc. (BCI, New York)
Tokyo Barclays Capital Japan Limited (BCJL, Tokyo)
São Paulo Banco Barclays S.A. (BBSA, São Paulo)
Hong Kong Barclays Bank PLC, Hong Kong branch (Barclays Bank, Hong Kong)
Toronto Barclays Capital Canada Inc. (BCC, Toronto)
Johannesburg Absa Capital, a division of Absa Bank Limited (Absa Capital, Johannesburg)
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