SMS (2175): After confirming ambitious growth plans, focus turns to concrete strategies

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SMS (2175): After confirming ambitious growth plans, focus turns to concrete strategies

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SMS (2175)

After confirming ambitious growth plans,

focus turns to concrete strategies

Reiterate Rating: UNDERPERFORM | PO: 1,450 JPY | Price: 1,795 JPY

14 May 2026

Raise PO to ¥1,450 but reiterate Underperform rating Equity

We revise our forecasts to reflect the 5-year growth roadmap, raising our sales

estimates but lowering FY3/27-29 OP estimates by 6-12% in response to the planned

aggressive growth investment. We reiterate our Underperform rating, despite the Key Changes

encouraging commitment to ambitious growth, owing to the lack of specific measures (¥) Previous Current

and the demanding P/E of 24x FY3/27 EPS. We hike our DCF-based price objective from Price Obj. 1,400.00 1,450.00

¥1,400 to ¥1,450 to reflect the expected improvement in long-term FCF from the 2027E Rev (m) 68,374.0 70,041.0

planned growth investment. 2028E Rev (m) 72,156.4 74,651.3

2029E Rev (m) 75,293.2 79,419.0

FY3/31 EBITDA target of ¥28bn looks overly ambitious 2027E EPS 88.74 74.45

The two core tenets of the roadmap are (1) market share expansion (20% to 30%) and a 2028E EPS 100.12 82.61

50% boost in employee productivity for the Career business and (2) bolstering customer 2029E EPS 109.13 91.33

acquisition (14% to 21%) for the Management Support business by expanding into other

domains (elderly and disability welfare care). While strategy looks reasonable, we await Ritsuo Watanabe >>

disclosure of specific initiatives in the medium-term business plan to be presented by Research Analyst

BofAS Japan

the new management team by April 2027. We forecast FY3/31 EBITDA of ¥15bn, ritsuo.watanabe@bofa.com

reflecting uncertainties in market share gain and productivity improvement. Kei Takeuchi >>