Earnings quite firm on overseas rebound, domestic share gain; higher cost risk

Research evidence excerpt

Earnings quite firm on overseas rebound, domestic share gain; higher cost risk

in the

Absolute and TOPIX-relative share price mainstay DS business is to treat the customer as its utmost priority and to

delegate authority, making it possible to offer a wide range of products at

discounted prices. The company’s targeted total addressable market (TAM)

is expected to expand from the around ¥98t presently to about ¥130t by

2035. Its long-term plan (through FY6/35) aims to more rapidly implement

strategies such as growing the existing business through new store openings

and merchandising strategies, developing a new food-focused format, and

increasing demand from foreign visitors to Japan. We believe Japan’s shift

from deflation to inflation and labor shortages/wage growth make more M&A

initiatives along the lines of the Olympic acquisition likely, leading us to

Senior Analyst Toshio Takahashi anticipate ongoing stable growth.+81 3 6202 8325 toshio.takahashi@mizuho-sc.com

Senior Analyst Hideya Asaeda WATCH: Caution on forex trends

+81 3 6202 8598 hideya.asaeda@mizuho-sc.com

We note the risk of fluctuations in tax-free sales and the short-term share

Click here for ESG on price from forex trends and geopolitical developments.

our entire coverage MEASURE: Lowering price objective to ¥1,170

Our new price objective of ¥1,170 reflects our revised earnings forecasts and

is based on a PER of roughly 26x our FY6/28 EPS estimate. Although we

still see the potential for accelerated growth in the domestic DS business,

the target multiple now references the stock’s average PER of roughly

26x over the past two years or so out of consideration for changes to the

external environment, including the situation in the Middle East (valuation