Hikari Tsushin "CEO meeting takeaways" (Neutral) Watanabe

Research evidence excerpt

Hikari Tsushin "CEO meeting takeaways" (Neutral) Watanabe

e 03/29E 2,612.1 3,249.9

risk of a rise in credit costs due to an economic slowdown stemming from the Middle

Mariko WatanabeEast situation and other issues is low. In fact, past conflicts have not resulted in financial

Analyst

impairment, according to the president. Compared with other businesses, the ROIC of mariko.watanabe@ubs.com

the finance business is lower, and it is expected to continue to expand as long as it +81-3-5208 6297

exceeds the cost of capital, but the company intends to restrain lending if returns fall

below the 10% benchmark.

Product development

The OP plan for FY3/27 is ¥130.0bn, and management believes it could reach around

¥200.0bn with the existing product line-up. The company is constantly evaluating new

products and is developing products that are expected to grow to a certain scale within

the next 1-3 years.

Marketable securities investment

As at the end of March, the company was investing in approximately 800 listed

companies. In FY3/26, the company invested ¥9.4bn in tender offers for 16 companies.

It is becoming increasingly difficult to maintain an IRR as high as in the past given rising

interest rates and a decrease in undervalued stocks, and the company plans to sell some

of marketable securities. In March-April, it resolved to make two companies in which it

has stakes wholly-owned subsidiaries, and will proceed with PMI hereafter. The

company’s securities investments are purely investments and are not for the purpose of

Highlights (¥b) 03/24 03/25 03/26 03/27E 03/28E 03/29E 03/30E 03/31E

Revenues 601.9 686.6 734.8 802.4 853.9 908.3 965.0 1,023.9

Operating profit 94.5 105.0 113.1 127.2 135.7 144.7 153.4 162.6

Recurring profit 168.0 150.7 195.5 151.2 159.2 167.7 176.9 186.1