Earnings environment challenging, lowering profit forecast: reiterating Neutral

Research evidence excerpt

Earnings environment challenging, lowering profit forecast: reiterating Neutral

ing across the

Absolute and TOPIX-relative share price industry, we reduce our outlook for this metric for Acom because we think

growth will be less than we previous expected as management enforces

expense discipline. Second, there appears to be a rising share of NPLs

with a high loss provisioning rate among those with restructured terms. We,

therefore, revise up outlook for the bad loan provisioning rate and bad loan

costs. Third, we factor in more IT expenses, including for security measures.

We also conservatively account for expenses related to marketing initiatives

at the start of the fiscal year.

WATCH: Still looking for ROA improvement

Despite the ongoing growth of the guarantee business, we believe Acom isSenior Analyst Naruhiko Sakamaki

+81 3 6202 8476 naruhiko.sakamaki@mizuho-sc.com in a phase of waning profit growth expectations based on the disappointingly

weak new customer acquisitions in the unsecured loan business and the

Click here for ESG on higher interest rate burden. We are still awaiting a recovery in the overseas

our entire coverage business from an upturn in the macro environment and for the company to

secure profit growth with an improved ROA driven by better cost efficiency.

MEASURE: Price objective of ¥485 based on PBR

We base our ¥485 price objective on a PBR of 1.02x (previously 1.06x) and

our end-FY3/27 BPS estimate of ¥477.1. The target multiple is based on our

FY3/28 adjusted ROE estimate of 10.2% and a cost of capital of 10%. The

ROE we use for our valuation approach excludes additions to allowances for

losses from interest refunds in consideration of continuity with past figures.