First Read: Yokohama Financial Group "Monetary policy normalisation..."

Research evidence excerpt

First Read: Yokohama Financial Group "Monetary policy normalisation..."

se for 03/29E 155.1 157.9 2 -

expenses (previously +8.4%). This is the result of reflecting steady growth in loans in the

Koichi NiwaKanagawa and Tokyo areas, which are the company’s main markets. Based on the

Analyst

above, we are revising up our EPS forecast for FY3/27 by 27%, FY3/28 by 11%, and

koichi.niwa@ubs.com

FY3/29 by 2%. The reasons for our price target revision are changing our valuation base +81-3-5208 6245

year (to FY3/28 for BPS, FY3/32 for perpetual growth rate calculation year) and lowering

Makoto Ishiithe cost of capital. The main factor behind lowering the cost of capital is the high

Associate Analyst

visibility of the company's initiatives. Notably, it is maintaining an optimal balance

makoto.ishii@ubs.com

between strategic investments for growth and shareholder returns, while establishing +81-3-5208 3097

and executing a disciplined capital circulation framework, which we have reflected as a

positive factor for the share price valuation.

Valuation:

Our price target is based on a residual income model (RIM). Specifically, it is calculated as

the sum of 1) BPS of ¥1,300 (UBS forecast for FY3/28), 2) discounted present value of

¥130 (residual income period: UBS forecast for FY3/29- FY3/31), and 3) terminal value of

¥533 (period: UBS forecast for FY3/32). We assume COE of 8.5% (estimated by UBS

based on a comprehensive assessment of earnings yield and CAPM) and a perpetual

growth rate of 0.5%.

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

Revenues 223.5 260.3 304.4 356.9 415.0 480.4 503.8

Net operating profit 90.0 126.2 158.3 190.9 234.5 285.8 292.8

Recurring profit 65.9 121.0 153.7 159.5 201.4 245.7 252.3

Net profit (reported) 55.8 81.0 101.8 106.2 135.1 165.8 170.2