Expecting domestic business to offset shortfall in US detached housing business

Research evidence excerpt

Expecting domestic business to offset shortfall in US detached housing business

r our FY1/27 OP forecasts for the

Absolute and TOPIX-relative share price overseas business, and, due to higher costs stemming from the situation

in the Middle East, for the custom detached houses business, the rental

housing & commercial buildings business, and the remodeling business.

However, we raise our OP forecasts for the rental housing management

business (rent hikes, cost controls), the architectural/civil engineering

business (improved construction margins), the condominiums business, and

the urban redevelopment business (accelerated sales of buildings owned by

the company). (More on page 2)

WATCH: Outlook for reducing interest-bearing debt

At end-FY1/26, Sekisui House’s interest-bearing debt stood at ¥1.8817t,Senior Analyst Yoshihiro Hashimoto

+81 3 6202 8157 yoshihiro.hashimoto@mizuho- around 2.4x the end-FY1/24 level (¥744.9b), which was prior to the MDC

sc.com acquisition. The number of years it takes for the company to repay debt (= net

interest-bearing debt/EBITDA) rose from 1.57 years at end-FY1/24 to 3.54 Click here for ESG on years at end-FY1/25. However, we expect this figure to fall to below three our entire coverage years as, partly to maintain its credit rating, the company accelerates real

estate sales through end-FY1/27 and reduces interest-bearing debt.

MEASURE: Valuation approach for our ¥3,900 price objective

As before, our price objective is based on an EV/EBITDA of 8.5x and our

FY1/28 estimates. Our ¥3,900 price objective equates to a PER of 10.5x on

our FY1/28 EPS estimate and a dividend yield of 3.8% based on our FY1/28

DPS estimate.

Consolidated results and forecasts Share Price: ¥3,254 (8 Jun) 52wks: H ¥3,832 L ¥3,000