Overseas Business Quantified, Uncertainty Not Dispelled; Downgrade to HOLD

Research evidence excerpt

Overseas Business Quantified, Uncertainty Not Dispelled; Downgrade to HOLD

ina was foreseeable, Q1 revenue declined in Thailand —

the company's largest overseas market — and remained flat in Malaysia, where it holds a high

market share. Exhibit 1 - Lion (4912) EBIT forecasts

12,000 JF E 80.0%

Regarding the localization of management, Lion sources 75% of management personnel 10,000 60.0%

locally. This is a trend seen across various companies, and is not a new phenomenon. 8,000 40.0%20.0%

Therefore, can we definitively say that having a local management structure signifies a phase 6,000 0.0%

of profitable growth overseas? 4,000 -20.0%-40.0%

2,000 -60.0%

Impact of Middle Eastern crude oil prices (Ex. 2, 6): As of March, the company mentioned 0 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2E Q3E Q4E -80.0%

2022/3 2023/3 EBIT2024/3mn 2025/3YoY% (RHS)2026/3an additional negative impact of $10/bbl compared to current assumptions. If prices trend .

towards $100, an additional burden of ¥3–4bn is expected, though mitigation is possible. Source: Company data, Jefferies forecast

Exhibit 2 - Lion (4912) Input material cost YoYRegarding collaboration with dentists in the Oral Healthcare segment, the briefing left an

JF Eimpression of insufficiency, in our view. 2,0001,000

Rationale for PT calculation: We lower our PT to ¥1,800, based on adjustments to our earnings 0

forecasts and valuation multiples. Our PT is now based on 6x FY2026 EV/EBITDA (previously Title(1,000)

Axis(2,000)

8x) and 19x P/E (previously 21x). Regarding the Oral Healthcare Initiative aimed at improving

profitability in key overseas markets, it is difficult to factor in its feasibility at this stage; we (3,000)(4,000) Input material cost mn

view this as a longer-term catalyst.

. (5,000)

Source: Company data, JFE estimates