Park24: Raising our earnings forecast and price target

Research evidence excerpt

Park24: Raising our earnings forecast and price target

il price declines, we are revising

From To % ch Cons.

up our mobility business OP forecasts from ¥15.3bn to ¥17.7bn for FY10/26 and from 10/26E 248.6 255.1 3 181.8

¥15.3bn to ¥20.8bn for FY10/27 (company plan: ¥18.5bn). Compared with 10/27E 151.2 155.7 3 159.7

approximately 82mn vehicles nationwide and 3.17mn vehicles for rent/lease, the 10/28E 170.7 170.9 0 186.8

company had 67,000 vehicles for car sharing as of end-April, suggesting substantial

room for a higher penetration rate. Assuming annual additions of 8,000 vehicles from Mariko Watanabe

FY10/27 onward, we forecast a mobility business OP CAGR of +16% over the next three Analyst

mariko.watanabe@ubs.com

years.

+81-3-5208 6297

Financial strategy is entering a phase of pursuing efficiency

Management noted that it considers net debt/EBITDA (we forecast 0.8X for FY10/26),

together with the shareholders’ equity ratio and interest-bearing debt ratio, to be key

indicators of financial soundness, and recognises that it currently has some capacity to

apply modest leverage. The company’s financial strategy appears likely to enter a phase

focused on the pursuit of efficiency. Capex appears likely to undershoot the plan due to

a slowdown in car-sharing vehicle additions. We are therefore revising up our FY10/26

operating cash flow forecast from ¥62.9bn to ¥63.5bn.

Valuation:

Our price target is based on a DCF model (after dilution) assuming a growth rate of 0%

and a WACC of 6.8%, up from 6.5% to reflect interest rate rises, equating to FY10/27E

PER (before dilution) of 18X.

Highlights (¥b) 10/23 10/24 10/25 10/26E 10/27E 10/28E 10/29E 10/30E

Revenues 330.1 370.9 406.2 411.1 439.2 472.7 509.0 543.8

Operating profit 32.0 38.7 37.6 41.6 44.4 47.8 53.2 57.1