Raise PT to ¥7,800; Remain Bullish on Accelerating Growth

Research evidence excerpt

Raise PT to ¥7,800; Remain Bullish on Accelerating Growth

aising PT to ¥7,800: We are raising our PT to ¥7,800 (from ¥6,300), which implies

23.9x FY2/27E P/E and 19.2x FY2/28E P/E. We now position BC at a premium to the IT services Figure 1 - Peers' P/E Valuation (as of 3 July

sector and maintain our bullish view, as the company is accelerating sales growth to 28.1% 2026)

YoY (JEF 28.4%) this fiscal year based on company guidance. BC has also been aggressively 25.0 21.5 21.7

19.6hiring industry specialists, including talent from the defense sector. 20.0 18.8 18.8 19.2

16.3

15.0

13.6We believe a meaningful portion of the earnings acceleration will be driven by defense and

12.5

cybersecurity-related projects. BayCurrent's cybersecurity revenue is currently just under ¥9bn, 10.0

with management targeting ¥20bn this fiscal year and potentially ¥30bn over the longer term.

5.0The defense business is also expanding rapidly, with revenue expected to increase from less

than ¥1bn currently to approximately ¥10bn in the near term, and potentially ¥20bn in FY2/28 0.0

or shortly thereafter. Combined, these two businesses could account for 10–20% of total .Source:SHIFTJefferies,TISI FactsetOtsuka Trend Micro Fujitsu BayCurrent Obic IIJ NRI

earnings over the medium-to-long term (see our AI Strategy/Management Meeting write-up

for details). Chart 1 - Stock Performance Index -

BayCurrent Index

We are also positive on BC's ability to remain within its mid-term EBITDA margin target range 250

of 30–40%, with the company targeting an EBITDA margin of 35% this fiscal year. 200

100Ongoing Risk: Despite strong earnings fundamentals, BC remains exposed to the market's AI-

negative perception of consulting stocks. Consequently, the share price may continue to be 50