GO Inc. (581A.T): Ample growth potential in both volume and unit price; poised to achieve high growth accompanied by profitability; initiate at Buy

Research evidence excerpt

GO Inc. (581A.T): Ample growth potential in both volume and unit price; poised to achieve high growth accompanied by profitability; initiate at Buy

Goldman Sachs GO Inc. (581A.T)

Valuation

We believe it is appropriate to apply an EV/EBITDA, or adjusted EBITDA, valuation

methodology to our FY5/28E (FY2) earnings forecast for GO.

This is because (1) although GO is in a growth phase, it has already achieved profitability,

making a profit-based valuation possible; and (2) when comparing GO with other

companies, using EBITDA allows for the exclusion of the effects of depreciation and

amortization, accounting standards, tax systems, and financial structures, including

interest burden.

GO had ¥37.7 bn in tax loss carryforwards on its balance sheet as of end-FY5/26. As GO

is already profitable and the tax-saving effects from utilizing these loss carryforwards

have begun to materialize, we believe the loss carryforwards can also be valued to some

extent through the application of the EV/adjusted EBITDA multiple, in the form of

reduced cash outlays due to a lower corporate tax burden.

Our reasons for using FY5/28 as the valuation base year are as follows:

1. We believe a long-term valuation is possible because the Japanese taxi market in

which GO operates is regulated in terms of the number of taxi vehicles and fares,

making sudden changes in the market environment less likely.

2. Under an ultra-long-term valuation approach, volatility is likely to be amplified by

the relatively high volatility in technology company valuations due to recent

concerns over AI disruption, and by the possibility that GO’s new businesses, such as

logistics-related and robotaxi-related operations, could affect its business outlook.

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