Raising Price Target to ¥3,800

Research evidence excerpt

Raising Price Target to ¥3,800

BV, basic 1.7 2.0 2.0 1.9

Earnings forecasts: We adjust our outlook in light of recent trends, revising OP EV/EBITDA, basic 10.9 12.5 12.2 11.7

forecasts up by 3% for F3/27 and 2% for F3/28. We also add F3/29 forecasts. For Unless otherwise noted, all metrics are based on Morgan Stanley ModelWare

framework

F3/27 1Q, we estimate OP of ¥18.0bn (FactSet consensus: ¥17.4bn). Key focus points ** = Based on consensus methodology

* = GAAP or approximated based on GAAP

for results include SG&A (management at the F3/26 4Q briefing indicated scope to e = Morgan Stanley Research estimates

keep SG&A below plan), GPM control in an environment where high-ticket items are

driving sales, and progress in the approach to domestic and overseas VIP customers.

PT valuation basis: Our new PT of ¥3,800 is derived from a P/B of 2.0x and our

F3/28 BPS estimate. We continue to use P/B as our primary metric given the

historically strong correlation between ROE and P/B. In our April 2026 PT revision,

we used a target P/B of 1.4x, the average since May 2023, reflecting heightened

uncertainty surrounding the Middle East situation at the time and the company's

post-pandemic earnings recovery. We now apply a target P/B multiple of 2.0x, in line

with the average since 2026, when persistent inflation and resulting shifts in

consumer purchasing behavior became increasingly evident in Japan. While this level

may appear somewhat elevated relative to the longer-term trend, given the firm's

Morgan Stanley does and seeks to do business with

stronger relative positioning in times of inflation as opposed to deflation, and taking companies covered in Morgan Stanley Research. As a result,