SBI Holdings (8473): 1Q Financial Services earnings to be flat QoQ ex one-offs; Securities up a little

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SBI Holdings (8473)

1Q Financial Services earnings to be flat

QoQ ex one-offs; Securities up a little

Reiterate Rating: BUY | PO: 3,400 JPY | Price: 3,038 JPY

Financial Services earnings beat is positive, but we

estimate c.¥25bn of valuation gains included as expected

1Q consolidated PBT came in at ¥225.8bn, substantially exceeding our estimate of

¥98.1bn. NP was ¥148.1bn, around ¥80bn above our forecast. Valuation gains from the

PE investment business reached a high ¥116.1bn. According to company disclosures, 13

portfolio companies are expected to contribute to earnings in FY3/27, of which valuation

gains from 6 companies were recognized in 1Q. The prospect of further PE-related

valuation gains being recognized in future quarters is positive. PBT in the Financial

Services segment was ¥116.0bn, exceeding our estimate of ¥96.6bn by ¥19.4bn. SBI

Securities' NP exceeded our forecast by ¥8.8bn, primarily due to stronger-than-expected

trading gains. We believe Financial Services segment profit included a gain on the sale

of SBI Savings Bank of c.¥25bn. This was consistent with our expectations.

Reiterate Buy given substantial upside on an SOTP basis

As discussed above, 1Q earnings may have been unusually strong, and investors should

be mindful of the sustainability of the current earnings level. The company announced an

interim DPS forecast of ¥30 (YoY +¥10). However, interim dividends have historically

been significantly lower than second-half dividends, making the interim yield less

attractive relative to peers within the sector. After the share price approaches our PO,

investors may enter a period of waiting for the next catalyst, particularly if the US Clarity

Act does not pass the Senate next week.

PO raised to ¥3,400 from ¥3,250

We raise our price objective to ¥3,400 from ¥3,250, based on our SOTP valuation

methodology. For SBI Shinsei Bank, we continue to apply a 12.7x multiple to JGAAP

earnings in deriving fair value. For SBI Securities, we now base our valuation on our

FY3/28 earnings forecast rather than FY3/27. Given the too strong 1Q result, we believe

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