NS Group (471A): Earnings model update

Research evidence excerpt

Insurance, Securities, Diversified

We fine-tune our earnings forecasts for NS Group based on results through 2Q FY2026. We maintain our December 2027 price target of ¥1,800 and our Overweight rating. It is worth noting that in 2Q, new guarantee volumes were weak not only for residential but also for commercial properties. On the other hand, we expect recurring revenue to remain solid, supported by gradual price increases. We believe that even in periods of strengthening inflation, the earnings base of the rent guarantee service is stable, and from a valuation perspective, including dividend yield, the stock still appears undervalued.

Overview of earnings forecasts: We forecast operating revenue of ¥33.2 billion for FY2026 (guidance: ¥33.1 billion), ¥36.3 billion for FY2027 (+9% YoY), and ¥39.0 billion for FY2028 (+7% YoY). We forecast net profit of ¥8.0 billion for FY2026 (guidance: ¥7.9 billion), ¥8.6 billion for FY2027 (+7% YoY), and ¥9.5 billion for FY2028 (+10% YoY). We think achieving the topline target of ¥36.5 billion in FY2027, the final year of the current medium-term plan, will be somewhat challenging given the current business environment, but the profitability target of an adjusted EBITDA margin of around 43.0% looks achievable. The company recognizes that the competitive environment is becoming more challenging even in the commercial segment, as existing players, which have mainly focused on the residential segment, are entering the commercial segment. In light of this business environment, we have slightly lowered our outlook for new commercial guarantee volumes and take a somewhat cautious view of growth in operating revenue. For the commercial segment, as with the residential segment, the company prioritizes profitability over volume, even if it means accepting a slight decline in volumes. For renewal guarantee fees, the company states it is now raising unit prices at the