West Japan Railway "Time to wait for a while" (Neutral) Isogai

研报英文原文证据摘录

West Japan Railway "Time to wait for a while" (Neutral) Isogai

be hiked in

From To % ch Cons.

March 2029. Based on examples from industry peers, the scale of the fare hikes is likely 03/27E 246.4 228.7 -7 233.8

to be 8-10%. 03/28E 232.5 227.2 -2 233.9

03/29E 226.5 206.2 -9 236.0

Real estate business might also be in investment phase during first half of plan

Yusuke Isogai, CFAIn the new medium-term plan, the company presented a target to almost double OP in

Analyst

the real estate business to ¥85bn in FY3/31 (FY3/27 guidance: ¥45.5bn). Toward yusuke.isogai@ubs.com

achieving this target, the company anticipates the opening of new commercial facilities, +81-3-5208 6204

accelerated property sales and M&A deals. However, upfront investment looks likely to

continue for some time, and it is not clear how M&A will boost profit growth. It is likely

to take time before the business attracts more attention from investors. We look for

management to disclose profit targets for each sub-segment (property leasing, property

sales and hotels), as well as present a more concrete growth story.

Valuation: Re-evaluation still appears some way off

We are lowering our price target from ¥3,250 to ¥2,900, based on a FY3/27E PER of

13X, below the historical average of 14X because rising railway costs are likely to weigh

on earnings. Fare hikes are a positive, but uncertainty over the timing and scale of the

increases is likely to cap upside in the share price. We believe this uncertainty needs to be

removed before there can be a full-fledged rise in the share price.

Highlights (¥b) 03/24 03/25 03/26 03/27E 03/28E 03/29E 03/30E 03/31E

Revenues 1,635.0 1,707.9 1,845.8 1,849.0 1,905.1 1,961.1 2,072.4 2,246.9

Operating profit 179.7 180.2 198.1 173.1 175.0 164.7 214.5 217.0