Baycurrent (6532.T): Slight OP miss on upfront costs, but AI, security, defense demand stronger than expected; faster profit growth from 2Q

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Baycurrent (6532.T): Slight OP miss on upfront costs, but AI, security, defense demand stronger than expected; faster profit growth from 2Q

Goldman Sachs Baycurrent (6532.T)

Investment Thesis - Baycurrent

We are Buy rated. Baycurrent is a leading domestic consulting firm (IT consulting /

strategy consulting) primarily serving large enterprises. Through aggressive hiring, the

company is rapidly expanding its supply capacity of consultants and continues to grow

above the industry average. A key strength is its cross-industry project assignment

system. Rather than confining consultants to specific sectors, Baycurrent employs a

“one-pool” system, under which the company flexibly assigns them to projects across a

variety of industries, enabling optimal allocation of human resources. This advantage

translates into higher utilization rates and superior profitability relative to competitors.

Against the backdrop of expanded supply capacity from aggressive hiring and rising

demand for DX/AI/security-related consulting, we expect profit growth to continue

exceeding the sector average. Considering its profit growth potential and the

price-to-earnings ratio (PER) level, we believe the current share price is undervalued.

Price Target, Risks, and Methodology - Baycurrent

Our 12-month target price for Baycurrent is ¥8,100. We apply a target P/E multiple of

20x (a c.15% premium to the IT services sector average of 17.0x) to our FY2/28 EPS

forecast of ¥409. The rationale for assigning a premium to the IT services sector average

is that, given the growth potential of the consulting market and the company’s strong

hiring capabilities, we expect profit growth to exceed the sector average over the

medium term. We forecast a compound annual growth rate (CAGR) in operating profit of