Hoshizaki (6465) Report Interpretation

Overview

This earnings update assesses Hoshizaki after its 2Q12/26 results. Goldman Sachs found the results and unchanged full-year guidance broadly in line, made minor forecast adjustments, and maintained its Neutral rating and ¥6,000 12-month target price.

Core views

Hoshizaki’s 2Q12/26 operating profit of ¥15.7bn, announced on August 6, was broadly in line with Goldman Sachs’ ¥16.0bn forecast and the LSEG StarMine SmartEstimate consensus of ¥15.6bn. The company also retained FY12/26 operating-profit guidance of ¥55.6bn. Goldman Sachs regards this as broadly in line with its ¥56.0bn estimate, although below market consensus of ¥58.2bn. Management was constructive at a recent CEO meeting, but the institution says this did not materially alter its forecasts or investment view. Goldman Sachs fine-tuned estimates to reflect the quarter while leaving its rating and 12-month target unchanged. Its forecasts show revenue rising from ¥485.9bn in FY12/25 to ¥541.0bn in FY12/26E, ¥581.0bn in FY12/27E and ¥625.0bn in FY12/28E. Operating profit is forecast at ¥56.0bn, ¥66.0bn and ¥74.0bn respectively, with operating margin moving from 10.4% in FY12/26E to 11.4% in FY12/27E and 11.8% in FY12/28E. EPS is projected at ¥290.6 in FY12/26E, ¥353.4 in FY12/27E and ¥410.8 in FY12/28E. The ¥6,000 target price is based on the average of Goldman Sachs’ FY12/26–FY12/27 estimates, applying a sector EV/EBITDA multiple of 10x and a 10% sector-relative discount; this equates to an implied FY12/27 P/E of 17x. At the reported ¥5,656 share price, the target implies 6.1% upside, consistent with the maintained Neutral view rather than a change in investment stance. The report identifies several target-price risks. Shareholder returns could exceed or fall short of assumptions of a 40% dividend payout ratio and ¥30bn per year of share buybacks. Other variables include proactive or passive cash allocation and capital-policy actions, faster or slower M&A-driven growth, and profitability changes caused by shifts in domestic versus overseas regional mix or product mix.

Analysis framework

Goldman Sachs compared reported quarterly operating profit and company guidance with its own forecasts and market consensus, then made minor estimate adjustments. It values the company using a sector EV/EBITDA multiple applied to average FY12/26–FY12/27 estimates, adjusted for a sector-relative discount.

Methodology notes

• Valuation methodsEV/EBITDA valuation

  Sector EV/EBITDA multiple valuation

  Goldman Sachs applies a 10x sector EV/EBITDA multiple to the average of its FY12/26–FY12/27 estimates, then applies a 10% sector-relative discount to derive the ¥6,000 target price.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Hoshizaki (6465.T)

  Primary covered company; its in-line quarterly results support Goldman Sachs’ unchanged Neutral view and ¥6,000 target price.

  Strengths

  2Q operating profit and FY12/26 guidance were broadly in line with Goldman Sachs expectations.

  Weaknesses

  FY12/26 company guidance of ¥55.6bn is below the ¥58.2bn market consensus cited in the report.

  Comparison

  2Q operating profit of ¥15.7bn compared with Goldman Sachs’ ¥16.0bn forecast and ¥15.6bn consensus.

  Risks

  Shareholder-return execution, cash allocation, M&A growth, and regional or product-mix effects on profitability.

Key data

• 2Q12/26 operating profit¥15.7bnBroadly in line with Goldman Sachs’ ¥16.0bn forecast and ¥15.6bn LSEG StarMine SmartEstimate consensus.
• FY12/26 operating-profit guidance¥55.6bnUnchanged; compared with Goldman Sachs’ ¥56.0bn estimate and ¥58.2bn market consensus.
• FY12/26E revenue¥541.0bnGoldman Sachs forecast, versus ¥485.9bn in FY12/25.
• FY12/27E operating profit¥66.0bnGoldman Sachs forecast, following ¥56.0bn in FY12/26E.
• FY12/27E EPS¥353.4Goldman Sachs forecast, versus ¥290.6 in FY12/26E.
• 12-month target price¥6,000Based on 10x sector EV/EBITDA and a 10% sector-relative discount; implied FY12/27 P/E is 17x.

Impact & implications

The in-line quarter and maintained guidance leave Goldman Sachs’ central earnings and valuation case largely intact. The report therefore retains a Neutral rating and ¥6,000 target price rather than changing its investment view.

Risks

• Shareholder returns may differ from Goldman Sachs’ assumptions of a 40% dividend payout ratio and ¥30bn per year of share buybacks.
• Cash allocation measures and capital policy may be more proactive or more passive than assumed.
• M&A could accelerate or decelerate growth.
• Changes in domestic versus overseas regional mix or product mix could improve or weaken profitability.