Goldman Sachs raises Japan Exchange Group target price to ￥2,400 and maintains Buy

Overview

This report is an update by Goldman Sachs on Japan Exchange Group. The key change is that, based on recent trading value, turnover, FY3/27 guidance, and the expectation of BoJ rate hikes, earnings forecasts were raised and the 12-month target price increased to ￥2,400 while maintaining a Buy rating.

Core views

Goldman Sachs believes JPX can benefit from the improving earnings cycle of Japanese listed companies, collateral management income leverage from rising yen interest rates, and long-term derivatives and potential inorganic growth. Recent TSE trading value and turnover increased significantly, and activity remained strong even after excluding AI-related stocks, suggesting a broader base for market activity.

Analysis framework

The report uses adjusted turnover excluding AI-related stocks in the trailing 12 months to reduce the impact of AI-theme volatility on forecasts and thus raises the average daily trading value assumptions; it also factors in expansion of the Arrowhead stock order management system and normal IT capex in the operating expense estimate. The target price is based on FY3/28 EPS multiplied by the five-year average 12-month forward P/E of 25.19x.

Methodology notes

• Valuation methods12-month forward P/E method

  Target price = FY3/28 EPS × 5-year average 12-month forward P/E

  Goldman Sachs calculated a 12-month target price of ￥2,400 using an FY3/28 EPS estimate of ￥95.3 and a 25.19x 12-month forward P/E multiple.

• ForecastingAdjusted turnover excluding AI-related stocks

  Monthly turnover is calculated using trading value and market cap after excluding AI-related stocks

  This method is used to reduce distortion to JPX trading value forecasts from volatility in AI-theme stocks; the report notes turnover remains elevated even after excluding AI.

• Goldman Sachs FrameworkGS Factor Profile

  Compares stock attributes across growth, financial returns, valuation multiples, and an aggregate dimension

  This framework assesses a stock's relative attributes versus the market and industry peers using Goldman Sachs forecasts and standardized ranking.

• M&A FrameworkM&A Rank

  Evaluates the likelihood of a company being a takeover target on a 1-to-3 score

  JPX has an M&A Rank of 3, which means low probability, and it is usually not factored into the target price.

Asset mapping & comparison

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

• Japan Exchange Group (8697.T)

  Covered target

  Strengths

  Japan cash equities market share exceeds 80%, and it can benefit from higher trading value, rising interest rates, and derivatives growth.

  Weaknesses

  Earnings are sensitive to stock market cap, turnover, and trading fees; rising IT spend may also compress profit margins.

  Comparison

  The report says its P/E premium versus peer exchanges and TOPIX has retreated to mid-cycle levels, making the risk-reward more attractive.

  Risks

  A decline in stock market cap and turnover, lower collateral-management interest income than expected, weak derivatives volumes, and trading fee rates below expectations.

Key data

• 12-month target price￥2,400Raised 23% from the previous target price of ￥1,950.
• Current price￥2,122The report cites implied upside of 13.1%.
• ADTV (Apr-Jun 2026)￥12.392 trillionCovers domestic common stocks, ETFs, and REITs, up 106% year-on-year.
• Trading value growth excluding AI-related stocks+49% to +137% YoYThe report states non-AI trading activity also increased sharply.
• FY3/27-FY3/29 net profit forecast revisions+27% / +11% / +12%Reflects trading value trends, FY3/27 guidance, and BoJ policy rate assumptions.
• FY3/28 EPS forecast￥95.3Used in target price valuation calculation.
• FY3/27 DPS forecast￥76Raised from ￥57 previously to reflect a higher dividend assumption given a maintained payout ratio.

Impact & implications

If trading activity in the Japanese stock market remains elevated, JPX's trading and clearing income, market data income, and related earnings leverage should improve. BoJ rate hikes may also lift collateral management income, but system expansion and IT investment could result in higher operating costs.

Risks

• Falling equity market cap could reduce trading value and the fee base.
• Weaker turnover in cash equities would weaken trading and clearing income.
• If the BoJ rate-hike path falls short of expectations, collateral management interest income could be affected.
• Lower-than-expected derivatives volumes would limit long-term growth.
• Actual trading fees below expectations or higher-than-expected IT costs could pressure profitability.

What to watch

• Whether full-year guidance is revised upward, which the report says often happens in September.
• Whether trading value and turnover excluding AI-related stocks can remain elevated after April-June.
• The BOJ policy rate path and its impact on collateral management income.
• The impact of Arrowhead system expansion and normal IT investment on the expense ratio.
• Derivatives product growth and potential inorganic growth opportunities.