Hoshizaki Earnings: Record High Nine-Months Revenue; Fair Value Estimate Raised 3.6% to JPY 5,700

Wide-moat Hoshizaki marked another strong quarter result, with quarterly revenue growth of 15% year on year, ahead of our previous estimate of 9%. While Japan segment sales increased by 5.5% year on year as inbound travel continues to grow, we were also surprised by 8% year-on-year sales growth in Americas, driven by strong demand in dispenser products as well as the 44.5% year-on-year sales growth in Asia especially thanks to better-than-expected business expansion in India. Based on the upbeat results, we raise our fiscal 2024 companywide revenue growth assumption to 16.2% from 12.4%, reflecting our view that the strong momentum will continue at least one more quarter in Japan, Americas, and Asia. Meanwhile, we raise our companywide operating margin assumption for fiscal 2024 to 12.1% from 11.2%, as we are encouraged by an operating margin of 13.7% in the September quarter, which surpassed our previous forecast of 11.5% mainly due to the increasing portion of own manufactured products sales. As a result, we raise our fair value estimate for Hoshizaki to JPY 5,700 from JPY 5,500. We are also impressed by the newly announced equity buyback program, with the buyback amount set at up to JPY 10 billion right after the completion of the previous buyback program in July. As the share price hiked nearly 20% since the result announcement on Nov. 12, we think Hoshizaki’s midterm outlook is priced in.