Capcom Earnings: Weak Third Quarter but We Remain Confident in Target Operating Profit Achievement

Capcom delivered somewhat underwhelming December-quarter results, mainly due to the digital content segment’s unit sales and margin both missing our expectations because of a less favorable title mix and unexpected impairment losses. Nonetheless, management expressed strong confidence in the successful launch of Monster Hunter Wilds in the March quarter and retained its operating income guidance of JPY 64 billion for fiscal 2024 (ending March 2025). After tweaking our currency assumptions for the March quarter, we bumped up our revenue forecast slightly to JPY 171 billion from JPY 166 billion, but maintained our operating income forecast of JPY 64 billion for fiscal 2025. We broadly maintain our medium-term forecasts and fair value estimate of JPY 3,000. We believe shares are currently slightly overvalued.