Inbound Demand in Japan and Overseas Acquisitions to Drive Hoshizaki’s Sales Growth

Hoshizaki’s 6465 fourth-quarter revenue, ending December, was slightly above our expectations, up 23.9% year on year, supported by postpandemic demand for commercial kitchen equipment worldwide and the acquisition of Italy-based Brema. In the company’s largest market, Japan, investments by restaurants especially picked up, and according to the Japan Food Service Association, domestic chain restaurant sales have finally recovered to 2019 levels in the fourth quarter. While capital investments by pubs/bars remain low compared to restaurants, we expect related investments to pick up in 2023, supported by the recent reopening of borders. Our outlook remains largely unchanged and we maintain our fair value estimate at JPY 5,000. We believe the company’s shares are fairly valued, as expectations of postpandemic growth are priced in.

We raise our 2023 companywide revenue growth assumption to 10.1% year on year, from 3.3% previously, based on a stronger outlook in the Europe/Asia segment. We project segment sales in the year will be twice the amount of prepandemic levels, driven by strong sales in India as well as mergers and acquisitions, including the company’s plan to raise its stake in Turkey-based Oztiryakiler, or Ozti, to 51% in the second half of the year. Over the medium term, we expect Hoshizaki will prioritize sales in the emerging markets, as both Ozti and Western (India) have been expanding capacity. We expect secular drivers like increasing awareness of food safety/preservation will drive refrigerator and freezer demand. Therefore, we project overseas sales will grow at 5% CAGR between 2023 and 2026, which is twice the growth of Japan.