Initiating Coverage on Zozo, Japan’s Top Fashion E-Commerce Platform; JPY 3,500 FVE

We initiate coverage of Japanese apparel e-commerce platform Zozo with a fair value estimate of JPY 3,500 and a narrow economic moat rating. With the company’s broad range of fashion brands and attractive customer base, as well as its extensive fashion fulfillment capabilities built over the past 20 years, we believe it is well-positioned to benefit from the growth in online penetration in fashion, driven by the shift in consumer habits and technological advancement in the next five years. We believe Zozo’s shares are moderately undervalued because we have more confidence than the market in Zozo's medium- to long-term growth.