Hoshizaki Earnings: Expecting Further Domestic Sales Growth Supported by Inbound Demand

Hoshizaki’s March quarter revenue growth of 25% year on year was better than our forecast of 17% growth, which was mainly from price increases and strong demand in Japan. According to the Japan Food Association, while the number of restaurants declined 1.3% year on year, the number of customers increased by 8% in March. Moreover, we were pleasantly surprised by the faster-than-expected recovery of the number of customers in pubs and dinner restaurants, which grew 66% and 26% year on year respectively, for the same month. Considering the strong recovery in the number of restaurant customers, we expect increases of both inbound and domestic consumers will lead to further capital investments in existing facilities, despite the inflationary headwinds. As such, we revise our 2023 revenue growth projection to 13.4% year on year, up from 10.1% previously (with Japan sales growing 9.5%, up from 5.0%), and raise our fair value estimate to JPY 5,200 from 5,000. We think shares are fairly valued.