Hoshizaki Earnings: Margins to Weaken in 2024 but Acquisitions Support Future Expansion

Hoshizaki’s fiscal 2024 operating income guidance of JPY 44 billion aligns with our projection but falls short of market expectations. Our 2024 operating income estimate is unchanged; however, we raise our medium-term projection based on a more robust outlook from consolidating Turkey-based Ozti in the second quarter of 2024. While the combination of fixed costs from Ozti’s capacity expansion and one-time cost accounting treatments from the company will limit the profit contribution in 2024, we expect the company will utilize Ozti’s established channels to increase sales in growing markets in Europe, Middle East, and Africa over the longer term. As such, we expect capacity utilization to improve and revise our 2027 operating income estimate to JPY 54 billion, up from JPY 50 billion, thus raising our fair value estimate of Hoshizaki to JPY 5,500 from JPY 5,200. We believe shares are fairly valued.