Recruit Earnings: Year 0 Is Off to a Good Start

We raise our fair value estimate for narrow-moat Recruit Holdings by 3% to JPY 6,900 per share from JPY 6,700 following first-quarter fiscal 2024 results, which ended in June 2024. The company looks on track to reach management’s guidance for the full year, reiterated during the result. The guidance implies revenue will remain mostly flat on fiscal 2023, as the jobs market stabilizes following several years of strong hiring due to large fiscal and monetary stimulus following the covid-19 pandemic. The reported 6% growth on the previous corresponding period was a jump from 2% growth during the fourth quarter of fiscal 2023, which followed several quarters of negative growth. Margins are expected to expand as the company pursues its "Year 0" strategy, its own version of the "Year of Efficiency," as many other technology companies have done in recent years. At current prices, Recruit shares screen as overvalued after rallying strongly in the past year due to the falling Japanese yen.