Hoshizaki Earnings: Expect Moderate Growth in the Second Half Amid Macroeconomic Headwinds

While Hoshizaki’s June quarter sales of JPY 93 billion, up 20% year on year, were largely in line with our expectations, its operating margin of 12.0% exceeded our forecast of 9.8% due to progress in cost pass-throughs in the domestic market. In addition, the product mix was better than expected, as sales of low-margin refrigerators were lower due to a production issue in Europe and inventory adjustments in the Americas; further, this shortfall was offset by better-than-expected sales of high-margin ice dispensers. Although we expect the product mix to revert to normalized levels in the second half of the year, we raise our operating margin assumptions for 2023 and 2024 by 0.4% and 0.5%, respectively, given the better-than-expected margin recovery in the first half. However, we maintain Hoshizaki’s fair value estimate of JPY 5,200 as sales forecasts and profit margin assumptions are largely unchanged after 2025. We view its shares as currently fairly valued.