LY Corp Earnings: Shows Commitment to Improving ROE, ID Integration Underway; Raise Fair Value 9%

We raise LY Corp’s fair value estimate to JPY 480 from JPY 440 after fine-tuning our midterm margin projection as LY Corp showed commitment to improve return on equity, specifically, aiming to recover EPS to JPY 18.70, the level before integration. LY Corp achieved record-high September-quarter adjusted EBITDA, and we were surprised by the huge improvement in the strategy segment. This gave us more confidence that LY Corp will be able to continuously improve margins through disciplined cost control. We also anticipate Line-Yahoo ID integration, which began in October, to accelerate growth in advertisement and e-commerce in the long run. The market reacted positively following the announcement, so we believe the stock is now fairly valued.