JR Central Earnings: Strong Recovery; Major Delays to Chuo Shinkansen Project

Narrow-moat-rated JR Central recovered strongly, with operating income in the year to March 31, 2024 (fiscal 2024) rising 62% to JPY 607 billion, beating our expectations by 13%. The good result was mainly driven by the transport segment. Management guides to flat earnings in fiscal 2025, with operating income of about JPY 608 billion as further revenue growth is offset by higher wages and other costs. We leave our medium-term forecasts largely unchanged but our longer-term forecasts rise as we factor in significant delays to the opening of the Chuo magnetic levitation shinkansen. We expect earnings to fall when the Chuo opens because of a duplication of costs without commensurate revenue growth due to partial cannibalization of the Tokaido Shinkansen.