Zozo Earnings: Lifting Our Fair Value Estimate by 22% to JPY 4,880 to Reflect Better Margin Outlook

We raised our fair value estimate for Zozo to JPY 4,880 from JPY 4,000 based on parent company Line Yahoo's strong commitment to Zozo shop on its e-commerce platform, Yahoo Shopping. In addition, we have greater confidence in Zozo's cost control and operational improvement initiatives, which offset the increase in logistics-related costs. While Zozo’s share price has gone up by more than 50% over the past year, we believe that there is limited room for further upside for the time being, as we think that higher gross merchandise value growth prospects on Line Yahoo's commitment and further margin improvement in the medium term have already been priced in. We deem the stock fairly valued currently.