Kyushu Railway Earnings: Solid Performance Despite Natural Disasters

No-moat Kyushu Railway’s EBIT increased 10% to JPY 30 billion in the first half of fiscal 2025 (year ending March 31, 2025), mainly on improved real estate and hotel performance. We leave our forecasts largely unchanged and maintain our JPY 3,000 per share fair value estimate. The stock screens as overvalued at present. While the company is performing well, we think recovery from the pandemic is nearly complete, and its longer-term outlook is depressed by a declining and aging population that is worse in Kyushu than in other parts of Japan. Further development of the expressway network in the region also weighs on the outlook for train usage, and thus profit margins.