Company Reports

Narrow-moat Recruit Holdings' full-year results were slightly better than we expected. We raise our fair value estimate by 3% to JPY 6,700 per share following fiscal 2023 earnings, which ended in March 2024. Recruit believes job markets are finally stabilizing after years of volatility due to the covid pandemic and reinstated its full-year guidance. Our revenue forecast for fiscal 2024 remains unchanged, coming in a little above the middle of the guidance range. Our adjusted EBITDA forecast is slightly raised, increasing by 2%, based on management's commitments to maintain disciplined spending, and is slightly below the middle of the guidance range. We expect more job market normalization and cost inflation for the group to present headwinds during the year. At current prices, Recruit shares screen as fairly valued.

We expect Recruit’s strategy to focus on expansion of its online marketplace for employment, Indeed, and to a lesser extent, expansion of its online review site for employers, Glassdoor.

We initiate coverage on Recruit Holdings with a JPY 6,500 per share fair value estimate. We believe Recruit has a narrow economic moat, primarily based on network effects. We forecast revenue to grow at a 10-year compound annual growth rate of 4%, primarily driven by 6% growth in its HR technology segment. We expect EBIT margins to expand to 18% by fiscal 2032 from 12% in fiscal 2022. We assign Recruit a Morningstar Uncertainty Rating of High and rate its capital allocation as Exemplary. We use a weighted average cost of capital, or WACC, of 8%. At current prices, Recruit shares screen as fairly valued.

We expect Recruit’s strategy to focus on expansion of its online marketplace for employment, Indeed, and to a lesser extent, expansion of its online review site for employers, Glassdoor.