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KDDI Corp ADR KDDIY

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KDDI Relying on New Service Growth To Offset Mobile Price Declines; Lift FVE to JPY 4,100

Dan Baker Senior Equity Analyst

Analyst Note

| Dan Baker |

Narrow-moat KDDI’s fiscal 2020 result (year ending March 2021) was broadly in line with our estimates. Revenue increased 1.4% year over year, with operating income up 1.2% and net profit up 1.8%, all slightly ahead of the flat guidance for all three lines. This was despite the energy business incurring a JPY 20.5 billion operating profit loss due to extreme volatility in wholesale energy prices in December and January. Basic telecom operating profit fell by JPY 41 billion, more than offsetting the JPY 58 billion operating income increase from growth fields, particularly the financial business, which added JPY 19 billion. We increase our forecasts slightly and our fair value estimate for KDDI to JPY 4,100 from JPY 4,000, and to USD 20 per ADR from USD 19 per ADR. At this fair value, KDDI would trade on a price/earnings ratio of 13.7 times with a 3.1% dividend yield.

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Company Profile

Business Description

KDDI is Japan's second-largest wireless operator (31% market share), the largest pay-TV operator (53% market share) and the second-largest provider of fibre-to-the-home broadband (12% market share). It has grown through acquisition and is focusing on increasing the number of customers who subscribe to more than one telecommunication service. It is also looking to grow its Life Design business which includes commerce, energy, and finance and had over 18 million IOT connections by the end of March 2021.

Contact
Garden Air Tower, 10-10, Iidabashi 3-chome
Tokyo, 102-8460, Japan
T +81 333470077
Sector Communication Services
Industry Telecom Services
Most Recent Earnings Mar 31, 2021
Fiscal Year End Mar 31, 2020
Stock Type
Employees 82,560

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