We set our target price at ¥1,700, based on our economic value-added model. This equates to an FY5/25 PER of 15.3x. Dividing this by the sum of our forecast for EPS growth over the next five years (2%, adjusted to exclude one-off expenses) and our forecast dividend yield produces a PEGY ratio of 4.1x.

We think the shares could be subject to marked volatility, due to acute business execution risks and the lack of visibility on the earnings outlook, coupled with the possibility that LY Corp., which is looking at how to leverage e-commerce operations, could make Askul a wholly owned subsidiary. We thus assign a High Risk rating.
We see the following risks associated with the attainment of our target price: 1) macro trends, 2) trends in price competition in the e-commerce industry, 3) trends in distribution costs, against the backdrop of a tight supply/demand picture for personnel, 4) managerial changes that exert a major impact on corporate culture, 5) corporate acquisitions that influence enterprise value, 6) business execution risks, and 7) the possibility that Askul is made into a wholly-owned subsidiary as part of parent LY Corp.’s measures to boost distribution in its ecommerce business.