PPIH's Upward Revision no Surprise; Favourable Mix and Some Cost Cuts Likely One-off

It is no surprise that narrow-moat Pan Pacific International Holdings (PPIH, previously called Donki) again raised its full-year profit guidance. It delivered another quarter of solid profit growth, posting 1% growth in sales and 12.7% growth in operating profit thanks to a more favorable business mix and cost cut efforts. Although the new guidance is in line with our estimates, we have upped our profit forecasts specifically for fiscal 2021 ending in June by 3%, anticipating that cost savings will continue through the second half. The adjustment is offset by a lift in estimates of minority interests as Asia profits advanced more rapidly than expected, which has an immaterial impact on our fair value estimate of JPY 2,000.