We Believe Nintendo’s Game Shipment Will Peak in Fiscal 2022, Driven by the Attractive Pipeline

Although narrow-moat Nintendo’s operating income guidance for fiscal 2022 (financial year ending March 2023) is below our expectations, we believe that the numbers are conservative in two respects. First, despite the increased user base, Nintendo guides for a 10.7% decline in game shipments, which is too pessimistic in our view. Second, its foreign exchange assumptions are JPY 115 per USD 1 and JPY 125 per EUR 1, implying a stronger yen than we see currently. Overall, we believe that the company can achieve our operating income forecast of JPY 630 billion, which is 6.3% up from the previous year, driven by the larger user base and attractive game pipeline. While Nintendo’s shares are in 3-star territory, they are more than 10% below our fair value estimate of JPY 65,000. Therefore, we suggest considering accumulating shares on dips. Nintendo announced a 10-to-1 split, which should be welcomed by the market by offering more flexibility to investors, as the split reduces Nintendo’s minimum trading amount to one-tenth.