Kyushu Railway Earnings: Recovery in Demand Underway, Reflected in Strong Performance

No-moat Kyushu Railway’s first-quarter fiscal 2024 earnings demonstrated a recovery in demand across all segments. EBITDA of JPY 21 billion was 43% more than the previous corresponding period, or PCP, with the biggest contribution from the railway business, which reported a 78% improvement in earnings. We maintain our full-year forecasts and fair value estimate of JPY 2,900 per share for Kyushu Railway, or JR Kyushu. For the remainder of fiscal 2024, we expect continued recovery in demand following the removal of pandemic restrictions for passenger trains, retail, restaurants, and hotels, in addition to incremental revenue from the new Nagasaki station, which is expected to open in the second half of fiscal 2024. At today’s prices, shares in JR Kyushu trade 7% above our fair value estimate.