JRC Posts Solid 1Q Results but Near-Term Headwinds Abound; FVE Maintained at JPY 24,000

We maintain our fair value estimate for narrow-moat Central Japan Railway, or JRC, at JPY 24,000. We consider JRC fairly valued at current levels and think investors should wait for a better entry point. Despite a strong start to the fiscal year, we think near-term headwinds such as the impending consumption tax hike in October 2019, effects from the US-China tariff war, and Japan’s export restrictions to South Korea, would lead to a slowdown in sales growth in future.