Strong Shinkansen Performance Underpins JRC’s Solid Q2 Results; FVE Maintained at JPY 24,000

Central Japan Railway, or JRC, posted strong second-quarter results, prompting management to raise its fiscal 2020 guidance for revenue growth and operating margin upwards. With the performance also above our expectations, we tweak our assumptions to reflect a more bullish outlook for the remainder of the fiscal year, but these adjustments have limited impact to our fair value estimate. We maintain our fair value estimate for narrow-moat-rated JRC at JPY 24,000 per share. JRC’s share price has recovered almost 4% since the release of its first-quarter results in late July, and while shares are trading at a slight discount to our fair value estimate, we think investors should wait for a larger margin of safety before building a position in the name.