NTT’s Cost Reductions Continue to Drive Profit Growth Despite Mobile Price Cuts; FVE up to JPY 4,200

Narrow-moat Nippon Telegraph and Telephone's, or NTT’s, fiscal 2021 result (fiscal year ended March 2022) was slightly better than our expectations with revenue growth of 1.8% year on year, operating profit growth of 5.8% year on year, and net profit growth of 28.9% year on year. The net profit growth was helped by the elimination of the NTT DoCoMo minorities following the takeover. Management gave fiscal 2022 guidance of 3.6% revenue growth, 2.9% operating income growth, and 0.8% net profit growth. Management is forecasting a fiscal 2022 dividend of JPY 120 per share, up from the JPY 115 per share declared for 2021, and corresponding to a 35% dividend payout ratio. After second-quarter fiscal 2021, the company lifted its dividend guidance from JPY 110 to JPY 115 per share and if the business continues to perform well in the first half of fiscal 2022 we believe a similar increase could be possible in fiscal 2022 which could see the fiscal 2022 dividend lifted to JPY 125 per share. Management is sticking with its fiscal 2023 guidance of EPS of JPY 370 per share, up from the JPY 329 reported in fiscal 2021 and the JPY 340 guided for fiscal 2022. Given this payout ratio is relatively low by telecom standards, NTT supplements its dividend with a buyback which will amount to up to JPY 400 billion to be conducted from May 13, 2022 to end March 2023.