NTT’s Second Quarter Affected by Electricity Price Increases but Otherwise Solid

Narrow-moat-rated Nippon Telegraph and Telephone Corp's, or NTT’s, second-quarter fiscal 2022 result (quarter ended September 2022) was slightly lower than our expectations on profitability with revenue growth of 7.4% year on year, operating profit decline of 5.7% year on year and net profit decline of 2.3% year on year. Management retained its fiscal 2022 guidance of 3.6% revenue growth, 2.9% operating income growth, and 0.8% net profit growth, with second-quarter profit growth behind this level, offset by first-quarter growth rates ahead. The global solutions businesses—NTT Data and NTT Ltd—were the main positives in a revenue sense, contributing an increase of JPY 246.5 billion. However, this only resulted in an extra JPY 7.7 billion of operating profit, as sales were affected by semiconductor shortages. Increased fuel prices also drove revenue in the retail electricity business but this had little impact on profits. The regional communications business was the main contributor to the operating income decline, with around JPY 50 billion in benefit to the previous period from the Olympics not in this period.