Casio Computer Earnings: Rich Dividends Support Shares Amid Weak Fundamentals

We lower Casio Computer’s fair value estimate to JPY 1,500 from JPY 1,650, as we believe Casio’s fundamentals will take longer than expected to recover. In fiscal 2022 (ending March 2023), the music instrument business posted an operating loss for the first time in four years, due to the economic slowdown and soaring raw material prices, and sales of the system equipment business were also sluggish. In addition, the operating margin of Casio’s mainstay timepieces segment fell to 15.0% from 18.3% in fiscal 2021, due to the slowing sales in Japan and China, where profitability has been relatively high. As we believe the challenging environment will continue throughout this year, we have lowered our operating margin forecasts for fiscal 2023 and 2024 to 6.8% and 9.0% from 9.7% and 10.2%, respectively. Although Casio’s shares lack near-term catalysts, we believe the downside is limited, supported by the dividend yield of 3.6%, which is the highest in its historical range.