Hoshizaki Earnings: Strong Ice Maker Sales Supported Margins but Expect Product Mix to Revert

Hoshizaki’s September-quarter revenue of JPY 98 billion, up 11% year on year, and 12.8% operating margin were better than expected, mainly due to strong sales of its high-margin ice makers in the Americas region, which grew 40%. A better product mix from weaker sales of low-margin refrigerators, due to continued inventory adjustments by distributors in the U.S. and refrigerator production issues in Europe, also pushed margins higher. As these issues will last longer than previously expected, we now expect the better product mix to continue until the first quarter of 2024. We raise our 2023 revenue growth projection by 2 percentage points to 15.5% year on year and operating margin assumption to 11.3% from 10.9%, but our 2024 projection remains unchanged. We expect operating margin to be flat in 2024, despite a 4% revenue growth, as increased production/sales of refrigerators in the Americas/Europe will offset the impact of operating leverage in Asia. With our outlook intact, we maintain our fair value estimate at JPY 5,200, suggesting Hoshizaki’s shares are fairly valued.