Company Reports

Capcom is a Japanese game developer, and its most notable flagship series, Resident Evil and Monster Hunter, account for the majority of its sales and profits. In the 2010s, Capcom changed its strategy from relying on new releases, to focusing on selling remakes and expanding global sales of old titles through digital distribution. This paved the way for Capcom’s stable sales growth and high profits in the past 10 years.

Although Capcom’s revenue and operating income for the June quarter fell 32.5% and 46.4%, respectively, they were within our expectations due to a weaker game title lineup than last year. Even though June-quarter game sales were slightly below its expectations, the company made no change to the full-year guidance of 50 million units of game sales and JPY 64 billion of operating income, which we believe signifies the company’s confidence in the release of AAA titles in the second half. We lower our game sales forecasts for the first half but raise those for the second half as we assume the company will concentrate promotion efforts in the second half to ensure the successful launch of new titles for the Resident Evil and Monster Hunter series. We retain our view that the company will be able to achieve its unit sales and operating income guidance for the fiscal year ending March 2025, as we remain confident in the strength of Capcom’s flagship IPs.

Capcom is a Japanese game developer, and its most notable flagship series, Resident Evil and Monster Hunter, account for the majority of its sales and profits. In the 2010s, Capcom changed its strategy from relying on new releases, to focusing on selling remakes and expanding global sales of old titles through digital distribution. This paved the way for Capcom’s stable sales growth and high profits in the past 10 years.

We initiate our coverage of Capcom, with a fair value estimate of JPY 3,000 and a narrow moat rating based on intangible assets. Capcom is a Japanese video game developer best known for its long-running hit series, Resident Evil (since 1996), Monster Hunter (since 2004), and Streetfighter (since 1987). By focusing on its core intellectual property, Capcom continues to deliver high-quality and widely popular AAA titles every year and monetizes them year after year by releasing sequels, remakes, and downloadable content consistently, thereby mitigating earnings volatility. We believe Capcom will continue to capitalize on its widely popular IP and maintain a high operating margin of 41%-46% in the next five years. We think shares are currently fairly valued.