Sanwa Holdings (5929 JP) (Neutral) Struggling in Japan but ahead of rivals

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Leaving overall 17/3 OP forecast unchanged, but revise down for Japan and up for overseas

We have fine-tuned our forecasts following the 17/3 H1 results briefing (see our 1 November Global Research report Japan construction sector: Sanwa Holdings’ results briefing ). We retain our Neutral rating, but amid lackluster business conditions in Japan earnings are stronger than at rivals, underpinned by the company’s adept cost control abilities and efforts to diversify both in Japan and overseas. We revise down our outlook for Japanese operations, having lowered our product volume forecasts for the industry for 17/3 and beyond. We revise up our forecasts for overseas operations to reflect steady progress in H1, despite assuming a stronger yen, and leave our overall 17/3 operating profit forecast unchanged. Our 17/3 EPS forecast is also unchanged, but a rise in the average P/E for the benchmark Russell/Nomura Large Cap (manufacturing) index lifts our target price to ¥1,140.