Yahoo Japan Corp

(Sept 11: ¥289)

MAINTAIN OUTPERFORM. Although 1Q profits were in line with our expectations, advertising business sales fell below both our forecast and the market consensus, which we think contributed to a recent fall in the share price. We believe the advertising business slump is due to both one-time and structural factors. While revising our estimates to reflect slower growth at the advertising business, we believe the company is committed to profit growth and continue to see it as being on track to increasing profits. Potential catalysts include earnings growth driven by membership services expansion, ad revenue growth from the start of video ads or revenue expansion from offline and finance businesses. We lower our DCF-based price target from ¥500 to ¥490 (potential return of 71%) in line with the changes to our estimates. We forecast cash flow through FY3/2023 and apply an EV/ Ebitda of 13x to calculate terminal value from FY3/2024. —