On Thursday, Goldman Sachs initiated coverage on Kyoritsu Maintenance Co Ltd (9616:JP), a prominent operator of the Dormy Inn hotel brand, with a Buy rating and a price target of JPY3,400.00. The analyst cited the company's above-average performance in average daily rates (ADR) and occupancy ratios compared to industry standards in Japan, attributing the success to its popular product offerings.
Kyoritsu Maintenance has been outperforming in the Japanese hotel industry, with its Dormy Inn brand's ADR and occupancy ratios surpassing the industry's averages. This trend is expected to contribute to the company's robust operating profit forecasts for the fiscal years ending March 2025 to 2027. Goldman Sachs projects operating profits of ¥20.0 billion, ¥23.1 billion, and ¥27.6 billion for these years, respectively, marking year-over-year increases of 20%, 15%, and 20%.
The analyst's estimates are more optimistic than the Bloomberg consensus, exceeding them by 5%, 4%, and 12%, for each of the fiscal years mentioned. This positive outlook is based on the expectation of continued high-single-digit percentage improvements in ADR for Kyoritsu Maintenance in the upcoming years.
Furthermore, the analyst anticipates an increase in the number of inbound travelers to regions outside of Tokyo. This expectation aligns with the planned expansion of regional airport capacities, which should facilitate the growth in tourism and benefit Kyoritsu Maintenance's hotel operations. The company's ability to capitalize on these trends could be a driving factor behind the positive assessment and the Buy rating bestowed by Goldman Sachs.
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