On Monday, Morgan Stanley adjusted its stance on Nomura Research Institute Ltd. (4307:JP) (OTC: NRILY) stock, downgrading from Overweight to Equalweight, while raising the price target to JPY 5,200 from JPY 4,700.
The firm anticipates a fiscal year 2025 operating profit (OP) of JPY 137.5 billion, marking a 14% year-over-year increase. This forecast aligns with the general consensus and is slightly higher than the company's guidance.
The expected profit growth for Nomura Research Institute is attributed to sales growth, particularly in consulting and IT infrastructure. Sales momentum is predicted to improve in the second half of the year, spurred by robust industrial IT demand and the effects of IT consulting. A steady performance is also forecasted in the financial IT sector, especially in business platforms, an area where the company is focusing its efforts.
Morgan Stanley projects that the gross profit margin (GPM) will see an improvement to 36.1%, a 0.7 percentage point increase. The breakdown of operating profit is estimated at JPY 133.9 billion in Japan, a 12% increase, and JPY 3.6 billion overseas, which is a significant rise from JPY 900 million the previous year. The firm notes that the company has set a target of JPY 5.5 billion for overseas operations.
The increase in overseas operating profit, which is expected to be JPY 2.7 billion, includes benefits from a JPY 1.2 billion reduction in intangible fixed asset amortization and a JPY 0.3 billion decrease due to lower short-term incentive payments and restructuring costs. This financial outlook provides a detailed breakdown of the factors contributing to the expected performance of Nomura Research Institute in the upcoming fiscal year.
InvestingPro Insights
As Nomura Research Institute Ltd. (NRILY) navigates a landscape of growth and profitability, the latest data from InvestingPro provides additional context for investors. The company's commitment to increasing shareholder value is evidenced by its track record of raising dividends for 5 consecutive years and maintaining dividend payments for 23 years, showcasing a stable financial policy. Notably, NRILY's market capitalization stands at $20.88 billion, reflecting its significant presence within the IT Services industry.
From a valuation perspective, NRILY's P/E ratio is at a formidable 35.35, indicating a premium valuation relative to its earnings. While this suggests investor confidence in the company's future prospects, it is also trading at a high P/E ratio compared to near-term earnings growth, which warrants a cautious approach for those sensitive to valuation metrics. Additionally, the company's liquid assets surpass its short-term obligations, providing it with financial flexibility to navigate market changes.
Investors should note that Nomura Research Institute is operating with a moderate level of debt, which could be a strategic advantage in maintaining operational efficiency and investing in growth opportunities. For those interested in further insights, InvestingPro offers additional tips on NRILY's financial health and future outlook. Visit https://www.investing.com/pro/NRILY to uncover more InvestingPro Tips, including the company's performance over various time frames and its position relative to industry peers.
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