2025-05-29-Jefferies-骊住（5938）_首席执行官会议备忘录_8页_157kb

LIXIL CEO Meeting Memo Summary

Core Content

LIXIL's CEO provided insights into the company's FY3/26 operating profit (OP) guidance and its strategic outlook for the future. The guidance reflects conservative assumptions due to various risks, including the impact of stricter building standards in Japan, demand weakness in Europe, and fixed cost burdens in the US bathtub business under the partnership with American Bath Group (ABG). Despite these challenges, the CEO is optimistic about LIXIL's ability to secure a cost advantage in the US due to the US tariff policy, which is expected to create entry barriers for low-priced toilet products from Chinese and Asian suppliers.

LIXIL plans to complete most of its restructuring activities by end-June, which is expected to improve its financial position and operational efficiency. While restructuring costs may weigh on the Q1 FY3/26 results on an IFRS basis, the CEO believes solid demand will help mitigate any profit downside. The company is also in negotiations with ABG to shorten the partnership contract period, which could further reduce costs.

The CEO has decided to disclose a preliminary outlook for the FY3/28 profit-margin target ahead of the originally planned medium-term business plan announcement. LIXIL aims for an operating profit margin (OPM) of +6.5% in FY3/28, up from +4.4% in FY3/25, with Japan contributing +2.8ppts and overseas contributing +6.6ppts. This improvement is expected to be driven by increased gross margins through price hikes and reduced selling, general, and administrative (SG&A) expenses via the use of digital tools by sales teams.

Key Points

• FY3/26 OP Guidance: Reflects conservative assumptions due to:
  • Domestic sales correction from stricter building standards in April.
  • Weak demand in Europe.
  • Fixed cost burden on the US bathtub business.
• Restructuring Plan: Most restructuring will be completed by end-June, with expected cost impact in Q1 FY3/26.
• US Tariff Policy: May provide cost advantages for LIXIL, especially for its American Standard (ASB) business, which is exempt from US tariffs on products made in Mexico.
• European Subsidiary (GROHE): Expected to be a key driver for OP gains in the long term.
• Preliminary Outlook: The CEO will reveal a preliminary outlook for FY3/28 instead of waiting for the full medium-term business plan.
• Profit-Margin Target for FY3/28: OPM +6.5% (up from +4.4%), with Japan targeting +8% and overseas +10%.

Financial Projections and Analyst View

Investment Recommendation

• Rating: BUY
• Price Target: ¥2,100 (+30% from current price of ¥1,614)
• 52-Week High-Low: ¥1,873 - ¥1,533
• Float (%): 93.9%
• Market Cap: ¥463.3B / $3.2B

Valuation and Risks

• Valuation Methodology: Based on EV/EBITDA of 9.8x, average during FY3/23–FY3/26.
• Upside Risks:
  • Higher OP than consensus estimates.
  • JPY appreciation.
  • Strengthening shareholder returns.
• Downside Risks:
  • Weakness in Japan's housing market.
  • Rising aluminum and copper prices.
  • Intensifying competition in the overseas sanitary ware industry.

Analyst Certification

• Sho Fukuhara and Shintaro Yoshida certify that the views expressed reflect their personal opinions and are not influenced by compensation.
• Non-US Analysts: Not registered/qualified with FINRA, and may not be subject to certain regulations.

Other Disclosures

• Conflict of Interest: Jefferies may receive compensation from companies covered in the research, which could affect the objectivity of the report.
• Disclaimer: The report is for general circulation and does not provide investment recommendations specific to individual investors.
• Currency Risk: Investors in non-US currencies should be aware of exchange rate fluctuations affecting returns.
• Ratings Distribution:
  • BUY: 60.41% (IB Serv./Past 12 Mos.), 17.92% (JIL Mkt Serv./Past 12 Mos.)
  • HOLD: 35.20% (IB Serv./Past 12 Mos.), 9.22% (JIL Mkt Serv./Past 12 Mos.)
  • UNDERPERFORM: 4.39% (IB Serv./Past 12 Mos.), 3.27% (JIL Mkt Serv./Past 12 Mos.)

Summary

LIXIL's FY3/26 OP guidance is based on conservative assumptions, with the CEO emphasizing the potential for cost advantages in the US due to the tariff policy. Restructuring is expected to be completed by end-June, with a potential cost impact in Q1 FY3/26. Despite this, the CEO remains confident in demand and the company's ability to meet its long-term profit-margin target. The investment recommendation is a BUY with a price target of ¥2,100, based on EV/EBITDA of 9.8x. Risks include domestic and international market conditions, while upside potential comes from improved margins and favorable currency movements.