Dentsu Group

CN: 4324

Market CapJPY1,170,944m

Last Close JPY4060

Dentsu Group is a holding company with two operational networks: Dentsu Japan Network (DJN) and Dentsu International (DI). Operating in over 145 countries, Dentsu Group provides a wide range of client-centric integrated communications, media and digital services.

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Investment summary

Dentsu had a strong Q222, reporting organic revenue growth of 8.2% (7.9% including Russia). Customer Transformation & Technology (CT&T) is the main engine of growth and represents 32.3% of group net revenue, up from 31.5% in Q122. We would expect this segment to be more resilient should a deteriorating H222 macro environment stall advertising momentum. Management is now guiding to the top end of the previously cited 4–5% revenue growth range and we have edged our forecasts ahead, with earnings also set to benefit from a lower tax charge than expected. The shares have outperformed the peer set in the year-to-date, narrowing the EV/EBITDA discount at which they trade.

Y/E Dec
Revenue (¥m)
EBITDA (¥m)
PBT (¥m)
EPS (fd) (¥)
P/E (x)
P/CF (x)
2020A 939243.0 90063.0 123470.0 249.0 16.3 N/A
2021A 1085592.0 195006.0 146021.0 389.0 10.4 0.0
2022E 1250000.0 210726.0 172809.0 440.0 9.2 0.1
2023E 1300000.0 217909.0 181411.0 470.0 8.6 0.1
Industry outlook

CT&T benefits from structural tailwinds as companies look to invest to optimise to meet the demands of their own customers, a process which may even accelerate as economic pressures become more pronounced. Dentsu’s latest global ad spend forecast is +8.7% for FY22, with gains of 5.4% for FY23 and 5.1% for FY24 pencilled in. Digital spend is forecast at 55.5% of FY22 global ad spend, with linear TV the next largest media, making up 26.1%. The Japanese ad market still lags the digital transition curve, with TV prominent. Digital is faster growing but is still well below the global share.

Last updated on 26/09/2022
Content on Dentsu Group
Dentsu Group – Edging forecasts to higher end of range
TMT | research Update | 15 August 2022
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Dentsu Group – Guidance edged up
TMT | research Update | 18 May 2022
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Dentsu Group – Upgrade to organic growth guidance
TMT | research Update | 15 February 2022
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Share price graph
Balance sheet
Forecast net cash (¥m) 149111
Forecast gearing ratio (%) N/A
Price performance
%
1m
3m
12m
Actual (13.7) (3.5) (6.3)
Relative* (8.4) (3.3) 5.0
52-week high/low ¥5020.0/¥3550.0
*% relative to local index
Key management
Kate Stewart IR director