Dentsu Group (TYO: 4324)

Last close As at 04/03/2024

JPY4,151.00

3.00 (0.07%)

Market capitalisation

JPY1,141,447m

Dentsu Group is a holding company, operating in over 145 countries. It provides a wide range of client-centric integrated communications, media and digital services.

Customer Transformation and Technology benefits from structural tailwinds as companies invest in optimising their responses to the increasing demands of their own customers, although short-term economic uncertainty has slowed the sales cycle for larger projects across the industry, particularly for clients in the tech sector. Dentsu’s December update on global ad spend forecast reduced estimated FY23 growth from +3.3% to +2.7%, with 4.6% for FY24 (was 4.7%), 4.2% (3.8%) for FY25 and 4.3% for FY26 pencilled in. Digital spend is estimated at 58% of FY23 global ad spend, with the growth rate slowing.

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Sector

TMT

Equity Analyst

Fiona Orford-Williams

Fiona Orford-Williams

Director, TMT

Milo Bussell

Associate Analyst, Consumer and Media

Max Hayes

Max Hayes

Associate Analyst

Key Management

  • Hiroshi Igarashi

    President & CEO

  • Kate Stewart

    IR director

  • Yushin Soga

    CFO

Balance Sheet

Forecast net debt (¥m)

20834

Forecast gearing ratio (%)

2

Share Price Performance

Price Performance
% 1M 3M 12M
Actual 5.5 4.1 (5.1)
Relative 0.6 (7.6) (29.3)
52 week high/low ¥4960.0/¥3586.0

Financials

Dentsu’s FY23 net revenue was a touch above guidance at Q3, with a better-than-expected operating margin reflecting a good Q4 in Japan, further boosted by a short delay in an IT project pushed out to Q124. The results were accompanied by the news of a change in global CFO, with the role reverting to Yushin Soga, who held the role until January 2023. As anticipated, net revenue outside Japan declined, although there was some trading improvement in the US in Q4. A thorough business review is now in progress, with the next mid-term plan due early in H2. In the meantime, the balance sheet is strong, with leverage reduced to 0.6x EBITDA, and share buybacks will be resumed. We regard the rating as undemanding.

Y/E Dec Revenue (¥m) EBITDA (¥m) PBT (¥m) EPS (fd) (¥) P/E (x) P/CF (x)
2022A 1243883.0 217500.0 187589.0 485.0 8.6 0.1
2023A 1289301.0 175742.0 151315.0 337.0 12.3 0.1
2024E 1356700.0 203377.0 159804.0 380.0 10.9 0.1
2025E 1393000.0 218527.0 178741.0 403.0 10.3 0.0