Fast Retailing (9983.T) Earnings Review: FY8/27 guidance above expectations; LifeWear penetration continues, mgmt more confident in Southeast Asia than before; maintain Buy

Fast Retailing's FY8/26 full-year consolidated business profits were ¥718.4bn (+30% yoy), largely in line with guidance (¥710bn) and our estimate (¥715bn), with ¥196bn (+8% yoy) at Uniqlo Japan and ¥439.8bn (+44% yoy) at Uniqlo International. FY8/27 consolidated guidance calls for both operating profits and business profits of ¥830bn (+12% yoy / +16% yoy, respectively), ahead of our expectations. The company also announced a dividend hike (FY8/26 DPS up to ¥850, from ¥640; FY8/27 DPS guidance ¥900), raising the payout ratio to c.50%. We expect sustained earnings expansion in step with the global penetration of the LifeWear concept, and management now appears to have deeper confidence in Southeast Asia growth. We maintain our FY8/27-FY8/28 operating profit estimates, which are 7%/3% higher than consensus (FY8/27 operating profits of ¥870bn), and introduce FY8/29 estimates. Our 12-month target price is unchanged at ¥88,000 (implies FY8/28E P/E of 42X), and we maintain our Buy rating.