F3/27 2Q Results: Neutral; Stepping Up Investment to Grow Key IP Overseas

2Q outcomes: Toei Animation had announced revisions to its full-year and 1H plans on Oct 28, so there were no particular surprises. In video production & sales/overseas video, strong streaming for Europe and the US meant the YoY revenue decline in overseas video was smaller than expected at ¥2.4bn, while the video production/sales OPM of 25% looks unexpectedly weak versus the 45-55% typical of 2Q in past years. Besides a sharp drop in revenue from highly profitable regular streaming contracts for China, promotional costs for One Piece overseas, part of growth investment, appear to have pushed up related SG&A costs. At the briefing the company gave an update on progress under the medium-term plan that commenced this year, with an impression of emphasizing proactive advertising and promotion spending and investment in content aimed at maximizing key IP value overseas, especially in North America. We remain Equal-weight with a ¥3,000 price target, based on F3/27 EPS and 25x P/E.