On Thursday, Citi initiated coverage on Fast Retailing Co Ltd. (9983:JP) (OTC: FRCOY), the parent company of the clothing retailer Uniqlo, with a Neutral rating and a price target of ¥53,000. The new price target is based on the firm's analysis of the company's earnings prospects and market performance expectations.
The coverage begins as Fast Retailing's shares have experienced a revaluation due to anticipated growth in various international markets and diminishing concerns regarding its Greater China business. Citi's target price is set at a multiple of 35 times the forecasted earnings per share (EPS) for the fiscal year ending in August 2026, which is about one standard deviation higher than the average one-year forward Price-Earnings Ratio (PER) from the past year.
Citi highlights that the overseas Uniqlo business is projected to be a key driver of sustained strong growth in the company's consolidated operating profit, with an expected compound annual growth rate (CAGR) of 11% from the fiscal year 2025 to 2028. This growth is anticipated to be particularly strong in the Southeast Asia and North America/Europe regions.
Despite the positive outlook for the company's international operations, Citi suggests that the market may have already factored in these high expectations for growth into the current valuation of Fast Retailing's shares. This assessment has led to the Neutral rating, indicating that the firm sees the stock as fairly valued at the current price levels based on the available information.
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