Itochu Q1: Quality On Sale

Core Viewpoint - ITOCHU Corp. is positioned well despite a market crash, showing resilience with a positive total return and maintaining its profit targets for FY 2025, while focusing on growth in non-resource businesses [2][10]. Financial Performance - ITOCHU's stock fell 24.4% during the market crash, but it is the only trading company with a positive total return through early August [2]. - The company reported a Q1 profit delivery of 23% of its annual target, with minimal extraordinary gains of ¥4.5 billion [3]. - ITOCHU expects a profit growth of 9.8% for FY 2025, primarily from non-resource businesses, which will contribute 74% of profits [4][10]. Business Strategy - ITOCHU is focusing on consolidating partially owned businesses and has announced tender offers for C.I. Takiron and Descente [5]. - The company is investing in growth, with plans to invest up to ¥1 trillion this year, although it has only seen a net investment cash outflow of ¥98 billion in Q1 [7][10]. Capital Management - ITOCHU plans to maintain a dividend payout of ¥200 per share for FY 2025, representing a 25% increase from the previous year [6]. - The total capital return from dividends and buybacks is projected at ¥437.8 billion, aligning with a payout ratio target of 50% [6]. Market Valuation - Following the market crash, ITOCHU's P/B ratio remains at 1.5, while its P/E ratio is 9.6, reflecting a premium valuation supported by the highest return on equity in its peer group at 15.4% [8][9]. Conclusion - ITOCHU is on track to meet its FY 2025 growth plan, with a focus on non-commodity sectors and capital investment, despite a slow start in investment activities [10].