Additionally, the company has reiterated its full-year 2025 outlook, projecting revenue of JPY250bn, a 12.5% YoY increase. The company plans to achieve 5% growth from its existing business through cross-selling and customer base expansion. The remaining growth is projected to come from new initiatives, including the acquisition of Koga Kankya Service’s operations, the expansion of transportation and storage business, increased investments in emerging markets, and the acquisition of an automobile transportation business in the US.
Founded in 1953 and headquartered in Chiba, Japan, Nikkon is a diversified logistics and transportation company specializing in automotive logistics and related services. The company operates through four segments: Transportation services, which contributed 45% of FY24 revenue; Warehousing, 18%; Packaging, 24%; and Testing made up of the remaining 10%. Nikkon predominantly operates in Japan (85% of FY24 revenue) and has presence in Asia (8%) and North America (7%).
Consistent momentum on medium-term path
Nikkon launched its 13th medium-term plan in 2023, covering FY24-FY26. The plan focuses on four key policies: improving profitability, expanding the business while launching new ventures, integrating ESG-oriented management, and enhancing human resources. Financial targets include achieving JPY280bn in net sales by FY26, with a 10-year CAGR of 9.7%.
This growth will be accomplished through consistent capital investments in growth areas such as warehouses, vehicles, and digital technologies to enhance operational capacity and quality. NIKKON plans to invest a total of JPY69bn in capital investments over FY24-FY26, with an annual target of JPY23bn. As of 1HFY25, 52% of the planned investments have been completed.
Additionally, the medium-term plan further includes achieving an operating profit margin of 10%, and ROE of 8% or higher through a combination of efficiency improvements, cost management, and strategic investments. Proactive cost reduction measures are being implemented, including improving labor productivity and optimizing resource allocation. Further, the company also plans to adjust pricing to reflect rising costs, such as fuel and labor to ensure profitability.
Sustained growth anchored by stable margins
Over the past three years, Nikkon has demonstrated a steady financial performance. Revenue increased at a CAGR of 6.8%, reaching JPY222bn in FY24, driven by the expansion of core businesses and strategic investments. EBITDA grew from JPY18.2bn in FY21 to JPY21.2bn in FY24, with the EBITDA margin remaining stable between 9-10% during the same period.
Similarly, the company maintained a consistent net profit margin of 7-8%, but FCF remained volatile due to higher capex. Capex stayed in range of JPY20-30bn, primarily driven by aggressive expansion and strategic investments. Consequently, net debt increased to JPY40.1bn in FY24 from JPY33.3bn in FY21, yet the debt-to equity ratio stayed within comfortable range of 0.32-0.34x.
Nikkon outperforms its peers Keikyu Corporation and Seino Holdings in revenue growth. Over the last three years, Nikkon’s revenue CAGR exceeded Keikyu’s 6.1% and Seino’s 2.8%. However, in terms of EBIT growth and margins, Keikyu fared better, growing at a CAGR of 15%, compared to Nikkon’s 5.3% and Seino’s -1.6%. Similarly, Keikyu’s margins stayed in the range of 5-10% over the last three years, while Seino’s margin ranged between 3-4%.
Attractive dividend yields
Nikkon is currently trading at a P/E ratio of 16x, based on the projected EPS of JPY147 for FY25, which is higher than its 10-year historical average of 10.9x. However, Nikkon is trading at a discount to its peers, Keikyu at 17x and Seino at 20x. The company’s EV/EBIT ratio stands at 13x, higher than its 10-year historical average of 10x, yet lower than Keikyu at 22x and Seino at 13x.
The discount in valuation of Nikkon compared to its peers is primarily due to company’s lower expected EBIT growth over the next three years. Nikkon’s EBIT is forecasted to grow at a 3-year CAGR of 10%, with margins expected to remain flat at 10%. In comparison, Keikyu and Seino are expected to achieve EBIT growth of 12% and 21% respectively, with margin expansions of around 100-200bps.
On the dividend front, the analysts project the dividend yields to remain around 3.0%, in line with historical figures, compared to Keikyu’s 1.5% and Seino’s 4.0%. Nikkon has limited coverage, with just two analysts covering the stock, both having a “hold” rating, with an average target price of JPY1,800, indicating limited upside potential. Stock was up by around 50% in the last 12 months and is currently trading at an all-time high of JPY2300.
Overall, Nikkon presents a good investment case with consistent growth and stable margins. However, Nikkon faces several risks that could impact its operations and financial performance. As a logistics provider, the company is exposed to operational risks such as accidents, equipment failures, transportation disruptions and regulatory challenges in transportation, labor and environmental standards. Additionally, highly competitive market would affect profit margins and economic downturns can reduce the demand for services.