Japan Elevator Service’s stock soars on strong FY 25 results

Published: 2025-05-27 05:59:56 ET 6544.T

Published on 05/27/2025 at 05:59

By Joshua Cooper

Japan Elevator Service reported FY 25 results on May 13, 2025, with a 17% y/y revenue increase to JPY49.4bn, driven by a favorable business environment and strong repair sales. EBIT rose 26.4% to JPY8.6bn, with a 131bp margin expansion to 17.5%. Net profit grew 22% to JPY5.5bn, with margins up 51bp to 11.2%. Consequently, the company's stock surged 12.8% the next day, closing at JPY3,670.

Japan Elevator Service Holdings Co., Ltd., established in 1994 and headquartered in Tokyo, Japan, specializes in the maintenance, inspection, and renewal of elevators and escalators. The company employs over 1,850 people and is listed on the Tokyo Stock Exchange.

The company operates through three segments: Maintenance & Repair Services, which focuses on the maintenance, inspection, replacement, and repair of elevators and escalators to ensure optimal engine performance and operational safety, contributing 62% to the total sales mix in FY 2025; Modernization Services, which provides comprehensive services for replacing main components, removing existing products, and installing new elevators, accounting for 35% of total sales in FY 2025; and Other Services, including the sale of parts for elevator maintenance, which made up 3% of total sales.

The company estimates that there are currently 1.1m elevators installed and maintained, with an anticipated annual growth rate of 1-2%, projected to reach 1.2m by March 2027. Furthermore, the company forecasts an increase in its market share from 10% in FY 2025 to 13% in FY 2027. To achieve net sales of JPY60bn, the company plans to expand its market presence and increase its share in Japan. This strategy will be executed by improving operating profit margins through enhanced productivity, increasing contributions from high-margin maintenance sales, and boosting margins in newly expanded areas with low market share by securing more maintenance contracts.

Additionally, domestic M&A and capex peaked in FY 2023, and a positive free cash flow trend is expected moving forward. The company has nearly completed its M&A activities to develop a base network for nationwide expansion. This strategic approach aims to solidify the company's market position and drive growth by leveraging its established infrastructure and focusing on high-margin segments.

Japan Elevator Service reported a strong performance over FY 22-25, posting a revenue CAGR of 18.4% to reach JPY49.4bn, driven by growth across all segments. EBIT surged 28% to JPY8.6bn in FY 25, with margins expanding by 364bp to 17.5% in FY 25, driven by operational efficiencies. Net income grew at a CAGR of 26.6% to JPY5.5bn in FY 25, with margins expanding by 204bp to 11.2% in FY 25.

The company generated consistent positive cash from operations over the same period, rising from JPY3bn in FY 22 to JPY5.6bn in FY 25. As a result, cash and cash equivalent grew from JPY2.2bn to JPY2.3bn in FY 25.

In comparison, Shin Maint Holdings Co., Ltd, a local peer, posted a lower revenue CAGR of 15.7% over FY 21-24, reaching JPY22.4bn in FY 24. EBIT surged at a CAGR of 22.1% to JPY1.3bn in FY 24. Net income increased at a CAGR of 25.5% to JPY861m in FY 24.

Over the past year, the company's stock has delivered impressive returns of approximately 28.7%, reflecting a positive fundamental trajectory. In comparison, Shin Maint delivered lower returns of 12.2%. The management declared dividends of JPY31 per share in FY 25, reflecting a yield of 1.1%.

Japan Elevator Service is currently trading at a P/E of 45.6x, based on the FY 26 estimated EPS of JPY78.6, which is lower than its three-year historical average of 50.8x but higher than Shin Maint's P/E of 12.4x. Likewise, the company is trading at an EV/EBIT multiple of 29.7x, based on the FY 26 estimated EBIT of JPY10.7bn, which is lower than its three-year historical average of 36.5x but higher than Shin Maint’s 8.2x.

Japan Elevator Service is covered by four analysts, all of whom have ‘Buy’ ratings, with an average target price of JPY3,832.5, implying a 7.8% upside potential from the current price.

Their views are further supported by an anticipated revenue CAGR of 13.7% over FY 25-27, reaching JPY63.8bn in FY 27. The analysts anticipate EBIT CAGR of 21.9% over the same period, reaching JPY12.8bn, with margins expanding by 261bp to 20.1% in FY 27. In addition, analysts estimate net profit CAGR of 23.8%, reaching JPY8.5bn, with margins expanding by 209bp to 13.3%. In contrast, analysts estimate an EBIT CAGR of 10.6% and a net profit CAGR of 10.5% for Shin Maint.

Japan Elevator Service reported strong FY 25 results, driven by favorable market conditions and robust repair sales, leading to significant revenue and profit growth. The company plans to expand its market share and improve margins through increased productivity and high-margin maintenance sales. Positive cash flow trends and strategic M&A activities support future growth. However, the group is prone to few risks, including credit risks, technological innovation risks, regulatory compliance risks.

Joshua Cooper