日本视频游戏：期望过高？第四季度财报发布后的思考

This party is getting crowded.The threat of US tariffs against Europe reiterated thevalue of the Japan Video Gaming sector as a space that’s far removed from macro, trade, orgeopolitical fault lines. That said, the average stock we cover is up 23% for the year, and itultimately alarms us somewhat that forward PE multiples now approaching levels last seenin 2020 during Covid. In this note, we’ve summarised some latest thoughts on the sector,and our discussions with the companies and investors. Our longer-term top picks in thesector remain Nintendo, Sony, Capcom.Some thoughts on the “now what” question.Valuation concerns have increasinglyfeatured in our discussions with investors in recent weeks. In such situations we’ve typicallynames that offer either (1) a high degree of near-term earnings certainty; or (2) the clearestmulti-year growth trajectories. Most investors (we think rightly) looked past Nintendo’s15mn unit guide for Switch 2 sales, focusing instead on “overwhelming” demand globally,and c. 4mn units of inventory build through Q4. Capcom can probably get most of the wayto its JPY73bn operating profit goal this year… before we even consider the contributionfrom new games. Further mean reversion of valuation multiples is maybe possible forNexon and Bandai Namco, but our conversations with investors have pointed to mixedfundamental views on both names.The inputs that matter for Switch 2, and Nintendo’s FY3/26E earnings.In ourdiscussions Nintendo confirmed the recent build-up of finished inventory will be shippedto retailers in the June quarter. On Nintendo’s guidance for hardware margins to resemblethe Switch launch though, we’d note that this reflects several important variables beyondtariffs (assumed at 10%), including Mario Kart World bundle mix, and sales of the cheaperJapan-only hardware. In this note, we’ve shown a detailed, bottom-up build of Nintendo’sFY3/26E hardware and software revenues and profits.FromSoftware flies solo… the implications for Bandai Namco.One of the moreinteresting learnings from Q4 reporting was Kadokawa confirming it will take on digitalpublishing for a FromSoftware game for the first time in FY3/28. Consider that TheDuskbloods will be a Switch 2 exclusive in “2026” (i.e. published by Nintendo), and EldenRing Nightreign looks like the last FromSoftware title Bandai Namco gets for a while. Weremain constructive on Bandai Namco’s Toy & Hobby business as a proxy on Japanese IPgrowth. But the Digital business feels somewhat impaired to us.Square Enix: can this be more than just “a sign of 3D buying”?The scenarios in whichSquare Enix’s recent rise end up being justified fundamentally mostly revolve around newgame success… while R&D amortisation costs remain under control. Some new media wasrecently revealed for Kingdom Hearts IV, while Dragon Quest XII and Final Fantasy VII Part3 represent other drivers of hope. Even in these scenarios, the case for further upside feelsstretched to us… but equally the short case feels difficult to act upon — at least until theactivist makes its intentions available for analysis.www.bernsteinresearch.com BERNSTEIN TICKER TABLETickerRating7974.JP (Nintendo)O9697.JP (Capcom)OOLD9766.JP (Konami)M9684.JP (Square Enix)MOLD7832.JP (Bandai Namco)MOLD3659.JP (Nexon)MOLDJPLPRICE TARGET CHANGE / ESTIMATE CHANGE IN BOLDO - Outperform, M - Market-Perform, U - Underperform, NR - Not Rated, CS - Coverage Suspended3659.JP base year is 2024;Source: Bloomberg, Bernstein estimates and analysis.INVESTMENT IMPLICATIONSWe have a constructive long-term view on the Japan Video Gaming sector. The companies we cover mostly sit on strong IPportfolios, and benefit from a material labour cost and productivity advantage compared with many large Western (in particularUS) peers. That said, after the year to date rally where the average stock we cover has outperformed the Nikkei index by over20%, valuation multiples now look stretched in several places. On average the sector now trades on forward PE multiples notseen since the Covid peak in 2020.Our long-term stock preferences in the sector solve for medium-term growth visibility and confidence in execution on earnings.Nintendo and Capcom remain our top picks in the sector, alongside Sony which we co-cover with our Japan semis colleagues.Volatility around Nintendo’s next couple quarterly prints wouldn’t shock us, as key variables like Switch 2 hardware marginsand software tie ratios are worked out. But we expect the shares to then go higher as investor attention turns to peak cycleearnings. Our projections for Capcom reflect the company’s pacing of revenue and profit recognition as much as our views onthe company’s underlying earnings power… and busy runway for new launches (Monster Hunter Wilds expansion, Resident Evil9, Onimusha: Way of the Sword).On the flip side, we think it’s now clear that Elden Ring Nightreign will be the last FromSoftware game Bandai Namco publishesfor a while — given The Duskbloods in “2026”, and Ka