Morningstar | Casio Computer: G-Shock Is Not Only Resistant to Physical Shock but Also to Economic Slowdown
While Casio Computer’s December quarter results were slightly below our forecast, it demonstrates that Casio’s businesses are resistant to recessions, in our view. Excluding the impact of the exit from digital camera, Casio’s organic revenue declined 2% from the previous year, despite the economic slowdown in China. Revenue of mainstay watches and calculators remained flat from the previous year, and operating margin for these businesses were 20% and 17%, respectively. We believe that the strength of Casio’s main businesses will encourage shareholders in particular. Casio’s shares are 20% below its recent peak in last October, but we retain our fair value estimate of JPY 1,800 as well as our view that Casio’s share price is supported by the shareholder return, underpinned by the rich cash flow from watches and calculators.Meanwhile, we are focusing on the progress of Casio’s transformation. Casio’s revenue dropped to half over the last decade as the company divested unprofitable businesses such as handsets, digital cameras, and electronic devices, which contributed improving its operating margin from high single digits to low teens. On the other hand, the company has not established another business pillar as we assess that the company has not been able to leverage its resources efficiently because of the rigidity of business domains. Casio plans to complete the restructuring within this fiscal year and to implement the early retirement plan for the first time throughout its history, suggesting Casio’s strong intention to rebuild the company, in our view.
Casio Computer is mainly engaged in the development, manufacture and sale of consumer electronics. Along with its affiliates, Co. operates in three business segments. The Consumer segment is engaged in the manufacture and sale of watches, clocks, electronic dictionaries, electronic calculators, label printers, electronic musical instruments and digital cameras. Co.'s watch brands include "G-SHOCK," "BABY-G," "PRO TREK," "EDIFICE," "OCEANUS, " "SHEEN," "PHYS," "wave ceptor" and "LINEAGE." The System equipment segment provides handy terminals, electronic cash registers including POSs, office computers, page printers and data projectors. The Other segment manufactures molds and other products.
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