Intrinsic Value Apple International Co., Ltd. (2788.T)

• Previous Close: ¥350.00
• Intrinsic Value: ¥5,088.58
• Upside potential: +1,354%

Stock Valuation Context

Business Model And Market Position

Apple International Co., Ltd. operates in the auto dealership sector, specializing in the purchase, sale, and export of used cars across Japan and international markets. The company’s core revenue model is driven by its used car franchise business and auto auction operations, leveraging Japan’s robust used car market. Its strategic positioning in Yokkaichi, a key logistics hub, enhances its ability to source and distribute vehicles efficiently. The company’s diversified operations, including franchise partnerships and auction services, provide resilience against regional demand fluctuations. While the used car industry is highly competitive, Apple International’s established network and export capabilities differentiate it from smaller local dealers. The company’s focus on quality assurance and transparent transactions aligns with growing consumer demand for reliable pre-owned vehicles, particularly in emerging markets where affordability is a key driver.

Revenue Profitability And Efficiency

In FY 2024, Apple International reported revenue of JPY 43.8 billion, with net income of JPY 1.2 billion, reflecting a net margin of approximately 2.7%. The diluted EPS stood at JPY 92.75, indicating modest profitability. Operating cash flow was negative at JPY -1.2 billion, likely due to working capital adjustments or inventory buildup, while capital expenditures remained minimal at JPY -24 million.

Earnings Power And Capital Efficiency

The company’s earnings power is constrained by thin margins typical of the used car dealership sector. Its capital efficiency appears moderate, with limited reinvestment needs given the asset-light nature of its auction and franchise operations. The negative operating cash flow raises questions about short-term liquidity management, though its JPY 4.4 billion cash reserve provides a buffer.

Balance Sheet And Financial Health

Apple International’s balance sheet shows JPY 4.4 billion in cash against JPY 7.9 billion in total debt, suggesting a leveraged position. The debt-to-equity ratio is elevated, though manageable given the industry’s working capital demands. The company’s financial health hinges on its ability to maintain inventory turnover and stabilize operating cash flows in the coming fiscal year.

Growth Trends And Dividend Policy

Growth trends are likely tied to Japan’s used car export demand, particularly in Southeast Asia and Africa. The company’s dividend payout of JPY 15 per share implies a conservative distribution policy, prioritizing liquidity retention over shareholder returns. Future expansion may depend on scaling its franchise network or diversifying into ancillary automotive services.

Valuation And Market Expectations

With a market cap of JPY 4.7 billion, the company trades at a P/E of approximately 3.9x, below sector averages, reflecting market skepticism about sustained profitability. The negative beta (-0.363) suggests low correlation with broader equity markets, possibly due to niche industry exposure.

Strategic Advantages And Outlook

Apple International’s strengths lie in its established export channels and franchise model, which mitigate reliance on domestic demand. However, macroeconomic headwinds and competitive pressures in the used car sector pose risks. The outlook remains cautious, with success contingent on optimizing inventory management and expanding high-margin services like financing or warranties.

Sources

Company filings, Tokyo Stock Exchange disclosures