Intrinsic Value Create Restaurants Holdings Inc. (3387.T)

• Previous Close: ¥741.00
• Intrinsic Value: ¥1,011.53
• Upside potential: +37%

Stock Valuation Context

Business Model And Market Position

Create Restaurants Holdings Inc. is a prominent player in Japan's competitive restaurant industry, operating a diversified portfolio of 1,037 restaurants across 244 brands as of February 2022. The company specializes in food courts, izakaya bars, and dinner-time restaurants, offering a broad range of cuisines including Japanese, Western, Chinese, and ethnic specialties. Its well-known brands such as Hina-Sushi, Shabu Sai, and Isomaru-suisan cater to diverse dining preferences, from casual seafood izakayas to specialty ramen and Italian dining. The company's multi-brand strategy allows it to capture a wide customer base while mitigating risks associated with single-concept reliance. Its strong market presence is supported by a mix of affordable and mid-range dining options, positioning it as a resilient operator in Japan's dynamic food service sector. The firm’s ability to manage a large-scale, multi-brand portfolio efficiently underscores its operational expertise and adaptability in a highly fragmented industry.

Revenue Profitability And Efficiency

The company reported revenue of JPY 156.4 billion for the fiscal year, with net income reaching JPY 5.6 billion, reflecting a disciplined cost structure and operational efficiency. Diluted EPS stood at JPY 26.57, indicating stable profitability. Operating cash flow was robust at JPY 25.99 billion, supported by strong restaurant-level execution, while capital expenditures of JPY 3.47 billion suggest ongoing reinvestment in store upgrades and expansion.

Earnings Power And Capital Efficiency

Create Restaurants demonstrates solid earnings power, with a net income margin of approximately 3.6%. The company’s ability to generate JPY 25.99 billion in operating cash flow highlights efficient capital deployment. Its diversified brand portfolio contributes to steady cash flow generation, though the high number of concepts may require careful management to maintain margins.

Balance Sheet And Financial Health

The company holds JPY 21.47 billion in cash and equivalents against total debt of JPY 67.7 billion, indicating moderate leverage. While debt levels are notable, the strong operating cash flow provides adequate coverage. The balance sheet reflects a typical structure for a growing restaurant chain, with reinvestment needs balanced against liquidity.

Growth Trends And Dividend Policy

Growth appears steady, supported by a large store footprint and multi-brand strategy. The company pays a dividend of JPY 8 per share, signaling a commitment to shareholder returns. Future expansion may focus on optimizing underperforming brands while selectively adding new locations.

Valuation And Market Expectations

With a market cap of JPY 289.3 billion, the stock trades at a moderate valuation relative to earnings. The low beta of 0.12 suggests lower volatility compared to the broader market, possibly reflecting investor confidence in its stable cash flows and defensive positioning in the consumer cyclical sector.

Strategic Advantages And Outlook

Create Restaurants benefits from its extensive brand diversification and operational scale, allowing it to navigate shifting consumer preferences. The outlook remains stable, supported by Japan’s steady dining demand, though competition and cost inflation pose ongoing challenges. Strategic focus on high-performing brands and efficiency improvements could drive sustained profitability.

Sources

Company filings, market data