Rakuten Aug 2021

Asia Pacific Equity Research
28 October 2021
Neutral
Rakuten Group (4755) 4755.T, 4755 JP
Price (27 Oct 21): ¥1,248
Still Monitoring Competitive Landscape in MNO
▲ Price Target (Dec-22): ¥1,180
Business, but Risk/Reward Equation Improving Prior (Dec-21): ¥920
Japan Equity Research

Internet, Telecom , Games
Haruka Mori AC
, , , ,
In light of recent trends, we revise our earnings estimates for Rakuten Group
Kaori Chiba
and raise our price target to ¥1,180 through December 2022. For the share
, ,
price to rebound in earnest, we think it will be necessary to see accelerating
momentum in customer acquisitions in the MNO business and actual top-line Ami Terai
growth. With that said, we do not anticipate any fresh news in the near term , , , ,
that could have a negative impact, and the stock is looking more compelling
from a risk/reward standpoint. We believe the share price will continue to be JPMorgan Securities Japan Co., Ltd.
more reactive to news flow than earnings. Over the short term, we are
monitoring potential catalysts stemming from strategic partnerships at Key Changes (FYE Dec)
Rakuten Symphony, which is to be incorporated (announced on September 30), Prev Cur
Revenue - 21E (¥ bn) 1,588.2 1,678.9
and external fundraising. Revenue - 22E (¥ bn) 1,733.0 1,867.0
 Raising our earnings estimates, mainly for internet services: We now
forecast non-GAAP operating losses of ¥215.1 billion in FY2021 Style Exposure
(Bloomberg consensus estimate: ¥191.1 billion) and ¥80.4 billion in
FY2022 (¥87.4 billion), and profit of ¥135.2 billion in FY2023. We raise
our profit estimates for the internet service business for the following
reasons. In FY2021, 1) profitability is improving thanks to fewer losses in
logistics and brisk top-line growth in domestic e-commerce operations,
centered on Rakuten Ichiba, 2) losses in other internet services have shrunk
more than anticipated (to almost the breakeven point in 2Q), and 3) Rakuten
Travel should start to recover in earnest. In the mobile business, however,
we expect operating losses of around ¥100 billion in 3Q and 4Q after a loss
of ¥99.7 billion was booked in 2Q. We think these losses will contract
sharply from 2Q FY2022, when roaming charges should fall considerably.
See Figures 2-8 for details about our earnings estimates.
 Watch for losses to contract in mobile business from 2Q FY2022: As of
August, the total number of MNO and MVNO subscribers topped five
million, but delays in expanding its own network coverage have dashed
expectations for momentum to pick up over the short term. We expect
population coverage to reach 96% by March 2022 (it was 93.3% as of end-
September), but there are some lingering uncertainties related to
semiconductor supply. Changes in the competitive landscape still require
monitoring, as the three major carriers have been moving aggressively to
beef up their mid- to low-capacity bands. In the mobile business, we
forecast non-GAAP operating losses of ¥409.6 billion in FY2021, ¥269.5
billion in FY2022, and ¥80.3 billion in FY2023, assuming the number of
Sources for: Style Exposure – J.P. Morgan Quantitative and Derivatives Strategy; all other tables are company data and J.P. Morgan estimates.
See page 14 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, users should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report.
This material was originally prepared by a J.P. Morgan entity (as identified in the material) in connection with its business and is being
provided to you as a courtesy in a modified format only for informational and educational purposes (not investment purposes), and on
a delayed basis.
JPMorgan Securities Japan Co., Ltd. Asia Pacific Equity Research
Haruka Mori 28 October 2021
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MNO subscribers rises to 5.24 million as of end-FY2021, 8.3 million by

end-FY2022, and 11.35 million by end-FY2023. We look for losses to
shrink faster from 2Q FY2022 as roaming costs fall and paying users
increase. Profit contributions from Rakuten Symphony’s first project (with
1&1) are a potential upside factor.
 Expect double-digit growth in gross merchandise sales in domestic e-
commerce business from FY2022: In the near term, it is necessary to
monitor the impact from a full reopening of the economy on merchandise
sales. We also expect Rakuten Travel to recover. We anticipate double-digit
YoY growth in gross merchandise sales in the domestic e-commerce
business to be maintained in FY2022. Moreover, we expect gradually
stronger contributions from greater usage by Rakuten Mobile users.
According to the company, about 20% of Rakuten Mobile subscribers are
also new Rakuten users, and one-third of these new users start using
Rakuten Ichiba within one year of signing their contract. In the domestic e-
commerce business, we look for growth in non-GAAP operating profit (we
estimate ¥76.2 billion in FY2021 and ¥91.6 billion in FY2022) to be driven
by reductions in logistics-related costs into FY2022, as well as by growth in
Rakuten Ichiba and Rakuten Travel.
 Diversification of fundraising methods: In the MNO business, we
understand that the company has already secured most of the capital needed
for building a 4G network through next fiscal year. In order to work in the
1.7GHz band (outside Tokyo, Nagoya and Osaka; ¥56 billion for migration
costs and ¥120 billion for capex), or if the company is allocated new
frequency bands, Rakuten will probably have to secure more funding.
Management has said that it would consider selling assets and shareholdings
in the investment business (unrealized gains of $966 million as of end-June),
and also noted the possibility of accepting capital from outside investors
when Rakuten Symphony is incorporated. Furthermore, if Rakuten Bank,
which has started to prepare for a listing on the stock market, achieves a
high valuation as a fintech company, we think the company might look into
listing other financial subsidiaries (excluding the credit card business).
2
a delayed basis.
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Price Performance Summary Investment Thesis and Valuation

Investment Thesis
For the share price to rebound in earnest, we think it will be
necessary to see accelerating momentum in customer
acquisitions in the MNO business and actual top-line growth.
With that said, we do not anticipate any fresh news in the near
term that could have a negative impact, and the stock is
looking more compelling from a risk/reward standpoint. We
believe the share price will continue to be more reactive to
news flow than earnings. Over the short term, we are
YTD 1m 3m 12m monitoring potential catalysts stemming from strategic
Abs 25.6% 10.9% 2.6% 18.1% partnerships at Rakuten Symphony, which is to be
Rel 14.0% 14.5% -1.4% -6.4% incorporated (announced on September 30), and external
Company Data
fundraising.
Shares O/S (mn) 1,580
52-week range (¥) 1,545-957 Valuation
Market cap ($ bn) 17.3 Our price target through December 2022 is ¥1,180. We use
Exchange rate 113.83 DCF modeling to value the internet service business and the
Free float(%) 55.3%
3M - Avg daily vol (mn) 8.71 MNO business, and a comparison with competitors to value
3M - Avg daily val ($ mn) 89.2 the fintech business. Our DCF assumptions are a risk-free rate
Volatility (90 Day) 38 of 0.5%, a market risk premium of 5.5%, beta of 1.1, and a
Index TOPIX
BBG BUY|HOLD|SELL 9|6|1 terminal growth rate of 2.0% (0.5% for the MNO business).
Our price target equates to 28x our FY2023 EPS forecast.
Key Metrics (FYE Dec)
¥ in billions 2020/12A 2021/12E 2022/12E 2023/12E Performance Drivers
Financial Estimates
Revenue 1,455.5 1,678.9 1,867.0 2,072.2
EBITDA 112 62 229 449
EBIT (94) (235) (100) 115
Net income (116) (283) (147) 60
Reported EPS -85.0 -197.2 -102.4 42.0
BBG EPS (73.38) (104.59) (53.02) 21.20
Cashflow from operations 1,041 307 476 709
FCFF 680 (167) 268 477
Margins and Growth
Revenue growth 15.2% 15.3% 11.2% 11.0%
Gross margin 63.5% 65.0% 65.0% 70.0%
EBITDA margin 7.7% 3.7% 12.3% 21.6%
EBIT margin -6.8% -12.8% -4.3% 6.5%
Fully Diluted EPS growth 248.7% 132.0% -48.1% -141.1%
Ratios
Effective Tax Rate -23.3% -27.9% -68.3% 54.6%
Interest cover 5.7 5.3 19.6 38.3
Net debt/Equity 2.6 2.3 3.1 2.9
Net debt/EBITDA 14.7 29.3 8.6 4.3
ROCE -4.4% -8.1% -3.7% 1.7%
ROE -17.0% -40.2% -20.9% 9.3%
Valuation
FCFF yield 40.0% -9.3% 14.9% 26.6%
Dividend yield 0.4% 0.4% 0.4% 0.4%
EV/Revenue 2.4 2.2 2.1 1.9
EV/EBITDA 31.8 60.2 16.9 8.6
P/E NM NM NM 29.7
Source: J.P. Morgan Quantitative and Derivatives Strategy for Performance Drivers; company data, Bloomberg Finance L.P. and J.P. Morgan estimates for all other tables. Note: Price history may not be complete
or exact. 3
a delayed basis.
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Figure 1: Rakuten: New and Old J.P. Morgan Estimates

¥ billion, ¥, x
Revenue yoy OP yoy OP yoy NP yoy EPS P/E
(IFRS) (Non-GAAP)
12/20 1,455.5 15.2% -93.8 - -98.6 - -114.2 - -85.0 -
12/21E new 1,678.9 15.3% -235.0 - -215.1 - -284.9 - -197.2 -
12/21E old 1,588.2 9.1% -173.0 - -152.6 - -217.4 - -150.5 -
12/21 CoE - - - - - - - - - -
12/22E new 1,867.0 11.2% -100.3 - -80.4 - -148.6 - -102.4 -
12/22E old 1,733.0 9.1% -62.1 - -41.7 - -115.3 - -79.4 -
12/23 E new 2,072.2 11.0% 115.3 - 135.2 - 58.9 - 42.0 29.7
12/23E old 1,921.8 10.9% 108.9 - 129.3 - 44.9 - 32.1 38.9
12/24 E new 2,196.9 6.0% 192.1 66.6% 212.0 56.8% 130.6 121.7% 91.9 13.6
12/25 E new 2,526.9 15.0% 288.6 50.2% 308.5 45.5% 212.9 63.0% 149.2 8.4
Source: Company data, J.P. Morgan estimates
Note: Price as of Oct. 27
4
a delayed basis.
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Figure 2: Rakuten: Annual Basis PL

¥ million
12/17 12/18 12/19 12/20 12/21E 12/22E 12/23E 12/24E 12/25E
Sales 944,474 1,101,480 1,263,932 1,455,538 1,678,900 1,867,000 2,072,200 2,196,900 2,526,900
Operating expenses 837,550 1,027,753 1,266,902 1,579,630 1,913,900 1,967,300 1,956,900 2,004,800 2,238,300
Operating profits (before additional line
- - - - - - - - -
items)
Other incomes 51,096 120,634 86,901 54,483 0 0 0 0 0
Other expenses 6,009 23,936 11,186 24,240 0 0 0 0 0
Individually disclosed items - - - - - - - - -
Operating profits(IFRS) 149,344 170,425 72,745 -93,849 -235,000 -100,300 115,300 192,100 288,600
Amortization of intangible assets -7,758 -10,982 -8,764 -9,502 -9,500 -9,500 -9,500 -9,500 -9,500
Stock Based Compensation -7,509 -7,833 -10,137 -10,612 -10,400 -10,400 -10,400 -10,400 -10,400
Other -2,399 28,110 -3,483 28,932 0 0 0 0 0
Operating profits (Non-GAAP) 167,010 161,130 95,129 -98,617 -215,100 -80,400 135,200 212,000 308,500
Individually disclosed items -2,913 -3,178 -5,385 -19,457 -11,700 -11,700 -11,700 -11,700 -11,700
Income/loss from equity method
-8,349 -1,824 -111,918 -37,710 22,800 22,800 22,800 22,800 22,800
investments
Other non-operating income - - - - - - - - -
Pretax profits 138,082 165,423 -44,558 -151,016 -223,900 -89,200 126,400 203,200 299,700
Taxes 27,594 23,534 -11,490 -35,178 62,500 60,900 69,000 74,100 88,300
Minority interests -97 -393 -1,180 -1,639 -1,500 -1,500 -1,500 -1,500 -1,500
Net profits (to owners of the parent) 110,585 142,282 -31,888 -114,199 -284,900 -148,600 58,900 130,600 212,900
Net income (IFRS) 110,488 141,889 -33,068 -115,838 -283,400 -147,100 60,400 132,100 214,400
EBITDA 203,720 242,854 193,289 111,637 61,920 229,220 448,620 526,420 623,520
EPS (¥) 82.0 104.9 -24.4 -85.0 -208.0 -108.0 44.3 97.0 157.4
Fully diluted (¥) - - - - -197.2 -102.4 42.0 91.9 149.2
DPS (¥) 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5
CFPS (¥) 122.5 158.8 54.9 27.4 -61.8 52.8 209.0 264.6 327.8
BPS (¥) 507.5 574.1 543.6 461.7 572.9 458.3 495.9 586.1 736.8
% YoY
Sales 20.8 16.6 14.7 15.2 15.3 11.2 11.0 6.0 15.0
Operating profits (before additional line
- - - - - - - - -
items)
Operating profit(IFRS) 91.5 14.1 -57.3 - - - - 66.6 50.2
Operating profit (Non-GAAP) 40.3 -3.5 -41.0 - - - - 56.8 45.5
Recurring profit - - - - - - - - -
Pretax profit 86.8 19.8 - - - - - 60.8 47.5
Net profits (to owners of the parent) 191.1 28.7 - - - - - 121.7 63.0
% of sales
Operating profit (before additional line
- - - - - - - - -
items)
Operating profit (IFRS) 15.8 15.5 5.8 -6.4 -14.0 -5.4 5.6 8.7 11.4
Operating profit (Non-GAAP) 17.7 14.6 7.5 -6.8 -12.8 -4.3 6.5 9.6 12.2
Pretax profits 14.6 15.0 -3.5 -10.4 -13.3 -4.8 6.1 9.2 11.9
Net profits (to owners of the parent) 11.7 12.9 -2.5 -7.8 -17.0 -8.0 2.8 5.9 8.4
5
a delayed basis.
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Figure 3: Rakuten: Segment PL

¥ million
12/17 12/18 12/19 12/20 12/21E 12/22E 12/23E 12/24E 12/25E
[Sales by segment]
Internet Service 596,923 676,676 788,460 874,806 1,012,100 1,088,600 1,177,300 1,277,300 1,388,600
yoy (%) 13.4% 16.5% 11.0% 15.7% 7.6% 8.1% 8.5% 8.7%
1) Domestic EC 375,121 411,384 482,206 584,135 700,500 768,200 852,000 941,900 1,041,800
Domestic EC GMS rate 15.8% 12.1% 13.0% 13.1% 13.8% 13.7% 13.8% 13.9% 14.1%
yoy (%) 10.1% 17.6% 21.0% 19.9% 9.7% 10.9% 10.6% 10.6%
a-1) Rakuten Ichiba Business 160,200 176,100 208,700 266,300 334,200 357,800 393,600 432,900 476,200
Take rate vs. Rakuten Ichiba GMS 7.7% 8.0% 8.6% 8.2% 9.0% 8.8% 8.8% 8.8% 8.8%
yoy (%) 7.8% 9.9% 18.5% 27.6% 25.5% 7.1% 10.0% 10.0% 10.0%
a-2) Rakuten Travel 51,000 56,900 62,000 44,600 49,300 56,600 63,400 67,800 72,600
yoy (%) 10.9% 11.6% 9.0% -28.1% 10.5% 14.8% 12.0% 6.9% 7.1%
b) Other Domestic EC 153,319 227,378 261,061 273,195 317,000 353,800 395,000 441,200 493,000
yoy (%) 54.1% -2.7% 19.9% 54.7% 16.0% 11.6% 11.6% 11.7% 11.7%
2) Other Internet Services 221,802 263,713 306,214 290,671 311,600 320,400 325,300 335,400 346,800
yoy (%) 18.9% 16.3% -5.1% 7.2% 2.8% 1.5% 3.1% 3.4%
Gross Transaction Value
Domestic EC GMS 3,713,800 4,451,000 5,058,000 5,592,600 6,165,100 6,759,500 7,411,300
yoy (%) 19.9% 13.6% 10.6% 10.2% 9.6% 9.6%
(Old-1) Domestic EC GMS 3,411,100 3,825,154 - - - - - - -
yoy (%) 13.7% 12.1% - - - - - - -
a) Rakuten Travel (checkout basis,
599,100 670,300 729,400 524,000 579,100 666,000 745,900 798,100 854,000
estimates)
yoy (%) 10.7% 11.9% 8.8% -28.2% 10.5% 15.0% 12.0% 7.0% 7.0%
b) Rakuten ichiba (estimates) 2,075,500 2,205,400 2,432,300 3,248,200 3,696,000 4,065,600 4,472,200 4,919,400 5,411,300
yoy (%) 8.8% 6.3% 10.3% 33.5% 13.8% 10.0% 10.0% 10.0% 10.0%
c) Other Domestic EC (estimates) 730,500 937,500 585,000 678,800 782,900 861,000 947,000 1,042,000 1,146,000
yoy (%) 32.2% 28.3% 13.1% 16.0% 15.3% 10.0% 10.0% 10.0% 10.0%
Mobile 67,481 89,863 123,860 172,451 214,300 286,000 346,200 399,500 448,900
yoy (%) - 33.2% 33.3% 39.2% 24.3% 33.5% 21.0% 15.4% 12.4%
a) MNO+MVNO 35,100 51,174 80,252 122,300 121,500 157,800 207,700 252,500 295,800
yoy 45.8% 56.8% - -0.7% 29.9% 31.6% 21.6% 17.1%
No. of subscribers (‘000) 1,672 1,989 2,325 3,400 5,640 8,300 11,350 13,950 16,510
Net additions (‘000) 317 336 1,075 2,240 2,660 3,050 2,600 2,560
b) Other 92,800 128,200 138,500 147,000 153,100
yoy 38.1% 8.0% 6.1% 4.1%
FinTech 345,187 424,488 486,372 576,195 634,600 689,000 763,300 743,600 947,800
yoy (%) 23.0% 14.6% 18.5% 10.1% 8.6% 10.8% -2.6% 27.5%
a) Rakuten Card 160,797 187,124 229,756 261,328 279,000 307,800 353,300 300,600 467,000
yoy (%) 15.5% 16.4% 22.8% 13.7% 6.8% 10.3% 14.8% -14.9% 55.4%
b) Rakuten Bank 75,335 82,471 89,081 95,527 104,700 115,200 126,700 139,400 153,300
yoy (%) 13.0% 9.5% 8.0% 7.2% 9.6% 10.0% 10.0% 10.0% 10.0%
c) Rakuten Securities 50,646 59,681 56,556 74,091 88,200 88,200 88,200 88,200 88,200
yoy (%) 9.8% 17.8% -5.2% 31.0% 19.0% 0.0% 0.0% 0.0% 0.0%
d) Rakuten Payment 19,169 22,754 28,842 33,060 42,800 51,400 61,700 74,000 88,800
yoy (%) 18.7% 26.8% 14.6% 29.5% 20.0% 20.0% 20.0% 20.0%
e) Rakuten Life 32,443 30,624 33,565 38,539 42,800 44,900 47,100 49,500 52,000
yoy (%) -1.4% -5.6% 9.6% 14.8% 11.1% 5.0% 5.0% 5.0% 5.0%
f) Rakuten Insurance - 60,413 65,656 55,578 55,000 55,000 55,000 55,000 55,000
yoy (%) - - 8.7% -15.3% -1.0% 0.0% 0.0% 0.0% 0.0%
g) Others 6,798 -18,578 -17,085 18,072 21,200 25,400 30,000 35,400 41,800
yoy (%) - - 17.3% 20.0% 18.0% 18.0% 18.0%
Elimination -65,117 -89,548 -134,760 -167,914 -182,100 -196,600 -214,600 -223,500 -258,400
Total 944,474 1,101,481 1,263,932 1,455,538 1,678,900 1,867,000 2,072,200 2,196,900 2,526,900
6
a delayed basis.
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Figure 4: Rakuten: Segment PL (continued)

¥ million
12/17 12/18 12/19 12/20 12/21E 12/22E 12/23E 12/24E 12/25E
[OP by segment]
Internet Service (Non-GAAP) 106,444 107,707 104,579 40,395 105,300 92,200 108,100 125,300 144,800
yoy (%) 1.2% -15.8% -61.4% 160.7% -12.4% 17.2% 15.9% 15.6%
OP margin (%) 17.8% 15.9% 13.3% 4.6% 10.4% 8.5% 9.2% 9.8% 10.4%
1) Domestic EC (Non-GAAP) 72,146 58,494 51,503 58,192 76,200 91,600 107,300 123,900 142,900
yoy (%) -19.8% -12.0% 13.0% 30.9% 20.2% 17.1% 15.5% 15.3%
OP margin (%) 19.2% 14.2% 10.7% 10.0% 10.9% 11.9% 12.6% 13.2% 13.7%
a) Rakuten Ichiba Business (Non-GAAP) 61,400 62,990 65,800 87,900 98,800 100,900 111,700 124,300 139,100
yoy (%) 4.1% 2.6% 4.5% 33.6% 12.4% 2.1% 10.7% 11.3% 11.9%
OP margin (%) 38.3% 35.8% 31.5% 33.0% 29.6% 28.2% 28.4% 28.7% 29.2%
b) Rakuten Travel (Non-GAAP) 19,300 21,130 22,900 14,200 18,200 20,900 23,500 25,100 26,900
yoy (%) 5.5% 9.5% 8.4% -38.0% 28.2% 14.8% 12.4% 6.8% 7.2%
OP margin (%) 37.8% 37.1% 36.9% 31.8% 36.9% 36.9% 37.1% 37.0% 37.1%
c) Other Domestic EC (Non-GAAP) -5,700 -22,800 -37,200 -43,900 -40,800 -30,200 -27,900 -25,500 -23,100
2) Other Internet Services (Non-GAAP) 34,298 49,829 53,076 -17,797 29,100 600 800 1,400 1,900
Mobile (Non-GAAP) -6,947 -13,672 -73,898 -227,259 -409,600 -269,500 -80,300 -19,800 30,800
Depreciation & amortization 4,078 5,254 14,174 53,980 96,200 109,000 107,400 104,400 101,200
EBITDA -54,969 -175,697 -313,383 -160,500 27,100 84,600 132,000
FinTech (Non-GAAP) 63,509 67,903 69,306 81,291 89,000 96,900 107,400 106,500 132,900
yoy (%) 6.9% 2.1% 17.3% 9.5% 8.9% 10.8% -0.8% 24.8%
a) Rakuten Card (Non-GAAP) 26,311 26,938 32,571 37,733 42,400 44,600 51,500 46,700 68,800
yoy (%) 2.4% 20.9% 15.8% 12.4% 5.2% 15.5% -9.3% 47.3%
OP margin (%) 16.4% 14.4% 14.2% 14.4% 15.2% 14.5% 14.6% 15.5% 14.7%
b) Rakuten Bank (Non-GAAP) 20,604 24,735 27,048 28,053 30,000 35,700 39,300 43,200 47,500
yoy (%) 20.0% 9.4% 3.7% 6.9% 19.0% 10.1% 9.9% 10.0%
OP margin (%) 27.3% 30.0% 30.4% 29.4% 28.7% 31.0% 31.0% 31.0% 31.0%
c) Rakuten Securities (Non-GAAP) 16,813 19,054 11,013 16,609 16,500 16,500 16,500 16,500 16,500
yoy (%) 13.3% -42.2% 50.8% -0.7% 0.0% 0.0% 0.0% 0.0%
OP margin (%) 33.2% 31.9% 19.5% 22.4% 18.7% 18.7% 18.7% 18.7% 18.7%
d) Rakuten Payment -1,202 -1,874 -5,311 -6,776 -5,800 -5,800 -5,800 -5,800 -5,800
e) Rakuten Life (Non-GAAP) 1,205 2,653 5,946 6,916 7,900 7,900 7,900 7,900 7,900
yoy (%) 120.2% 124.1% 16.3% 14.2% 0.0% 0.0% 0.0% 0.0%
OP margin (%) 3.7% 8.7% 17.7% 17.9% 18.5% 17.6% 16.8% 16.0% 15.2%
f) Rakuten Insurance (Non-GAAP) - -3,942 -1,234 853 1,200 1,200 1,200 1,200 1,200
yoy (%) - - - - 40.7% 0.0% 0.0% 0.0% 0.0%
OP margin (%) 1.5% 2.2% 2.2% 2.2% 2.2% 2.2%
g) Others (Non-GAAP) -222 340 -727 -2,096 -3,200 -3,200 -3,200 -3,200 -3,200
Elimination (Non-GAAP) 4,004 -808 -4,864 2,904 200 0 0 0 0
Total (Non-GAAP) 167,010 161,130 95,129 -98,617 -215,100 -80,400 135,200 212,000 308,500
7
a delayed basis.
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Figure 5: Rakuten: Quarterly Basis PL

¥ million
12/20 12/21
1Q 2Q 1H 3Q 4Q 2H 1Q 2Q 1H 3Q E 4Q E 2H E
Sales 331,443 347,325 678,768 361,422 415,348 776,770 391,513 402,158 793,671 413,400 470,900 884,300
Operating expenses 351,115 379,695 699,489 394,341 485,800 880,141 458,079 466,330 894,560
Other incomes 1,024 43,887 44,911 683 8,889 9,572 33,308 3,078 36,386
Individually disclosed items 5,406 8,184 13,590 7,562 3,088 10,650 4,082 2,355 6,437
Operating profits(IFRS) -24,054 3,333 -20,721 -39,798 -33,330 -73,128 -37,340 -63,549 -100,889 -70,700 -63,400 -134,100
Amortization of intangible assets -2,634 -2,668 -5,302 -2,607 -1,593 -4,200 -2,590 -1,744 -4,334 -2,600 -2,600 -5,200
Stock Based Compensation -3,284 -2,338 -5,622 -2,414 -2,576 -4,990 -3,165 -2,266 -5,431 -2,500 -2,500 -5,000
Other 0 40,926 40,926 -6,123 -5,871 -11,994 0 0 0 0 0 0
Operating profits (Non-GAAP) -18,136 -32,587 -50,723 -28,654 -19,240 -47,894 -31,585 -59,539 -91,124 -65,600 -58,300 -123,900
Financial balance -4,178 -2,732 -6,910 -14,188 1,641 -12,547 1,881 -7,566 -5,685 -3,000 -3,000 -6,000
Income/loss from equity method investments -7,618 -5,103 -12,721 -25,261 272 -24,989 17,584 7,226 24,810 -1,000 -1,000 -2,000
Pretax profits -35,850 -4,502 -40,352 -79,247 -31,417 -110,664 -17,875 0 -17,875 -74,700 -67,400 -142,100
Taxes -450 -12,078 -12,528 -34,665 12,015 -22,650 7,707 -23,167 -15,460 0 0 0
Minority interests -81 -258 -339 -596 -704 -1,300 -439 -427 -866 -300 -300 -600
Net income (IFRS) -35,319 7,834 -27,485 -43,986 -42,728 -86,714 -25,143 -40,295 -65,438 -74,400 -67,100 -141,500
% YoY
Sales 18.2 13.4 15.7 13.2 16.0 14.7 18.1 15.8 16.9 14.4 13.4 13.8
Operating profits (IFRS) - - - - - - - - - - - -
Operating profits (Non-GAAP) - - - - - - - - - - - -
Pretax profits - - - - - - - - - - - -
Net profit - - - - - - - - - - - -
% of sales
Other operating expenses 105.9 109.3 103.1 109.1 117.0 113.3 117.0 116.0 112.7 0.0 0.0 0.0
Operating profits(IFRS) -7.3 1.0 -3.1 -11.0 -8.0 -9.4 -9.5 -15.8 -12.7 -17.1 -13.5 -15.2
Operating profits (Non-GAAP) -5.5 -9.4 -7.5 -7.9 -4.6 -6.2 -8.1 -14.8 -11.5 -15.9 -12.4 -14.0
Pretax profits -10.8 -1.3 -5.9 -21.9 -7.6 -14.2 -4.6 0.0 -2.3 -18.1 -14.3 -16.1
Net profits -10.7 2.3 -4.0 -12.2 -10.3 -11.2 -6.4 -10.0 -8.2 -18.0 -14.2 -16.0
8
a delayed basis.
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Figure 6: Rakuten: Segment PL (Quarterly)

¥ million
12/20 12/21
[Sales by segment]
Internet Service 190,977 201,829 392,806 214,615 267,385 482,000 224,943 237,868 462,811 248,100 301,200 248,100
yoy (%) 12.9% 6.1% 9.3% 7.7% 16.4% 12.4% 17.8% 17.9% 17.8% 15.6% 12.6% -48.5%
1) Domestic EC 124,183 132,681 256,864 148,742 178,529 327,271 158,263 163,607 321,870 176,300 202,300 378,600
Domestic EC GMS rate 13.6% 12.9% 13.2% 13.6% 12.7% 13.1% 14.1% 14.2% 14.1% 13.9% 13.4% 13.6%
yoy (%) -39.6% -40.1% -39.8% -40.2% -37.4% -38.7% 27.4% 23.3% 25.3% 18.5% 13.3% 15.7%
a-1) Rakuten Ichiba Business 52,000 67,400 119,400 65,300 81,600 146,900 82,900 77,200 160,100 78,800 95,300 174,100
Take rate vs. Rakuten Ichiba GMS 8.4% 8.0% 8.2% 8.1% 8.3% 8.2% 10.1% 8.9% 9.5% 8.5% 8.8% 8.7%
yoy (%) 11.6% 33.2% 22.8% 24.0% 38.8% 31.7% 59.4% 14.5% 34.1% 20.7% 16.8% 18.5%
a-2) Rakuten Travel 13,600 2,600 16,200 10,900 17,500 28,400 9,600 9,900 19,500 14,100 15,700 29,800
yoy (%) 0.0% -81.9% -42.1% -39.8% 10.1% -16.5% -29.4% 280.8% 20.4% 29.4% -10.3% 4.9%
b) Other Domestic EC 58,576 62,693 121,269 72,513 79,413 151,926 65,747 76,530 142,277 83,400 91,300 174,700
yoy (%) 23.0% 45.1% 33.6% 38.3% 39.8% 39.1% 12.2% 22.1% 17.3% 15.0% 15.0% 15.0%
2) Other Internet Services 66,793 69,149 135,942 65,873 88,856 154,729 66,680 74,261 140,941 71,800 98,900 170,700
yoy (%) 9.2% -6.8% 0.4% -10.1% -8.9% -9.4% -0.2% 7.4% 3.7% 9.0% 11.3% 10.3%
Gross Transaction Value
Domestic EC GMS 916,300 1,029,800 1,946,100 1,095,000 1,409,900 2,504,900 1,122,000 1,155,700 2,277,700 1,270,400 1,509,900 2,780,300
yoy (%) 9.3% 15.9% 12.7% 13.0% 38.5% 26.1% 22.4% 12.2% 17.0% 16.0% 7.1% 11.0%
a) Rakuten Travel (checkout basis, 160,500 30,500 191,000 127,700 205,300 333,000 112,400 115,900 228,300 166,000 184,800 350,800
estimates)
yoy (%) 0.0% -82.0% -42.1% -40.0% 10.0% -16.6% -30.0% 280.0% 19.5% 30.0% -10.0% 5.3%
b) Rakuten ichiba (estimates) 615,500 842,000 1,457,500 805,700 985,000 1,790,700 818,600 867,300 1,685,900 926,600 1,083,500 2,010,100
yoy (%) 10.0% 48.0% 29.2% 29.0% 45.0% 37.3% 33.0% 3.0% 15.7% 15.0% 10.0% 12.3%
c) Other Domestic EC (estimates) 140,300 157,300 297,600 161,600 219,600 381,200 191,000 172,500 363,500 177,800 241,600 419,400
yoy (%) - - - - - - 36.1% 9.7% 22.1% 10.0% 10.0% 10.0%
Mobile 38,934 43,969 82,903 45,369 44,179 89,548 55,805 51,462 107,267 53,200 53,800 107,000
yoy (%) 53.9% 63.6% 58.9% 35.3% 15.8% 24.9% 43.3% 17.0% 29.4% 17.3% 21.8% 19.5%
FinTech 140,038 141,723 281,761 143,965 150,469 294,434 151,572 153,153 304,725 160,600 168,400 329,000
yoy (%) 22.9% 19.5% 21.2% 18.5% 13.7% 16.0% 8.2% 8.1% 8.2% 11.6% 11.9% 11.7%
a) Rakuten Card 63,251 64,329 127,580 64,948 68,800 133,748 66,654 68,734 135,388 69,200 74,400 143,600
yoy (%) 22.0% 14.9% 18.3% 11.7% 7.8% 9.7% 5.4% 6.8% 6.1% 6.5% 8.1% 7.4%
b) Rakuten Bank 23,527 23,621 47,148 23,708 24,671 48,379 25,710 25,803 51,513 26,100 27,100 53,200
yoy (%) 8.7% 9.0% 7.8% 9.0% 9.0% 6.7% 9.3% 9.2% 9.3% 10.0% 10.0% 10.0%
c) Rakuten Securities 17,830 17,269 35,099 18,794 18,800 37,594 23,750 20,614 44,364 21,900 21,900 43,800
yoy (%) 22.7% 29.3% 25.9% 31.8% 10.0% 31.1% 33.2% 19.4% 26.4% 16.5% 16.5% 16.5%
d) Rakuten Payment 8,607 7,008 15,615 8,230 9,215 17,445 8,757 9,749 18,506 12,300 12,000 24,300
yoy (%) 41.3% 6.2% 23.1% 12.5% 4.3% 8.0% 1.7% 39.1% 18.5% 50.0% 30.0% 39.3%
e) Rakuten Life 9,041 9,201 18,242 9,264 11,033 20,297 10,104 10,390 20,494 10,200 12,100 22,300
yoy (%) 17.0% 18.6% 17.8% 20.4% 6.3% 12.3% 11.8% 12.9% 12.3% 10.0% 10.0% 9.9%
f) Rakuten Insurance 13,928 15,902 29,830 14,136 11,612 25,748 11,795 13,251 25,046 15,000 15,000 30,000
yoy (%) -8.4% -2.9% -5.5% -9.1% -37.3% -24.4% -15.3% -16.7% -16.0% 6.1% 29.2% 16.5%
g) Others 3,852 4,396 8,248 4,885 4,939 9,824 4,801 4,612 9,413 5,900 5,900 11,800
yoy (%) - - - - - - 24.6% 4.9% 14.1% 20.0% 20.0% 20.1%
Elimination -38,506 -40,196 -78,702 -42,527 -46,685 -89,212 -40,807 -40,325 -81,132 -48,500 -52,500 -101,000
Total 331,433 347,325 678,758 361,422 416,287 777,740 391,513 402,158 793,671 413,400 470,900 884,300
9
a delayed basis.
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Figure 7: Rakuten: Segment PL (Quarterly) (continued)

¥ million
12/20 12/21
[OP by segment]
Internet Service (Non-GAAP) -853 -1,309 -2,162 8,589 33,968 42,557 41,559 17,347 58,906 20,500 25,900 46,400
yoy (%) NM NM NM 13.5% NM NM NM NM NM 138.7% -23.8% 9.0%
OP margin(%) -0.4% -0.6% -0.6% 4.0% 12.7% 8.8% 18.5% 7.3% 12.7% 8.3% 8.6% 18.7%
1) Domestic EC (Non-GAAP) 10,560 11,239 21,799 15,417 20,976 36,393 12,650 17,182 29,832 20,300 26,100 46,400
yoy (%) -12.9% -7.6% -10.2% 3.5% 70.3% 33.7% 19.8% 52.9% 36.9% 31.7% 24.4% 27.5%
OP margin(%) 8.5% 8.5% 8.5% 10.4% 11.7% 11.1% 8.0% 10.5% 9.3% 11.5% 12.9% 12.3%
a) Rakuten Ichiba Business 16,260 24,640 40,900 19,720 27,280 47,000 18,850 25,880 44,730 23,200 30,900 54,100
yoy (%) 3.6% 68.7% 34.9% 25.5% 38.0% 32.5% 15.9% 5.0% 9.4% 17.6% 13.3% 15.1%
OP margin(%) 31.3% 36.6% 34.3% 30.2% 33.4% 32.0% 22.7% 33.5% 27.9% 29.4% 32.4% 31.1%
b) Rakuten Travel (Non-GAAP) 5,200 -2,300 2,900 4,700 6,600 11,300 4,800 3,000 7,800 4,900 5,500 10,400
yoy (%) -0.2% -146.0% -71.6% -34.7% 20.0% -11.0% -7.7% -230.4% 169.0% 4.3% -16.7% -8.0%
OP margin(%) 38.2% -88.5% 17.9% 43.1% 37.7% 39.8% 50.0% 30.3% 40.0% 34.8% 35.0% 34.9%
c) Other Domestic EC (Non-GAAP) -10,900 -11,100 -22,000 -9,000 -12,900 -21,900 -11,000 -11,700 -22,700 -7,800 -10,300 -18,100
2) Other Internet Services -11,413 -12,549 -23,962 -6,828 12,993 6,165 28,909 165 29,074 200 -200 0
Mobile (Non-GAAP) -35,407 -53,825 -89,232 -61,451 -76,576 -138,027 -97,597 -99,686 -197,283 -107,100 -105,200 -212,300
FinTech (Non-GAAP) 19,826 21,256 41,082 22,309 17,900 40,209 24,550 22,524 47,074 21,000 21,000 42,000
yoy (%) 14.7% 24.3% 19.5% 34.9% -2.6% 15.2% 23.8% 6.0% 14.6% -5.9% 17.3% 4.5%
a) Rakuten Card (Non-GAAP) 9,808 9,234 19,042 11,512 7,179 18,691 11,038 10,750 21,788 10,200 10,400 20,600
yoy (%) 23.7% 12.0% 17.8% 37.5% -10.6% 14.0% 12.5% 16.4% 14.4% -11.4% 44.9% 10.2%
OP margin (%) 15.5% 14.4% 14.9% 17.7% 10.4% 14.0% 16.6% 15.6% 16.1% 14.7% 14.0% 14.3%
b) Rakuten Bank (Non-GAAP) 6,823 7,367 14,190 6,674 7,189 13,863 7,297 7,463 14,760 7,300 7,900 15,200
yoy (%) 6.0% 6.4% 6.2% -0.2% 2.7% 1.3% 6.9% 1.3% 4.0% 9.4% 9.9% 9.6%
OP margin (%) 29.0% 31.2% 30.1% 28.2% 29.1% 28.7% 28.4% 28.9% 28.7% 28.0% 29.2% 28.6%
c) Rakuten Securities (Non-GAAP) 4,397 3,653 8,050 4,431 4,128 8,559 6,310 3,422 9,732 3,400 3,400 6,800
yoy (%) 39.1% 62.1% 48.7% 40.6% 68.6% 52.8% 43.5% -6.3% 20.9% -23.3% -17.6% -20.6%
OP margin (%) 24.7% 21.2% 22.9% 23.6% 22.0% 22.8% 26.6% 16.6% 21.9% 15.5% 15.5% 15.5%
d) Rakuten Payment (Non-GAAP) -1,964 -596 -2,560 -1,680 -2,536 -4,216 -1,215 -545 -1,760 -1,500 -2,500 -4,000
e) Rakuten Life 1,385 1,455 2,840 1,466 2,610 4,076 1,756 1,841 3,597 1,800 2,500 4,300
yoy (%) 67.9% 51.9% 59.3% 30.3% -14.1% -2.1% 26.8% 26.5% 26.7% 22.8% -4.2% 5.5%
OP margin (%) 15.3% 15.8% 15.6% 15.8% 23.7% 20.1% 17.4% 17.7% 17.6% 17.6% 20.7% 19.3%
f) Rakuten Insurance -4 390 386 238 229 467 153 458 611 300 300 600
g) Other -620 -247 -867 -333 -896 -1,229 -789 -866 -1,655 -500 -1,000 -1,500
Elimination (Non-GAAP) -1,703 1,291 -412 1,898 1,418 3,316 -97 276 179 0 0 0
Total (Non-GAAP) -18,136 -32,587 -50,723 -28,654 -19,220 -47,900 -31,584 -59,539 -91,123 -65,600 -58,300 -123,900
10
a delayed basis.
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Figure 8: Rakuten: BS and CF

¥ million
12/17 12/18 12/19 12/20 12/21E 12/22E 12/23E 12/24E 12/25E
[Balance sheet]
Cash and cash equivalents 700,881 990,242 1,478,557 3,021,306 3,637,816 3,986,452 4,573,481 5,300,348 6,263,598
Accounts receivable-trade 128,057 181,026 222,485 243,886 274,208 286,980 302,409 320,141 340,083
Financial assets for securities business 1,889,157 1,789,832 1,976,009 2,673,229 2,973,229 3,073,229 3,173,229 3,273,229 3,373,229
Loans for credit card business 1,223,195 1,464,030 1,828,216 2,033,013 2,033,013 2,333,013 2,733,013 3,233,013 3,733,013
Investment securities for banking
business 203,161 205,641 272,711 266,227 266,227 266,227 266,227 266,227 266,227
Loans for banking business 753,419 891,925 1,049,993 1,436,513 1,456,513 1,477,513 1,499,613 1,522,813 1,547,213
Investment securities for insurance
business 21,803 277,057 287,200 283,969 283,969 283,969 283,969 283,969 283,969
Derivative assets 19,978 27,388 28,050 32,644 32,644 32,644 32,644 32,644 32,644
Investment securities 261,588 384,788 163,259 275,236 275,236 275,236 275,236 275,236 275,236
Other financial assets 176,427 275,800 390,234 492,686 472,686 442,686 412,686 382,686 352,686
Investments in associates and joint
ventures 54,481 12,788 177,199 58,072 58,072 58,072 58,072 58,072 58,072
Property, plant and equipment 73,171 91,335 376,424 684,110 945,575 972,515 999,755 1,009,995 1,021,335
Intangible assets 526,862 553,815 609,450 639,589 727,345 762,215 802,735 847,255 897,825
Deferred tax assets 36,472 50,049 80,153 126,203 156,203 186,203 216,203 246,203 276,203
Other assets 115,647 149,286 225,757 257,755 287,755 317,755 347,755 377,755 407,755
Total assets 6,184,299 7,345,002 9,165,697 12,524,438 13,880,491 14,754,709 15,977,027 17,429,587 19,129,089
Accounts payable - trade 202,874 255,353 329,483 337,427 290,384 312,332 337,781 366,473 398,406
Deposits for banking business 1,946,142 2,355,114 3,160,748 4,716,162 5,423,600 6,237,100 7,172,700 8,248,600 9,485,900
Financial liabilities for securities
business 1,790,388 1,753,216 1,860,645 2,587,227 2,587,227 2,587,227 2,587,227 2,587,227 2,587,227
Derivative liabilities 6,918 9,213 10,172 78,318 78,318 78,318 78,318 78,318 78,318
Bonds and borrowings 1,015,781 1,234,143 1,727,096 2,487,457 2,911,509 2,986,509 3,076,509 3,181,509 3,286,509
Other financial liabilities 351,779 444,531 820,440 1,131,505 1,231,505 1,331,505 1,431,505 1,531,505 1,631,505
Income taxes payable 13,264 13,243 12,952 8,700 8,700 8,700 8,700 8,700 8,700
Provisions 76,104 90,516 109,845 162,579 162,579 162,579 162,579 162,579 162,579
Policy reserves and others for
insurance business 22,050 334,536 318,090 285,336 285,336 285,336 285,336 285,336 285,336
Deferred tax liabilities 30,541 13,059 2,049 1,920 1,920 1,920 1,920 1,920 1,920
Other liabilities 45,050 65,871 76,977 98,793 118,793 138,793 158,793 178,793 198,793
Total liabilities 5,500,891 6,568,795 8,428,497 11,895,424 13,099,871 14,130,319 15,301,368 16,630,960 18,125,193
Common stock 205,924 205,924 205,924 205,924 205,924 205,924 205,924 205,924 205,924
Capital surplus 217,185 218,856 224,379 227,844 227,844 227,844 227,844 227,844 227,844
Retained earnings 320,397 424,568 413,603 290,449 -582 -155,314 -102,545 21,924 228,693
Treasury stock -103,616 -97,300 -92,305 -84,941 0 0 0 0 0
Other 43,291 22,425 -15,929 -30,538 11,343 11,343 11,343 11,343 11,343
Total equity attributable to owners of
the parent company 683,181 774,473 735,672 608,738 761,845 607,113 659,882 784,351 991,120
Non-controlling interests 227 1,734 1,528 20,276 18,776 17,276 15,776 14,276 12,776
Total net assets 683,408 776,207 737,200 629,014 780,621 624,389 675,658 798,627 1,003,896
Total of liabilities and net assets 6,184,299 7,345,002 9,165,697 12,524,438 13,880,491 14,754,709 15,977,027 17,429,587 19,129,089
Net Debt 53,312 472,313 1,025,203 1,637,697 1,812,263 1,960,678 1,949,046 1,885,364 1,669,035
ROE(%) 16.2 19.4 -4.4 -17.0 -40.2 -20.9 9.3 17.9 23.8
ROA(%) 2.0 2.1 -0.4 -1.1 -2.1 -1.0 0.4 0.8 1.2
Internet service business Cash flow

Operating profits before taxes 74,500 91,200 -79,400 -187,200 72,800 87,200 103,100 120,300 139,800
Income taxes -6,700 -17,300 -8,500 -5,900 -26,200 -31,400 -37,100 -43,300 -50,300
Depreciation 34,000 42,200 68,200 107,500 150,720 164,520 163,920 161,920 159,720
Goodwill amortization - - - - - - - - -
Increase in working capital (Non-finance) -5,200 -29,100 -6,700 -29,500 -11,257 -4,199 -5,181 -6,011 -6,793
Capital expenditures -28,600 -15,200 -89,800 -268,400 -351,025 -126,400 -129,400 -114,400 -117,400
Free cash flow (FCF) 15,400 18,100 -145,300 -381,000 -261,000 33,300 33,600 53,400 54,500
11
a delayed basis.
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Investment Thesis, Valuation and Risks

Rakuten Group, Inc. (4755) (Neutral; Price Target: ¥1,180)
Investment Thesis
For the share price to rebound in earnest, we think it will be necessary to see
accelerating momentum in customer acquisitions in the MNO business and actual
top-line growth. With that said, we do not anticipate any fresh news in the near term
that could have a negative impact, and the stock is looking more compelling from a
risk/reward standpoint. We believe the share price will continue to be more reactive
to news flow than earnings. Over the short term, we are monitoring potential
catalysts stemming from strategic partnerships at Rakuten Symphony, which is to be
incorporated (announced on September 30), and external fundraising.
Valuation
Our price target through December 2022 is ¥1,180. We use DCF modeling to value
the internet service business and the MNO business, and a comparison with
competitors to value the fintech business. Our DCF assumptions are a risk-free rate
of 0.5%, a market risk premium of 5.5%, beta of 1.1, and a terminal growth rate of
2.0% (0.5% for the MNO business). Our price target equates to 28x our FY2023 EPS
forecast.
Risks to Rating and Price Target

Upside Scenario to Target Price/Rating
 Greater-than-expected growth acceleration and profitability improvement of
Japanese e-commerce market
 Enhanced competitiveness in domestic EC business led by collaboration
strategies
 Increase in the number of subscribers in MNO business
Downside Scenario to Target Price/Rating
 Decline in share of Japanese e-commerce market
 Greater-than-expected expansion in investment due to intensified competition in
domestic EC business
 Greater-than-expected losses in MNO business
12
a delayed basis.
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Rakuten Group (4755): Summary of Financials

Income Statement 2019/12A 2020/12A 2021/12E 2022/12E 2023/12E Cash Flow Statement 2019/12A 2020/12A 2021/12E 2022/12E 2023/12E
Revenue 1,263.9 1,455.5 1,678.9 1,867.0 2,072.2 Cash flow from operating activities 318 1,041 307 476 709
COGS (384) (531) (588) (654) (622) o/w Depreciation & amortization 121 205 297 330 333
Gross profit 880 925 1,091 1,214 1,451 o/w Changes in working capital 232 996 393 405 425
SG&A - - - - -
EBITDA 193 112 62 229 449 Cash flow from investing activities (286) (303) (979) (454) (474)
D&A (121) (205) (297) (330) (333) o/w Capital expenditure (207) (385) (490) (227) (237)
EBIT 73 (94) (235) (100) 115 as % of sales 16.4% 26.5% 29.2% 12.2% 11.4%
Net Interest (5) (19) (12) (12) (12)
PBT (45) (151) (224) (89) 126 Cash flow from financing activities 458 808 503 69 84
Tax 11 35 (63) (61) (69) o/w Dividends paid (6) (6) (6) (6) (6)
Minority Interest 1 2 2 2 2 o/w Shares issued/(repurchased) - - 0 0 0
Net Income (33) (116) (283) (147) 60 o/w Net debt issued/(repaid) 488 756 424 75 90
.
Reported EPS (24.4) (85.0) (197.2) (102.4) 42.0 Net change in cash 488 1,543 (169) 90 318
DPS 4.50 4.50 4.50 4.50 4.50 Adj. Free cash flow to firm 118 680 (167) 268 477
Payout ratio NM NM NM NM 10.7% y/y Growth 94.0% 477.2% -124.6% -260.2% 77.8%
Shares outstanding 1,356 1,363 1,363 1,363 1,363
.
Balance Sheet 2019/12A 2020/12A 2021/12E 2022/12E 2023/12E Ratio Analysis 2019/12A 2020/12A 2021/12E 2022/12E 2023/12E
Cash and cash equivalents 1,642 3,297 3,913 4,262 4,849 Gross margin 69.6% 63.5% 65.0% 65.0% 70.0%
Accounts receivable 222 244 274 287 302 EBITDA margin 15.3% 7.7% 3.7% 12.3% 21.6%
Inventories - - - - - EBIT margin 7.5% -6.8% -12.8% -4.3% 6.5%
Other current assets 5,442 6,726 7,046 7,467 7,989 Net profit margin -2.6% -8.0% -16.9% -7.9% 2.9%
Current assets 7,306 10,266 11,233 12,015 13,140
PP&E 376 684 946 973 1,000 ROE -4.4% -17.0% -40.2% -20.9% 9.3%
LT investments 390 493 473 443 413 ROA -0.4% -1.1% -2.1% -1.0% 0.4%
Other non current assets 1,093 1,082 1,229 1,324 1,425 ROCE 5.3% -4.4% -8.1% -3.7% 1.7%
Total assets 9,166 12,524 13,880 14,755 15,977 SG&A/Sales - - - - -
Net debt/Equity 1.4 2.6 2.3 3.1 2.9
Short term borrowings 118 118 118 118 118 Net debt/EBITDA 5.3 14.7 29.3 8.6 4.3
Payables 329 337 290 312 338
Other short term liabilities 3,022 4,091 4,191 4,291 4,391 Sales/Assets (x) 0.2 0.1 0.1 0.1 0.1
Current liabilities 3,470 4,547 4,600 4,722 4,847 Assets/Equity (x) 10.9 15.9 18.7 20.4 23.6
Long-term debt 1,609 2,369 2,793 2,868 2,958 Interest cover (x) 35.9 5.7 5.3 19.6 38.3
Other long term liabilities 3,350 4,979 5,707 6,540 7,496 Operating leverage -277.7% -1343.5% 769.7% -558.9% -2439.8%
Total liabilities 8,428 11,895 13,100 14,130 15,301 Tax rate -25.8% -23.3% -27.9% -68.3% 54.6%
.
Shareholders' equity 737 629 781 624 676 Revenue y/y Growth 14.7% 15.2% 15.3% 11.2% 11.0%
Minority interests - - - - - EBITDA y/y Growth -20.4% -42.2% -44.5% 270.2% 95.7%
Total liabilities & equity 9,166 12,524 13,880 14,755 15,977 EPS y/y growth -123.2% 248.7% 132.0% -48.1% -141.1%
.
BVPS 543.6 461.7 572.9 458.3 495.9 Valuation 2019/12A 2020/12A 2021/12E 2022/12E 2023/12E
y/y Growth -5.3% -15.1% 24.1% -20.0% 8.2% P/E (x) NM NM NM NM 29.7
P/BV (x) 2.3 2.7 2.2 2.7 2.5
Net debt/(cash) 1,025 1,638 1,812 1,961 1,949 EV/EBITDA (x) 14.6 31.8 60.2 16.9 8.6
Dividend Yield 0.4% 0.4% 0.4% 0.4% 0.4%
.
出所：会社資料および J.P.モルガン予想
Note: ¥ in billions (except per-share data).Fiscal year ends Dec. o/w - out of which
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a delayed basis.
, , , ,
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1-800-477-0406 with your request. ( (
Date Rating Price (Y) Price Target

(Y)
28-Jan-21 N 983 920
14
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The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire
period.
J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated
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Bengo4.com (6027) (6027.T), CAPCOM (9697) (9697.T), CyberAgent (4751) (4751.T), DeNA (2432) (2432.T), Dentsu Group (4324)
(4324.T), Gree (3632) (3632.T), Hakuhodo DY Holdings (2433) (2433.T), KDDI Corp (9433) (9433.T), KONAMI HOLDINGS (9766)
(9766.T), Kakaku.com (2371) (2371.T), Mercari (4385) (4385.T), Nexon (3659) (3659.T), Nintendo (7974) (7974.T), Nippon Telegraph
& Telephone (9432) (9432.T), RAKUS (3923) (3923.T), Rakuten Group (4755) (4755.T), Recruit Holdings (6098) (6098.T), SQUARE
ENIX HOLDINGS (9684) (9684.T), Sega Sammy Holdings (6460) (6460.T), SoftBank (9434) (9434.T), SoftBank Group (9984)
(9984.T), Z Holdings (4689) (4689.T)
J.P. Morgan Equity Research Ratings Distribution, as of October 02, 2021

Overweight Neutral Underweight
(buy) (hold) (sell)
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Rakuten Aug 2021

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Asia Pacific Equity Research

Japan Equity Research

MNO subscribers rises to 5.24 million as of end-FY2021, 8.3 million by

Price Performance Summary Investment Thesis and Valuation

Figure 1: Rakuten: New and Old J.P. Morgan Estimates

Figure 2: Rakuten: Annual Basis PL

Figure 3: Rakuten: Segment PL

Figure 4: Rakuten: Segment PL (continued)

Figure 5: Rakuten: Quarterly Basis PL

Figure 6: Rakuten: Segment PL (Quarterly)

Figure 7: Rakuten: Segment PL (Quarterly) (continued)

Figure 8: Rakuten: BS and CF

Internet service business Cash flow

Investment Thesis, Valuation and Risks

Risks to Rating and Price Target

Rakuten Group (4755): Summary of Financials

Date Rating Price (Y) Price Target

J.P. Morgan Equity Research Ratings Distribution, as of October 02, 2021

"Other Disclosures" last revised October 16, 2021.

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