LY Corp. (4689.T) 1Q wrap Raise GSe and expect FY3 27 guidance beat, led by commerce sales and media profitability

Equity Research 11 August 2026 | 12:29AM JST

LY Corp. (4689.T) 1Q wrap: Raise GSe and expect FY3/27 guidance beat, led by commerce sales and media profitability

4689.T Price Target: -- Price: ¥488 Upside: -- NOT RATED Minami Munakata We revise our estimates based on 1Q results and our subsequent | Goldman Sachs Japan Co., Ltd. research. For the strategic business, we reflect upward revisions to Haruki Kubota our latest forecasts for PayPay Corp. (covered by Makoto Kuroda); | Goldman Sachs Japan Co., Ltd. for the commerce business, we raise our sales assumptions based on strong top-line momentum in 1Q; and for the media business, we make only minor revisions to our sales assumptions while raising our margin assumptions. As a result, we revise our FY3/27-FY3/31 adjusted EBITDA estimates by +9% to +10%. We forecast FY3/27 Key Data _____________________________________ Market cap: ¥3.2tr / $20.6bn adjusted EBITDA of ¥640.5 bn (guidance: ¥585 bn). We are Not Enterprise value: ¥4.5tr / $28.3bn 3m ADTV: ¥7.4bn / $46.2mn Rated on LY Corp. Japan Japan Games & Internet Leases incl. in net debt & EV?: No Details on our estimates GS Forecast __________________________________ n Media business: We revise our FY3/27-FY3/31 adjusted EBITDA 3/26 3/27E 3/28E 3/29E Revenue (¥ bn) 2,036.4 2,358.5 2,532.5 2,693.2 estimates for the segment by +11% to +14%. We forecast Op. profit (¥ bn) New Op. profit (¥ bn) Old FY3/27 adjusted EBITDA of ¥312.7 bn (guidance: ¥282.8 bn). In Op. profit CoE (¥ bn) -- -- -- --

1Q, sales were in line with expectations, and profitability EPS (¥) New EPS (¥) Old improved. Segment SG&A expenses declined 4% yoy, with LY P/E (X) P/B (X) 1.1 1.1 1.0 1.0 Corp explaining that personnel expenses, LLM expenses and CROCI (%) 0.4 7.8 8.9 9.7

sales promotion expenses all declined yoy. The company 6/26 9/26E 12/26E 3/27E indicated it can continue to operate the business in a EPS (¥) 8.5 6.8 8.9 6.4

Source: Company data, Goldman Sachs Research estimates. streamlined state and maintain an adjusted EBITDA margin of See disclosures for details. c.40%. Although we make only minor revisions to our sales assumptions, we profitability improvements driven by an increased sales mix of high-margin account ads and cost efficiency improvements look sustainable, and we therefore raise our FY3/27-FY3/31 adjusted EBITDA margin assumptions by a range of +3.5 pp to +5.6 pp. n Commerce business: We revise our FY3/27-FY3/31 adjusted EBITDA estimates for the segment by +11% to +21%. We forecast FY3/27 adjusted EBITDA of ¥177 bn (guidance: ¥159.8 bn). For Yahoo! Shopping, the effect of awarding

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Goldman Sachs LY Corp. (4689.T)

LY Corp. (4689.T) Income Statement (¥ bn) ___________________________________ NR Rating since Jul 6, 2026 3/26 3/27E 3/28E 3/29E Total revenue 2,036.4 2,358.5 2,532.5 2,693.2 Cost of goods sold ( ) SG&A (1,220.9) (1,289.9) (1,370.4) (1,428.4) Ratios & Valuation __________________________________________ R&D /26 3/27E 3/28E 3/29E Other operating inc./(exp.) 56.0 -- -- -- P/E (X) EBITDA P/B (X) 1.1 1.1 1.0 1.0 Depreciation & amortization ( ) FCF yield (%) EBIT EV/EBITDAR (X) 9.3 7.5 5.9 4.4 Net interest inc./(exp.) -- -- -- -- EV/EBITDA (excl. leases) (X) 9.3 7.5 5.9 4.4 Income/(loss) from associates (7.5) (2.8) (1.3) (0.7) CROCI (%) 0.4 7.8 8.9 9.7 Pre-tax profit ROE (%) 6.5 6.9 7.3 7.5 Provision for taxes ( ) Net debt/equity (%) ) Minority interest ( ) Net debt/equity (excl. leases) (%) ) Preferred dividends -- -- -- -- Interest cover (X) -- -- -- -- Net inc. (pre-exceptionals) Days inventory outst, sales 5.8 5.0 4.7 4.4 Post-tax exceptionals -- -- -- -- Receivable days Net inc. (post-exceptionals) Days payable…