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On Tuesday, analysts at JPMorgan downgraded Tokyo Metro Co Ltd (9023:JP) stock from Neutral to Underweight, adjusting the price target to ¥1,700 from ¥1,800. The decision comes as the recent increase in share price has led to a relative downside compared to its sector peers.
The analysts noted that Tokyo Metro’s new medium-term plan for fiscal years 2025-2027 continues to focus on a shareholder return policy with a dividend payout ratio of 40% or higher. Despite this, the dividend yield remains in the low 2% range, which is below the sector average, as other private railway operators have improved their shareholder returns.
Additionally, the company’s return on equity (ROE) target of 7.7% for fiscal year 2027 is seen as weak compared to other private railway operators, which have set targets of 8% or higher. This has contributed to the decision to lower the stock rating and price target.
Potential upside catalysts for Tokyo Metro shares include the possibility of an early fare revision. Although not included in JPMorgan’s three-year forecasts, an earlier-than-expected fare hike could support an increase in share price, considering the significant role of the railway business in the company’s operations.
Overall, the downgrade reflects concerns over Tokyo Metro’s relative performance and shareholder returns compared to its peers in the private railway sector.
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