Summary and major assumptions

Our analysts forecast growth of 4.1% in sales and 7.8% in recurring profits in FY24 

We have aggregated FY24–25 earnings forecasts by Nomura analysts for constituents of the Russell/Nomura Large Cap Index (sales and operating profits exclude financials, same basis hereafter). Our analysts forecast FY24 sales growth of 4.1% y-y, operating profit growth of 9.9%, recurring profit growth of 7.8%, and net profit growth of 5.2%. Versus the previous such exercise conducted on 3 June, they have raised their sales growth forecast by 0.8ppt, increased their operating profit growth forecast by 0.6ppt, raised their recurring profit growth forecast by 1.5ppt, and upped their net profit growth forecast by 1.0ppt. They think that yen depreciation and companies hiking their prices, factors that contributed to profit growth in FY23, will have less of an impact in FY24. Moreover, we think underlying profit growth is not as high as it appears, partly because of impairment losses posted by multiple companies in FY23 dropping out. At the same time, we expect profits at major companies to remain on an upward trajectory overall, as we expect demand for semiconductor materials and production equipment to improve versus FY23 owing in part to generative AI applications.

Our analysts forecast FY25 sales growth of 3.3% and recurring profit growth of 8.3% 

Our analysts forecast FY25 sales growth of 3.3% y-y, operating profit growth of 11.0%, recurring profit growth of 8.3%, and net profit growth of 8.3%. Versus the previous such exercise, they have lowered their sales growth forecast by 0.3ppt while raising their operating profit growth forecast by 1.5ppt, lowering their recurring profit growth forecast by 0.4ppt, and lowering their net profit growth forecast by 0.4ppt. In FY25, our analysts forecast a switch to y-y growth in real wages in Japan and think overseas economies will be solid. While the gap in forecast profit growth between FY24 and FY25 is smaller than it was at the time of the previous such exercise, our analysts still expect profit growth in FY25 to remain higher than in FY24.

Revision Index shows upward revisions predominate for both manufacturing and nonmanufacturing sectors

The Revision Index (RI) for the Russell/Nomura Large Cap Index (which shows the difference between the percentage of companies for which estimates were raised and the percentage for which estimates were lowered) is +28.1% for September 2024 (based on changes to FY24 recurring profit estimates between 4 June 2024 and 2 September 2024). The number of upward revisions is much larger than downward revisions, unlike last time (based on estimate changes made between 2 March and 3 June), when the mix of upward and downward revisions was roughly equal. For both the manufacturing and nonmanufacturing sectors, upward revisions by far outweighed downward revisions.

Projected dividend payout ratio of 37.1% in FY24, rise in percentage of companies forecast to raise their dividends

The projected dividend payout ratio for FY24 is 37.1%, up from 34.0% in FY23. Moreover, our analysts now expect 69.8% of companies to raise their dividends in FY24, up from 66.7% in the previous such exercise. We attribute this not only to growth in net profits, the source of dividends, but also to the increase in listed companies that are hiking their numerical payout ratio targets.