The increase in guidance is driven by strong performance in the first half of 2025, due to robust demand for sports activities both in Japan and overseas. This demand is attributed to the stimulative effect of international tournaments and the favorable impact of yen depreciation on overseas sales.

Founded in 1946, Headquartered in Tokyo, Japan, the company is engaged in the manufacture, purchase and sale of sporting goods, including badminton rackets, soft tennis rackets, tennis rackets, golf clubs, snowboards, shuttlecocks, strings, and the management & operation of golf courses, tennis and golf driving ranges.

The company mainly operates through five segments: Sporting Goods Division-Japan, which contributed 42.1% of 1HFY25 sales; Sporting Goods Division-Asia (48.5%); Sporting Goods Division- North America (4.6%); Sporting Goods Division- Europe (4.3%); and Sports Facilities Division (0.5%). Geographically, Japan contributes 28% of sales, while overseas markets make up the remaining 72%. In terms of sports categories, badminton contributes the highest at 61%, followed by tennis at 14% and golf at 1%, while the others contribute the rest 24%.

Leveraging international competitions

Yonex’s major revenue contributor – the badminton business - witnessed increased promotional and marketing activities in recent times, projecting the success of the Chinese national team, which won both the men’s and women’s World Team Championships held in 2Q. Additionally, the increased promotion of sporting events and players is expected to drive market growth in 3Q. The company further enhanced its brand and pulled in new fans through a co-branding project with Starbucks, gaining significant social media attention with 150mn views on the release day on major media platforms.

These initiatives propelled the badminton business to grow 16.3% YoY to JPY40.6bn in 1HFY25. On the other hand, the tennis business demonstrated growth over the years owing to the Group’s grassroot initiatives across the world and increased retail store shelf-space. Consequently, the efforts yielded overseas tennis sales of 4.3x in 1HFY25, compared to that of 1HFY19.

Ongoing excellence in performance

Yonex has delivered consistent performance over the 5 years, registering a revenue CAGR of 13.8% to reach JPY116bn in FY24 (ended March 2024), driven by Sporting Goods Division-Asia, which grew at CAGR of 24%, while the contribution jumped to 42% in FY24, up from 34% in FY19. Operating profit increased at higher rate than sales, which grew at CAGR of 29% over the same period to reach JPY14bn in FY24, while the margins expanded by 587 bps to reach 12.4% in FY24. Higher margins helped the company to generate healthy FCF, consequently doubling the net cash to JPY14.8bn in FY24, up from JPY7.4bn.

Yonex fared better compared to its peer, Mizuno and Globeride, demonstrating superior revenue and EBIT margin performance over last five years. Mizuno’s revenue grew by a CAGR of 5.2% reaching JPY230bn in 2024, compared to the Globeride’s revenue, which delivered a CAGR growth of 7.5% to JPY126bn. The EBIT margins for Mizuno expanded by 320bps, reaching 7.5% in FY24, while Globeride reported margins of 5.9%, an expanded of just 145bps.

Recently in 1H25, Yonex reported a robust 16% YoY increase in sales to JPY66.9bn, surpassing consensus estimates for the fourth consecutive quarter. The significant improvement in sales was primarily driven by the Asia segment, which grew by 24.7%, due to strong demand from China and Taiwan. Badminton demand remained solid in China, energized by the national badminton team’s double victories at the Thomas & Uber Cup held in April-May 2024. In Taiwan, badminton market continued to trend strongly, bolstered by numerous open tournaments held throughout the season. Additionally, operating profit jumped over 37% YoY to JPY7.6bn, with margins expanding by 180bps YoY, reaching 11.5%.

Solid financials drive competitive valuations

Yonex share price surged over 50% in the last 12 months. The sharp run-up in prices has pushed its valuation slightly higher compared to its peers, but it is trading significantly lower compared to its historical averages. It is currently trading at a P/E ratio of 19x, which is higher than its local peers Mizuno at 16x, Globeride at 11x, and industry global peers at 14x. However, on a positive note, it is trading lower than its 10-year historical average of 28x.

Additionally, the company is trading at an EV/EBIT of 14x, higher than its local peers, Mizuno at 10x and Globeride at 4x, while it is trading in line with the global peers average of 15x. Out of the three analysts covering the stock, two have a “Buy” rating and one has a “Hold” rating, with an average target price of JPY2,260, implying an upside protentional of around 15% from the current market price.

Overall, the company provides a compelling opportunity for evaluation driven by the strong traction in the badminton and tennis business units, sustained growth of top-line and healthy cash flow generation. Moreover, the guidance upgrade for FY25 reflects the positive trading environment and demand for the company’s products amidst increased marketing and promotional activities. However, major risks include market competition, dependency on specific sports, FX fluctuations, disruptions in supply chains and product defects which can impact their top-line and margins.