Kadokawa: Media Leader Capitalizing on the Anime and Manga Boom

Clement Loh of Lion Rock Partners presented his in-depth investment thesis on Kadokawa Corporation (Japan: 9468) at Wide-Moat Investing Summit 2025.

Thesis summary:

Kadokawa is a leading Japanese entertainment conglomerate with diversified operations spanning publishing, film and TV production, video games development, and digital content services. Founded in 1945, Kadokawa has evolved from a traditional publishing house into a fully integrated entertainment company, capitalizing on its extensive intellectual property (IP) portfolio, which includes manga, light novels, anime, and films. Its strategic advantage lies in its vertical integration, allowing it to effectively monetize content across multiple platforms and channels, driving a broad and robust revenue stream.

The company is uniquely positioned to benefit from increasing global demand for Japanese content, supported by its strong IP assets and cross-media monetization strategy. Kadokawa’s IP is particularly appealing due to its complex storylines, detailed world-building, and visually distinctive art styles, all of which have universal appeal and strong international growth potential. With the Japanese government setting ambitious targets for cultural exports — aiming for ¥10 trillion by 2028 and ¥20 trillion by 2033 — Kadokawa is well-placed to capture a significant portion of this growth through expanded global distribution channels and strategic partnerships with major streaming platforms like Netflix.

Kadokawa is undergoing a digital transformation, shifting towards higher-margin digital platforms and recurring revenue streams, while modernizing its existing digital offerings. Initiatives such as enhanced user analytics, platform redesign, multi-language support, and direct e-commerce integration are expected to significantly enhance user experience and expand international reach. This transition is anticipated to drive long-term margin improvements and sustained revenue growth.

Kadokawa shares recently traded at a valuation of approximately 25.4x earnings and 12.3x EV/EBITDA, reflecting growth expectations but still appearing attractive relative to peers. A sum-of-the-parts valuation and discounted cash flow analysis suggest meaningful upside potential. Moreover, Kadokawa’s strategic value as an acquisition target for global media conglomerates and technology companies adds another layer of potential value realization. Notably, Sony previously acquired a 10% stake, emphasizing Kadokawa’s strategic importance in the broader global entertainment landscape.

However, investors must consider several risk factors, including cybersecurity vulnerabilities highlighted by a past hacking incident, international IP protection challenges, potential capital misallocation risks exemplified by the costly cultural museum project, and execution risk inherent in international expansion initiatives. Nonetheless, the combination of robust IP assets, global content demand growth, ongoing digital transformation, and potential strategic interest from larger entities creates a compelling investment proposition with substantial upside.

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About the instructor:

Clement Loh is the Investment Manager of Lion Rock Partners, a private family fund based in Hong Kong. The fund applies the principles of value investing to seek out companies with competitive advantages selling at a reasonable price with a focus on emerging Asian markets and smaller companies. Clement holds a master’s degree in business administration from the University of Toronto and a degree in pharmacy. Prior to entering the investment profession, Clement worked in the pharmaceutical industry and is a non-practicing pharmacist. His interests include economics, strategy, science, education and history.

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