Profit growth through FY3/28 priced in; eyes on hydrogen procurement risks

Research evidence excerpt

Profit growth through FY3/28 priced in; eyes on hydrogen procurement risks

ll-year DPS of ¥55 (up ¥10 YoY) in FY3/28.

Absolute and TOPIX-relative share price WATCH: Profit levels at telecommunication systems division

We forecast OP of ¥322.5b (2.1x the FY3/26 level) for the telecommunication

systems segment in FY3/29, 13% above the target for ¥285b from the

medium-term plan. In addition to the new plant currently under construction

at the Sakura Works in Chiba Prefecture (investment of ¥45b), the benefits

from investment of up to ¥300b in Japan and the US announced on 13 March

(including ¥40b in Japan (announced on 14 May), with the remaining amount

of up to ¥260b earmarked for the US) are not expected to materialize during

the scope of the medium-term plan. Against this backdrop, the company

expects steady sales expansion for its differentiated SWR/WTC productsSenior Analyst Hiroshi Matsuda

+81 3 6202 8419 hiroshi.matsuda@mizuho-sc.com thanks to internal efforts such as procuring optical fiber from third parties and

improving productivity.

Click here for ESG on MEASURE: PER of roughly 33x our FY3/28 EPS forecast our entire coverage

We reiterate our Neutral rating but lift our price objective to ¥4,500 mainly to

reflect the revisions to our earnings forecasts. We keep our valuation base

year at FY3/28, but update our target PER from around 30x to roughly 33x,

which reflects a greater profit weighting for telecommunication systems (we

now assume about 88% in FY3/28 (previously about 87%)).

Consolidated results and forecasts Share Price: ¥4,194 (10 Jun) 52wks: H ¥7,933 L ¥1,098.8

Term Sales YoY OP YoY RP YoY NP YoY EPS PER EV/EBITDA

(¥m ) (%) (¥m ) (%) (¥m ) (%) (¥m ) (%) (¥) (x) (x)

FY3/25 979,375 22.5 135,519 95.0 137,240 96.8 91,123 78.6 330.3 – –