We reinstate coverage with Neutral rating, await better prospects for growth in ADAS field

Research evidence excerpt

We reinstate coverage with Neutral rating, await better prospects for growth in ADAS field

e of just over 11x. We reinstate

coverage with a Neutral rating because we do not regard the stock as undervalued.

We forecast 8% y-y decline in profits in 27/3 on sharp rise in semiconductor prices Source: LSEG, Nomura

We forecast 27/3 operating profits of ¥509.8bn, broadly in line with guidance of ¥500.0bn. The Performance / Stock price data

main discrepancies versus guidance are as follows. (1) We assume a weaker yen than (%) 1M 3M 12M

management does (providing a boost of ¥12.0bn). (2) We are 0.5–1.0% more downbeat about Absolute returns -1.7 -3.7 -3.8

output at Toyota Motor and 1.5–2.0% more downbeat about output at other automakers Relative to -3.6 -22.3 -50.1

Russell/Nomura Large

because of the situation in the Middle East and the possibility of price hikes by OEMs in Cap

response to sharp rises in input costs. However, we think that underlying profits will be broadly Market capitalization (¥bn) 5,461.0

in line with guidance, as volumes account for around half of the ¥45bn uncertainty risk in 52-week low stock price (¥) 1,801.0

guidance. (3) Denso uses large amounts of memory and electronic parts, and we expect prices 52-week high stock price (¥) 2,373.0

for these products to continue to rise sharply, in line with data center demand, and forecast a hit Shares outstanding (mn) 2,911.0

Daily turnover (3-M avg) (¥mn) 15,982.4

to profits of ¥110.0bn in 27/3 (versus guidance of ¥74.5bn). Based on past negotiations with

Note: Market capitalization and shares

customers, we think Denso will be able to pass on around 80% of this, but even so, we think the outstanding in this table include treasury stock.

dent to profits will be ¥10.0bn higher than guidance on a net basis.