REAL-TIME GLOBAL RESEARCH
Investor Feedback on Downgrade to UW
Key takeaways
- Denso shares already underperforming, trading below P/B 1.0x.
- Widely held view is near-term earnings worries, mid-term issues priced in.
- Many finding hard to turn positive on stock, as difficult to know when focal businesses (electrification, intelligent systems) will contribute fully to earnings.
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Research evidence excerpt
Denso shares already underperforming, trading below P/B 1.0x.
Widely held view is near-term earnings worries, mid-term issues priced in. Many finding hard to turn positive on stock, as difficult to know when focal businesses (electrification, intelligent systems) will contribute fully to earnings.
We recently published Auto Parts: Auto Parts at Crossroads: SDVs a New Challenge (Oct 13, 2026). As Japanese OEMs accelerate software-defined vehicle (SDV) launches through 2030, we see growing risk of a shift in value-add from traditional Tier 1 suppliers to chips/software firms and in-house development by OEM automakers. Of our coverage, we deemed Denso heavily exposed to such risk and downgraded it to UW. While many thought risks were largely priced in and downside limited, investors broadly agreed with our view on fundamentals, namely that structural changes to the industry will be a headwind. Key points below. (1) Which auto suppliers are we upbeat on (in contrast to our downbeat take on Denso)? Among Toyota-affiliated suppliers, we rate Toyoda Gosei OW for companyspecific growth drivers, including increased content (airbags) per vehicle and sales
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