Keyence (6861.T): 1Q above expectations; strong profit generation continues. Focus shifts to capital deployment policy. Buy reiterated

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Equity Research

29 July 2026 | 11:38PM JST

Keyence (6861.T)

1Q above expectations; strong profit generation continues. Focus shifts to capital

deployment policy. Buy reiterated

6861.T

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12m Price Target: ¥115,000

Price: ¥77,590

Upside: 48.2%

1Q actual OP came in at ¥187.1 bn vs. GSe OP of ¥165.0 bn and

LSEG StarMine SmartEstimates of ¥158.2 bn, a significant beat.

As the estimated tariff refund was small at around ¥4 bn, the 1Q

actual OP beat was driven by sales trends that exceeded both

our and market expectations by close to 10%. As a result, while

the upside surprise in 1Q GPM/OPM was notable, we believe

that these high levels should be sustained as long as the business

environment does not deteriorate significantly. We raise our

full-year 2027-29 OP estimates by +10%/+6%/+6% in line with

the 1Q outperformance. We reiterate our Buy rating with a new

target price of ¥115,000 (previously ¥110,000).

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Post our follow-up with the company, we see the highlights of

the 1Q results as follows. (1) The tariff refund impact is likely

to continue (possibly totaling up to several tens of billions of

yen) from 2Q onward. However, this is not a material factor

to focus on, given the considerably large upside from the

core business and the weaker yen. (2) While there were signs

of a bottoming out in the previously-stagnant automotive

sector, the fundamental driver of the demand recovery is the

broadening of capex appetite centered on

AI/semiconductors across three regions—Japan, the

Americas, and Asia. And this is a phase where Keyence’s

business model, including its same-day delivery system, truly

stands out. (3) There was no major update on the capital

deployment policy. However, the company noted, as it did at

the 4Q results, that the board of directors continues to discuss

this on an ongoing basis. We hope to see this materialize in the

form of the company’s first share buyback.

We have maintained above-consensus earnings estimates for

some time, and had anticipated that the upside in 1Q would

BUY

Yuichiro Isayama

Goldman Sachs Japan Co., Ltd.

Takeru Adachi

Goldman Sachs Japan Co., Ltd.

Takato Enoki

Goldman Sachs Japan Co., Ltd.

…