Uncertainty over margin recovery in H2 FY3/27

研报英文原文证据摘录

Uncertainty over margin recovery in H2 FY3/27

idance is UBS Cons.

6.5%). Of the ¥23bn yoy decline in OP, raw materials led to a ¥40bn reduction (our 03/27E 162.3 162.4

forecast: ¥35bn reduction), while upfront investment costs such as development 03/28E 206.5 188.5

expenses and personnel costs, recognised earlier in the year but unchanged on a full- 03/29E 229.6 211.5

year basis, were also higher than our forecasts (Figure 4). Higher raw material costs were

mainly driven by rising prices for copper, aluminium and memory. Management cited Kohei Takahashi

Analyst

memory prices as a risk factor even after the SCA agreement with Micron Technology.

kohei.takahashi@ubs.com

Quality costs declined by ¥15bn (0.8% of sales), which is likely within an acceptable +81-3-5208 6172

range at below 1%. Denso acquired 185mn of its shares (6.4% of shares outstanding)

from Toyota Industries for ¥313.6bn (¥1,696 per share). Shingo Hirata, CFA

shingo.hirata@ubs.com

FY3/27 guidance: OP still low +81-3-5208 6224

Management raised its sales forecast to reflect the Q1 beat versus plan, but left OP

guidance unchanged and continues to target an FY3/27 OP margin of 6.5%. Compared

with the previous guidance for OP (Figure 6), the company reduced its assumption for

raw materials by ¥16bn. Quality costs appear to reflect expenses incurred in Q1, while

an additional ¥15bn was added for uncertain risks, and we view the net impact as

neutral due to the reclassification of items.

Valuation: ¥1,900 price target

Our price target is based on a FY3/28E PER of 9X. Based on FY3/27 guidance, the PER is

12.7X.

Highlights (¥b) 03/24 03/25 03/26 03/27E 03/28E 03/29E 03/30E 03/31E

Revenues 7,144.7 7,161.8 7,540.0 7,668.9 7,928.5 8,131.8 8,432.2 8,675.1