On Wednesday, Citi adjusted its financial outlook on Sumitomo Heavy Industries Ltd (6302:JP), reducing the price target to ¥3,300 from the previous ¥3,800 while maintaining a Neutral rating. The revision follows a set of disappointing financial results for the third quarter of the fiscal year ending December 2024.
The company, which operates in various sectors including mechatronics and plastic injection molding, has been facing several challenges. A difficult macroeconomic environment in Europe has been impacting its business performance. Additionally, Sumitomo Heavy is dealing with an inventory adjustment at U.S. hydraulic excavator dealers and a decline in demand from semiconductor customers for its high-margin ion-implantation equipment.
Despite these challenges, Sumitomo Heavy has not altered its operating profit guidance for the fiscal year ending December 2024, keeping it at ¥65.0 billion. However, Citi has lowered its forecast for the company's operating profit to ¥57.0 billion from the earlier estimate of ¥65.0 billion. Looking ahead to the fiscal year ending December 2025, Citi has also reduced its operating profit forecast for Sumitomo Heavy to ¥55.5 billion from ¥68.0 billion.
The lowered price target of ¥3,300 is based on a valuation of 11 times the estimated earnings per share for the fiscal year ending December 2025. While acknowledging the stock's value attractions, Citi's outlook suggests a cautious stance, with a desire to see more proactive management from Sumitomo Heavy to navigate through the current business headwinds.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.