Hitachi Construction Machinery Earnings: Expect Decline in Mining Equipment; Fair Value Cut by 3%

Narrow-moat Hitachi Construction Machinery reported JPY 1.3 trillion in revenue and JPY 145 billion in operating profit for fiscal 2024 (ending March 2025), which aligns with our previous estimates. As for fiscal 2025, the company sees revenue remaining flat and operating profit dropping by 4% year on year due to the peeling-off of one-off compensation income recognized in fiscal 2024, which implies that operating profit to grow by 8% year on year if excluding the one-off impact. Recovery is expected in Europe and China, as the interest rate started to decrease in Europe, and the Chinese government is enhancing stimulus policy to boost the sluggish housing market. This positive impact is expected to be fully offset by the declining sales in Oceania and the Middle East, as a deterioration in demand for resources brought by a potential aggressive trade war will result in a decrease in mining equipment.