Kubota’s Q3 2019 Slightly Above Our Expectations Driven by Domestic Japanese Demand; FVE Raised

Kubota’s third-quarter 2019 EBIT was slightly above our expectations, increasing 16.8% year over year to JPY 55 billion from JPY 47 billion on the back of a 6.9% year-over-year increase in revenue to JPY 490 billion from JPY 458 billion. After factoring in the better-than-expected performance in the domestic market and making minor adjustments to our model, we increased our fair value estimate for Kubota to JPY 1,810 from JPY 1,730. Our narrow moat and stable moat trend ratings are intact. We think the shares are fairly valued at the current price, as we think that the near-term earnings growth driven by growing demand has been priced in.