Komatsu’s Q1 FY21 Below Expectations; Cautious Full-Year Guidance, With Gradual Recovery Expected

We cut our fair value estimate for Komatsu to JPY 2,150 per share from JPY 2,200 after taking into account the weaker-than-expected performance and management’s cautious guidance for fiscal 2021 (ending March) as a result of the COVID-19 outbreak. However, our fair value estimate of $20.50 per ADR is unchanged due to the depreciation of the U.S. dollars against Japanese yen. Our narrow moat and stable moat trend ratings remain intact. We think the shares are fairly valued at the current price, with near-term weakness from the machinery sales priced in.