1-Star Price
PREMIUM
5-Star Price
PREMIUM
Economic Moat
PREMIUM
Capital Allocation
PREMIUM
We increase our fair value estimate for Komatsu to JPY 2,710 per share (USD 26 per ADR) from JPY 2,310 (USD 22 per ADR) after considering the slightly quicker-than-expected recovery in third-quarter fiscal 2021 (ending March) and fine tuning our long-term estimates. Our narrow moat and stable moat trend ratings remain intact. We think the shares are fairly valued at the current price, with a gradual recovery in machinery sales priced in.
Tokyo-based Komatsu is the second-largest construction equipment manufacturer in the world by revenue. Its core construction, mining, and utility equipment business contributes around 90% of revenue. The remainder comes from its retail finance business and industrial machinery and others, which includes metal forging, machine tools, stamping presses, and defense-related equipment. The Americas and Asia are Komatsu's main markets, accounting for more than 80% of revenue, followed by Europe and the Commonwealth of Independent States.
