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Denso Corp - Stock Quote 6902

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Morningstar's Denso Corp Stock Analysis

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Denso Impacted by Automobile Supply Chain Disruption but Expects Strong Medium-Term Margin Expansion

Jason Kondo Equity Analyst

Analyst Note

| Jason Kondo |

We raise Denso’s fair value estimate to JPY 9,200 from JPY 8,800, after raising our midcycle operating margin assumption. Denso’s progress on its continued structural improvements over the past year has exceeded our expectations. While margins have been impacted due to rising components/logistics costs (along with the automotive industry), excluding these costs, the company estimates it should have reached 10% operating margin in fiscal 2021, which is ahead of our forecasts. Further, sales of its higher-margin electrification products remain strong, as the company continues to expand its track record of OEMs outside Toyota Motor, and over the medium term, we expect higher value-added products like its heat pump and third generation ADAS components will replace its lower-margin counterparts like air conditioner products for ICE automobiles and first generation ADAS components. As such, we now project midcycle operating margin in fiscal 2025 to be at 11.0% from 10.6% previously. Going forward, progress on its restructuring initiatives in Europe/North America can potentially change our outlook on midcycle margins.

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Denso Corp's Company Profile

Business Description

Denso Corporation manufactures automotive components and systems, as well as other industrial products and home appliances. The company was founded in 1949 as a result of becoming independent from Toyota Motors, which is currently the largest shareholder with 24% ownership. Its main businesses are powertrain control systems, thermal systems, electrification systems, mobility systems, and sensors/semiconductor systems for mainly HV, ICE, BEV, and FCV. The company operates globally and was founded in 1949 as a result of spinning out of Toyota Motor and is headquartered in Kariya, Japan.

1-1 Showa-cho
Kariya, 448-8661, Japan
T +81 566255511
Sector Consumer Cyclical
Industry Auto Parts
Most Recent Earnings Dec 31, 2021
Fiscal Year End Mar 31, 2020
Stock Type
Employees 196,126