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Kubota Corp 6326

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Stock XTKS Rating as of
JPY 2,366.50 −26.00 (1.09%)
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Company Report

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Kubota Earnings: Price Increases to Mitigate Impact of Weaker Tractor Production for 2024

Jason Kondo

Kubota’s March-quarter operating income, which remained flat year on year at JPY 103 billion, was well above our previous estimate as price raises mitigated the impact of declining sales/production volumes and capacity utilization did not weaken as much as we had expected. As our concerns about the company’s ability to raise prices for its agricultural machinery during headwinds have eased, we raise our fiscal 2024 operating income estimate to JPY 311 billion from JPY 288 billion, and accordingly revise our fair value estimate to JPY 2,900 from JPY 2,700. While we assume a 0.5-percentage-point operating margin decline year on year to 10.4% in 2024, we expect margins to improve over the medium term, driven not only by a production recovery of its mainstay compact tractors in 2025, but also further aftermarket parts sales as agricultural/landscaping activity picks up. Therefore, we believe Kubota’s shares are undervalued.

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Price vs Fair Value

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6326 is trading at a 668% premium.
Price
JPY 2,417.50
Fair Value
JPY 4,676.00
Uncertainty
Medium
1-Star Price
JPY 7,544.00
5-Star Price
JPY 2,974.00
Economic Moat
Ftj
Capital Allocation
Zhpqqqdq

Bulls Say, Bears Say

Bulls

We expect stable long-term top-line growth as Kubota is the small tractor market leader in North America, Southeast Asia, and Japan.

Bears

High dealer inventory of compact tractors overseas will lead to a near-term adjustment phase after the high covid-induced demand.

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Trading Information

Previous Close Price
JPY 2,392.50
Day Range
JPY 2,338.00–2,373.00
52-Week Range
JPY 1,907.00–2,565.00
Bid/Ask
JPY 2,366.00 / JPY 2,367.00
Market Cap
JPY 2.78 Tril
Volume/Avg
1.5 Mil / 3.7 Mil

Key Statistics

Price/Earnings (Normalized)
12.09
Price/Sales
0.94
Dividend Yield (Trailing)
1.99%
Dividend Yield (Forward)
1.99%
Total Yield
3.04%

Company Profile

Kubota manufactures and sells small and midsize agricultural and construction equipment as well as water treatment equipment. Its key products in the farm and industrial machinery segment include compact/utility tractors, mini excavators, compact track loaders, engines, and rice farming equipment, such as combine harvesters as well as rice transplanters. The company has produced over 5.4 million units of tractors worldwide and over 30 million units of engines. Its water and environment segment provides mainly pipe system products like ductile iron pipes and valves, water/waste treatment plants, pumps, as well as operation and maintenance services, including public-private partnership projects. The company is based in Osaka, Japan, and was founded in 1890.
Sector
Industrials
Industry
Farm & Heavy Construction Machinery
Stock Style Box
Large Core
Total Number of Employees
65,532
Website
http://www.kubota.co.jp

Competitors

Valuation

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Metric
6326
DE
AGCO
Price/Earnings (Normalized)
 12.0911.488.22
Price/Book Value
 1.214.841.85
Price/Sales
 0.941.950.63
Price/Cash Flow
 8.349.707.57
Price/Earnings
6326
DE
AGCO

Financial Strength

Metric
6326
DE
AGCO
Quick Ratio
 1.231.810.51
Current Ratio
 1.702.051.46
Interest Coverage
 50.515.5919.45
Quick Ratio
6326
DE
AGCO

Profitability

Metric
6326
DE
AGCO
Return on Assets (Normalized)
 4.94%9.82%9.20%
Return on Equity (Normalized)
 12.27%44.28%24.39%
Return on Invested Capital (Normalized)
 5.78%14.47%15.85%
Return on Assets
6326
DE
AGCO
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