On Wednesday, Citi revised its price target for Nabtesco Corp (6268:JP) (OTC: NCTKF), a leading Japanese precision equipment manufacturer, to ¥2,650 from the previous ¥3,100. The firm has maintained a Neutral rating on the stock.
The adjustment follows Nabtesco's third-quarter results for fiscal year 2024, which were in line with expectations. The analyst at Citi updated the benchmarks and balance sheet metrics applied in their sum-of-the-parts valuation method, leading to the lower price target. Despite a third consecutive quarter-over-quarter increase in orders for speed reducers, Nabtesco has not confirmed a demand turnaround from its robot customers.
The company experienced a mix of performances across its divisions. Notably, the transport division showed year-over-year and quarter-over-quarter weaknesses. The performance in automatic doors remained flat, while sales of hydraulic components saw a slight improvement both year-over-year and quarter-over-quarter. However, the margins in the component division continued to disappoint.
Investors are now looking ahead to the fourth-quarter results, expected to be released in mid-February, and the publication of a new Medium-Term Plan (MTP). Citi's analyst suggests that while Nabtesco's management may target improved margins and returns, achieving these goals could prove challenging.
InvestingPro Insights
To complement the analysis of Nabtesco Corp's recent performance and Citi's price target revision, let's delve into some key financial metrics and insights from InvestingPro.
According to InvestingPro data, Nabtesco Corp currently has a market capitalization of 1.92 billion USD, with a P/E ratio of 42.69. This relatively high earnings multiple, as highlighted by one of the InvestingPro Tips, suggests that investors are pricing in expectations for future growth, despite the recent challenges noted in the article.
Interestingly, while the article mentions weaknesses in certain divisions, InvestingPro data shows that Nabtesco has maintained profitability over the last twelve months. The company's revenue for this period stands at 2.23 billion USD, although it has experienced a slight decline with a revenue growth of -4.04% over the same period.
One positive aspect that may provide some stability for investors is Nabtesco's dividend policy. An InvestingPro Tip reveals that the company has maintained dividend payments for 21 consecutive years, demonstrating a commitment to shareholder returns even in challenging times. The current dividend yield is 3.31%, which could be attractive to income-focused investors.
Another InvestingPro Tip worth noting is that Nabtesco holds more cash than debt on its balance sheet. This strong financial position could provide the company with flexibility as it navigates the current market conditions and works towards the goals that may be outlined in its upcoming Medium-Term Plan.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights that could be valuable in assessing Nabtesco's future prospects. In fact, there are 7 more InvestingPro Tips available for Nabtesco Corp, which could provide a deeper understanding of the company's financial health and market position.
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