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Investing.com - Citi downgraded Keyence Corp . (6861:JP) (OTC:KYCCF), a $92.68 billion market cap company with impressive 83.81% gross margins, from Buy to Neutral on Wednesday, while lowering its price target to JPY62,000 from JPY66,500.
The downgrade follows declining shareholder support for Keyence (TYO:6861) President Nakata at the company’s recent annual general meeting, where only 77% of shareholders supported his reelection as director, down from 83% in June 2024 and 87% in June 2023. According to InvestingPro data, the company maintains a GOOD financial health score despite these governance concerns.
Citi noted this support level falls significantly below the 90% average for president/CEO reelections among its coverage universe, suggesting growing investor frustration with the company’s resistance to change.
The research firm acknowledged Keyence’s May 21 announcement regarding the acquisition of a small private German 3D-CAD company but indicated this hasn’t alleviated investor concerns.
Citi’s reduced price target reflects both anticipated "underwhelming" first-quarter results expected on July 29 and a valuation adjustment to 30x FY3/27E cash-adjusted earnings per share, down from the previous 35x multiple to align with lower valuations for global factory automation companies. The stock currently trades at a P/E ratio of 34.14x, though InvestingPro analysis suggests the shares are slightly undervalued at current levels.
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