Citi lowers Denso stock price target on slower electrification growth

Citi lowered its price target on Denso Corp . (TYO:6902:JP) (OTC:DNZOY) to JPY2,400.00 from JPY2,800.00 while maintaining a Buy rating on the Japanese auto parts supplier, which currently trades at $13.47 with a market capitalization of $37.3 billion. According to InvestingPro analysis, the stock appears undervalued at current levels.

The price target reduction reflects slower-than-expected growth in vehicle electrification, though Citi still expects this segment to contribute to improvements in per-vehicle component value and product mix for the company.

Citi anticipates gradual increases in advanced driver-assistance systems (ADAS) related sales for Denso, supporting the firm’s continued positive outlook despite the target price reduction.

The research firm expects Denso’s operating profit margin to continue expanding toward the company’s fiscal year 2031 target of 12%, showing confidence in the auto supplier’s profitability trajectory.

Citi identified potential catalysts for Denso stock in the upcoming release of the company’s next medium-term business plan expected this summer or later, which could include higher dividend on equity targets.

In other recent news, Denso Corporation’s outlook has been revised to stable by Moody’s Ratings, with its A2 issuer and senior unsecured ratings affirmed. This adjustment follows a similar revision for Toyota Motor (NYSE:TM) Corporation, Denso’s largest customer and shareholder. Moody’s noted that despite Denso’s involvement in transactions to delist Toyota Industries (OTC:TYIDF) Corporation, the company’s ample cash reserves will cover funding needs without affecting its credit quality. Meanwhile, Bernstein has initiated coverage on Denso with a Market Perform rating and a target price of ¥1,900, highlighting the company’s strengths in next-generation automotive technologies. Bernstein forecasts that Denso will achieve its mid-term earnings target by March 2026, aiming for sales of ¥7 trillion and an operating profit margin of 10%. The firm also pointed out potential risks such as import tariffs in the U.S., which could impact Denso’s revenue growth. Nonetheless, Denso is expected to benefit from the recovery of Toyota’s domestic production and the industry’s shift towards electrified and software-defined vehicles. These developments reflect Denso’s strategic positioning in the evolving automotive landscape.

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