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On Wednesday, CLSA analyst Masahiro Mochizuki adjusted the price target for Rinnai Corporation (5947:JP) (OTC: RINIF), a leading manufacturer of gas appliances including eco-friendly water boilers. The new price target is set at JPY3,700, reduced from the previous JPY4,000, while the Outperform (2) rating remains unchanged.
Mochizuki predicts that Rinnai's management will likely distribute over 70% of net profits, inclusive of buybacks, by fiscal year March 2026, aiming to boost the Return on Equity (ROE) to over 8%. This strategy is set against a backdrop of concerns regarding sluggish demand in China. Nevertheless, the analyst forecasts that the company's net profit for fiscal year March 2026 will grow by approximately 10% year-over-year, bolstered by strong performance in the Japanese and U.S. markets.
The company's eco-friendly water boilers are expected to be a significant contributor to sales and profits within Japan. However, due to the anticipated weak demand in China, the forecast for Rinnai's operating profit for fiscal year March 2026 has been revised downward. Consequently, the price-to-earnings (PE) based target price has been trimmed from JPY4,000 to JPY3,700.
Despite the lowered price target, Mochizuki maintains a positive outlook for Rinnai Corporation, citing a 15% implied upside from the current price level. The Outperform rating suggests that the analyst continues to see Rinnai's stock as likely to outperform the broader market or its sector in the near future.
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