Index falls as earnings results weigh; pound above $1.33, Bodycote soars
Investing.com - Morgan Stanley (NYSE:MS) downgraded Daicel Corporation (4202:JP) (OTC:DACHF) from Overweight to Equalweight on Friday, while significantly reducing its price target to JPY1,400.00 from JPY2,300.00.
The downgrade comes as Morgan Stanley reassessed Daicel’s fiscal 2026 operating profit outlook based on company guidance, citing concerns about inventory valuation effects that boosted fiscal 2025 operating profit by JPY9.9 billion but are expected to negatively impact fiscal 2026 profits by JPY9.2 billion.
The investment bank highlighted several challenges facing Daicel, including difficulty in assessing true profitability, high foreign exchange sensitivity where a one-yen appreciation against the U.S. dollar reduces 12-month operating profit by JPY800 million, and stagnant top-line growth.
Morgan Stanley’s new price target represents a forward price-to-earnings ratio of 7.2 times fiscal 2027 estimates, down from the previous 11.0 times that was based on fine chemicals stock averages, now using the 10-year average forward P/E minus one standard deviation.
While Morgan Stanley continues to expect high return on equity from Daicel, the firm warned that the stock may remain a "value trap" for some time, prompting the rating reduction despite maintaining some positive long-term outlook for the company.
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