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Investing.com - Goldman Sachs initiated coverage on Yokohama Rubber Co (TYO:5101) with a Buy rating and a price target of JPY5,000, implying 46% upside potential.
The Japanese tire manufacturer holds a 6% share of the global tire market, with a 4% share in passenger car tires and a stronger 10% share in the off-highway tire market based on FY12/25 guidance, according to Goldman Sachs.
The investment bank forecasts annual top-line growth of 6% for Yokohama Rubber over the next three years, outpacing Japanese tire competitors which are expected to grow at approximately 1% during the same period.
Goldman Sachs identifies agricultural tires as a key growth driver for Yokohama, citing increasing demand fueled by the acceleration of precision agriculture in developed countries and China, with off-highway tires expected to expand to 30% of the company’s profits.
The 12-month price target of JPY5,000 is based on price-to-book-ROE correlation and Goldman’s FY12/25 estimates, with the implied price-to-book ratio of 0.8X and price-to-earnings ratio of 8X aligning with historical medians.
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