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On Monday, Goldman Sachs analysts upgraded Nippon Paint Holdings Co., Ltd (4612:JP) (OTC:NPCPF) to a Buy rating from Neutral. The analysts also raised the price target for the company’s stock to JPY1,470 from JPY1,150.
The upgrade is part of Goldman Sachs’ Japan Transformers series, which focuses on companies undergoing significant transformations. The analysts highlighted Nippon Paint’s core decorative paints business as largely unaffected by reciprocal tariffs and benefiting from stabilizing petrochemical raw material prices. The company’s "asset assembler" business model is also noted as a key competitive advantage.
Goldman Sachs forecasts Nippon Paint to achieve an earnings per share compound annual growth rate of 20% over the fiscal years 2024 to 2027. Despite this growth potential, the shares are trading at a fiscal year 2026 price-to-earnings ratio of 13 times, which is below the 10-year average of around 20 times for global paint companies specializing in decorative paints.
The analysts also noted the positive impact of newly consolidated subsidiary AOC, which is expected to contribute significantly to the company’s operating profit from the second quarter of fiscal year 2025. This contribution is anticipated to enhance profit momentum, with year-on-year growth of 41% and quarter-on-quarter growth of 40%.
The analysts at Goldman Sachs see the current valuation as an attractive entry point for investors, leading to the stock’s upgrade to a Buy rating, reflecting a projected 34% upside.
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