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On Friday, UBS reiterated its Neutral rating on NTN Corp (6472:JP) (OTC: NTTBF), maintaining the price target at JPY250.00. The firm acknowledges the progress in management reforms at NTN Corp, which is reflected in the company's improving earnings structure.
The improvement is attributed to several company-specific factors, such as successful price pass-through, procurement reforms, and a better model mix. These factors are expected to contribute approximately ¥40.7 billion to the company's profits from the fiscal year ending March 2022 to the fiscal year ending March 2025, based on UBS's estimates.
The firm's analysis indicates that NTN Corp has been experiencing an uptick in profitability due to improved selling prices and variable costs. External Director Yuriya Komatsu (OTC:KMTUY)'s remarks were highlighted, indicating a growing company-wide awareness of profit margins and capital efficiency. The firm views the initiatives aimed at enhancing management speed and inventory turnover positively, as these have been longstanding issues within the company.
Despite the ongoing improvements, UBS's Neutral stance is primarily influenced by the current weak results stemming from a challenging external environment. This includes reduced demand in key sectors such as automobiles and general-purpose construction machinery. Nevertheless, the firm recognizes that NTN Corp's management policies and initiatives are steering in the right direction.
UBS suggests that there could be potential upside risks to NTN Corp's share price if the pace of management reforms accelerates and profit margins continue to improve. The firm's position reflects a cautious optimism, acknowledging the positive steps taken by NTN Corp while also considering the impact of broader market conditions on the company's performance.
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