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Investing.com - Goldman Sachs has upgraded Subaru Corp. (7270:JP) (OTC:FUJHY) from Neutral to Buy and raised its price target to JPY3,300.00 from JPY2,350.00.
The upgrade comes as Subaru demonstrates resilience against potential U.S. tariff impacts. The automaker has guided for a gross tariff impact of US$2.5 billion (approximately ¥360 billion on an operating profit basis) in FY3/26, assuming an additional 25% tariff for a total of 27.5%.
Goldman Sachs notes that Subaru’s management remains committed to achieving ¥100 billion in operating profits in FY3/26 while absorbing these tariff impacts. The company expects 75% of the tariff impact to relate to finished vehicle exports and 25% to parts.
The investment bank believes Subaru’s operating profits and free cash flow generation should improve significantly if the gross impact is halved by a 15% tariff scenario. This potential upside contributed to the firm’s more bullish outlook.
Subaru has already implemented a 4-5% price hike on May 20, leveraging its strong brand position to raise effective sales prices, which Goldman Sachs suggests could further reduce the net tariff impact on the company.
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