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On Wednesday, UBS analysts upgraded Makino Milling Machine Co Ltd (6135:JP) stock from Neutral to Buy, despite lowering the price target to JPY10,700 from JPY11,600. The upgrade reflects a change in valuation methodology following the withdrawal of Nidec’s tender offer for Makino.
Analysts at UBS believe that Makino’s shares are currently undervalued, given the company’s prospects for continued robust earnings. This optimistic outlook is supported by anticipated sales growth and improving profit margins. Makino is expected to benefit from sustained demand for its high-end machinery tools, particularly in markets less affected by tariffs.
Makino’s machinery is seeing increased demand in various global markets. In India, North American regions focused on auto parts and aviation, and China’s new energy vehicle sector, Makino’s high-end tools are especially sought after. This demand is likely to be a key driver of the company’s ongoing sales growth.
The company’s profitability is also on an upswing, thanks to a strategic shift towards higher value-added offerings and an increase in aftermarket sales. UBS notes that these factors are contributing to an improved financial performance for Makino.
UBS also commends Makino’s commitment to enhancing shareholder returns. This commitment, combined with the company’s strong earnings outlook and strategic business moves, forms the basis for UBS’s positive stance on Makino’s stock.
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